Strategic Portfolio Planning for Generic Drugs

Asa Cox Founder genericlicensing.com

May 12, 2010

About me
- 13 years in generics
Manufacturing, Development, Licensing, Consulting

- International projects - Online networker - Web business 2.0 believer

Topics
- Overview of typical generic portfolios - Specifics of portfolio planning for generics - Why strategic planning is important for generic companies - Introduction to sourcing generic products from 3rd parties

Aim: To understand why strategy and planning for generic portfolios is required!

Overview of typical generic portfolios

- Does typical exist?!
Country variables: Demographic Population Market development Local players Drug provision policy Generic incentives Economy

Overview of typical generic portfolios

Does typical exist?!
Typical category portfolios? e.g United Kingdom

Overview of typical generic portfolios

Does typical exist?!
Typical category portfolios? e.g United Kingdom Full : Teva, Actavis, Sandoz, Mylan

Overview of typical generic portfolios

Does typical exist?!
Typical category portfolios? e.g United Kingdom Full : Profit: Teva, Actavis, Sandoz, Mylan Arrow, Ratiopharm, Winthrop, Stada

Overview of typical generic portfolios

Does typical exist?!
Typical category portfolios? e.g United Kingdom Full : Profit: Focused: Teva, Actavis, Sandoz, Mylan, Arrow, Ratiopharm, Winthrop, Stada Rosemont, Hospira, Perrigo

Overview of typical generic portfolios

Does typical exist?!
Typical category portfolios? e.g United Kingdom Full : Profit: Focused: Teva, Actavis, Sandoz, Mylan, Arrow, Ratiopharm, Winthrop, Stada Rosemont, Hospira, Perrigo

Manufacturing: Cipla, Ranbaxy, Wockhardt, Aurobindo...

Specifics of portfolio planning for generics

If you were creating a portfolio from scratch... where would you start?!

Specifics of portfolio planning for generics

If you were creating a portfolio from scratch... where would you start?! Cash vs Profit
Business plan/strategy Cost of entry Available technology Risk of competition Supply chain

Specifics of portfolio planning for generics

If you were creating a portfolio from scratch... where would you start?!
Cash vs Profit

IMS top down

Value or volume Level of competition
- Same data as everyone!

Manufacturing capability

Specifics of portfolio planning for generics

If you were creating a portfolio from scratch... where would you start?!
Cash vs Profit IMS top down

Patent expiries
Originator tactics Timing - First in reaps rewards At risk vs late to the party
- Legal costs & expertise

COGS vs ASP
- Stock vs cash - Loss vs market share

Specifics of portfolio planning for generics

If you were creating a portfolio from scratch... where would you start?!
Cash vs Profit IMS top down Patent expiries

Manufacturing capability
Dose forms Biologics Capacity Dedicated units Supply chain Cost

Specifics of portfolio planning for generics

If you were creating a portfolio from scratch... where would you start?!
Cash vs Profit IMS top down Patent expiries Manufacturing capability

Marketing & Distribution

Rx or OTC - Branded or Private Label
- Standard or Generic+

Hospital or retail
- Wholesale, Multiples, Independent, Online

Positioning
- Service, Price, Depth, Speciality, Product Type

Specifics of portfolio planning for generics

If you were creating a portfolio from scratch... where would you start?!
Cash vs Profit IMS top down Patent expiries Manufacturing capability Marketing & Distribution

Copy Competition
Which one?! Response Attainability

Specifics of portfolio planning for generics

Using IMS Top Generics Top 200 - All over $400m - Very long tail

Specifics of portfolio planning for generics

Using IMS Top Generics
1. Fentanyl Launched: January 2005, 2008 sales: $800 million Branded equivalent: Duragesic, by Janssen 2008 sales of $250 million (from $1.1 billion) 2. Amlodipine besylate and benazepril hydrochloride* Launched: July 2007, 2008 sales: $779 million Branded equivalent: Norvasc, by Pfizer 2008 sales <$150m ($1.5 billion) 3. Metoprolol succinate Launched: May 2008, 2008 sales: $675 million Branded equivalent: Toprol, by AstraZeneca 2008 sales <$150m ($807 million) 4. Lamotrigine Launched: February 2005, 2008 sales: $671 million Branded equivalent: Lamictal, by GlaxoSmithKline 2008 sales $1.6 billion (peak)

Specifics of portfolio planning for generics

Using IMS Top Generics
5. Risperidone Launched: September 2008, 2008 sales: $610 million, Branded equivalent: Risperdal, by Janssen, 2008 sales $1.5b ($2.1 billion) 6. Omeprazole* Launched: July 2008, 2008 sales: $609.8 million Branded equivalent: Prilosec, by AstraZeneca, 2008 sales $185m ($1.1 billion) 7. Azithromycin Launched: November 2005, 2008 sales: $599 million, Branded equivalent: Zithromax, by Pfizer, 2008 sales <$150m ($1.7 billion) 8. Bupropion Launched: December 2006, 2008 sales: $521 million Branded equivalent: Wellbutrin, by Biovail, 2008 sales $579 million ($1.7 billion)

