Indian Pharma: Transitioning to Specialty Generics | 1

TITLE Indian Pharma: Transitioning to Specialty Generics

YEAR July, 2017

AUTHORS Life Sciences & IT Knowledge Banking Group, Corporate Banking , YES BANK

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TABLE OF CONTENTS
Executive Summary 6

1. Journey of India Pharma-An Introduction 8

2. Specialty Generics 12
A. New Therapeutic Entities (NTE) 12
B. Complex generics 