Specifics of portfolio planning for generics

Using IMS Top Generics Why difference in generic success?
Brand tactics
Price match Alternative formulations Effective anti-generic messages

Doctor perspective
Long term use Activity limits

Specifics of portfolio planning for generics

EXAMPLE: OMEPRAZOLE US vs UK US - $300m value erosion (25%) UK -

Specifics of portfolio planning for generics

OMEPRAZOLE UK (25 to 1)

Specifics of portfolio planning for generics

Targeting patent expiry of a blockbuster?!

Specifics of portfolio planning for generics

CLOPIDOGREL/PLAVIX

Specifics of portfolio planning for generics

CLOPIDOGREL/PLAVIX

Specifics of portfolio planning for generics

If you were creating a portfolio from scratch... where would you start?! SUMMARY: Commercial strategy
Profit or volume

Market strategy
Distribution channels Classification type

Manufacturing capability
Product type

Legal & Regulatory expertise

Patent expiry vs long tail

Why strategic planning is important

Why strategic planning is important

2009 global generic products generated $83bn (59.8bn) in audited sales (IMS)

Why strategic planning is important

2009 global generic products generated $83bn (59.8bn) in audited sales (IMS)

BCC estimates the global market to reach $129.3bn by 2014, representing a 9% annual growth rate.

In the $59bn global generics market in developed countries, Japan only accounts for 6%, while the US holds 42%, and five major European national markets account for 23%.

Why strategic planning is important

2009 global generic products generated $83bn (59.8bn) in audited sales, according to IMS.

BCC estimates the global market to reach $129.3bn by 2014, representing a 9% annual growth rate.
$37.5bn
Undeveloped markets

29%

In the $59bn global generics market in developed countries, Japan only accounts for 6%, while the US holds 42%, and five major European national markets account for 23%.

Why strategic planning is important

Government debt as % of GDP (2009)

Why strategic planning is important

Why strategic planning is important

Why strategic planning is important

IMS estimates that sales from the top 10 US generic players grew at an average of 13.2% in 2009 The big are getting bigger!

Why strategic planning is important

The big can get bigger still!

Why strategic planning is important

The big can get bigger still!

"Only those who are agile and strong will survive in this business," said Teva president and CEO Shlomo Yanai during the company's investor meeting last month in Jerusalem. "About 15% of our business will come from acquisitions. We are taking the necessary steps and building our infrastructure by getting assets and know-how either internally, through acquisition or partnerships." Teva estimates its 2009 global sales at $13.9bn, of which 70% are from generic products. Yanai is targeting $31bn in sales by 2015, of which 70% will still come from generics.

Why strategic planning is important

The big can get bigger still!

Teva estimates its 2009 global sales at $13.9bn, of which 70% are from generic products. Yanai is targeting $31bn in sales by 2015, of which 70% will still come from generics.

"Only those who are agile and strong will survive in this business,"

Why strategic planning is important

Biosimilars/follow on biologics

Approximately one-third of all newly approved drugs will be biologics. (2010)

Today, total sales of off-patent biologics amount to approximately $20 billion

Double-digit growth of 20 percent, they generated $95 billion of sales amounting to approximately 15 percent of global pharma revenues.

The average costs of biologic drug treatment is about $72,000/year (compared to about $1,000 for conventional "small molecule" pharmaceuticals)

Why strategic planning is important

Why strategic planning is important

Biosimilars/follow on biologics

Why strategic planning is important

The patent cliff: 2010-15

Of total pharmaceutical sales in 2008 of $643.6bn, a staggering 30% were derived from patented products which are at risk from generic competition within five years, almost double the percentage at risk in 2000 of 17%. Whilst the industry has already started its slide, the patent cliff becomes seriously precipitous in 2010 when 9%, or $57.5bn, of total market sales are expected to lose patent protection within the space of 12 months

Why strategic planning is important

The patent cliff: 2010-15

The world's top drugmakers face the loss of $140 billion in annual sales by 2016 (of $700bn 2008)

Why strategic planning is important

The patent cliff: 2010-15
Inhalation market Approximately 50% of the current $32 billion global market segment for asthma and COPD medicines is expected to lose patent protection by the end of 2016, according to industry analysts IMS Health. The asthma and COPD market segment is projected to grow significantly faster than the pharmaceutical market, driven by factors including a significant level of underdiagnosis, and Novartis/Sandoz will hope this acquisition will gain them a large market share in the future.
Sandoz has signed a definitive agreement to acquire Oriel Therapeutics, a privately held US pharmaceuticals company, gaining exclusive rights to a portfolio of generic drug candidates and related technologies targeting medicines in the inhalable respiratory drug market.
Holzkirchen, Germany, April 19, 2010

Why strategic planning is important

The patent cliff: 2010-15

"There is still room to grow in generics," says Yanai (TEVA). "Almost $150bn of branded drugs are going to be off patent in the next five years. This does not include the expiration of biologics, which is an additional $50bn potential.

Overview of typical generic portfolios

The patent cliff: 2010-15 Whats the big pharma plan? - More investment in R&D? - Clever anti-generic tactics? - Switch out before expiry strategies? - Increase legal spend on ever-greening patents? - Big budget advertising in BRIC markets?

Why strategic planning is important

The patent cliff: 2010-15. Whats the big pharma plan?
Astra Zeneca announced today that it has agreed to market 18 of Torrent Pharmaceuticals Ltd.s branded generic drugs in 9 emerging markets, marking the U.K. drugmakers first generic-drug partnership. Unlike some its competitors, Astra Zeneca is very vulnerable to generic competition as many of its best selling products such as Nexium for ulcers, the antipsychotic Seroquel and Crestor for cholesterol. are near patent expiry. Industry analysts expect the company to lose as much as 25% of its sales revenue to generic encroachment by 2014.

Why strategic planning is important

The patent cliff: 2010-15. Whats the big pharma plan?
Sanofi-Aventis bought Zentiva NV of the Czech Republic, Helvepharm AG of Switzerland, Medley SA of Brazil and Laboratorios Kendrick SA of Mexico to bolster its branded generics portfolio.

Why strategic planning is important

The patent cliff: 2010-15. Whats the big pharma plan?

Generics are an important part of the health care system. ????? believes that when there is a direct generic equivalent to the prescribed brand name drug, it should be used provided the doctor agrees it is best for the patient.

Why strategic planning is important

The patent cliff: 2010-15. Whats the big pharma plan?

Generics are an important part of the health care system. Pfizer believes that when there is a direct generic equivalent to the prescribed brand name drug, it should be used provided the doctor agrees it is best for the patient.
http://www.pfizer.com/about/public_policy/generics.jsp

Why strategic planning is important

The patent cliff: 2010-15. Whats the big pharma plan?
NEW YORK, March 18 (Reuters) - Pfizer Inc (PFE.N) may still be eager to buy generic drugmakers, after being outbid for Germany's Ratiopharm in an effort to shore up revenue as it braces for evaporating sales of its blockbuster Lipitor cholesterol treatment. Pfizers expanded agreements with Aurobindo Pharma Ltd. will grow its generic product portfolio within emerging markets to reflect the diverse and often unique market dynamics and commercial interests of more than 70 countries. Pfizer entered into agreements with Claris Lifesciences Ltd. (Claris) to commercialize sterile injectable medicines after the products are no longer patent protected, and have lost market exclusivity in North America, Europe, Australia and New Zealand. The Claris agreements advance Pfizers Established Products strategy, which focuses on the commercialization of products where market exclusivity has been lost. Pfizers global annual sales of established products are approximately $10 billion.

Why strategic planning is important

The patent cliff: 2010-15. Whats the big pharma plan?
Pfizers global annual sales of established products are approximately $10 billion (?!)

Why strategic planning is important

The patent cliff: 2010-15. Whats the big pharma plan?
Last year, GlaxoSmithKline entered into joint ventures with the generic manufacturers Dr. Reddys Laboratories (India) and Aspen Pharmacare Ltd (South Africa). Also, the company paid $246.5 million for Bristol-Myers Squibbs Pakistan and Egypt drug units and acquired UCBs drug portfolio in Africa, the Middle East, Asia Pacific and Latin America for $702 million; clearing signaling its intention to more aggressively pursue emerging global markets.

Why strategic planning is important

SUMMARY: What is the future going to look like?! 5 year high growth window Major player strength & depth Biologics Big pharma entering generics

Introduction to sourcing from 3rd parties

Creating the portfolio why look outside - Manufacturing constraints - Development capability - Time to revenue - Financial status - Product mix - Country/region specific products - Tactical & strategic relationships Strong and agile Teva in-licenses 30% of products!

Introduction to sourcing from 3rd parties

Creating the portfolio where to look - Emerging markets - EU ascension states - High Tech Far East (Korea, Taiwan) - Well developed Latin America - Online - New databases - Forums and discussion groups - Virtual partnering events

Introduction to sourcing from 3rd parties

Creating the portfolio considerations - Partner Selection - Commercial relationship model - Quality and consistency of supply - Long term cost position - Partners ambitions - Beware - Regulatory expertise - Number of dossiers/licenses sold - IP ownership and supply chain flexibility

Summary
- What type of portfolio do you want? - Selecting generic products isnt easy - Why strategic planning is important for generic companies - The other option; in-license & partner

That is why strategy and planning for generic portfolios is required!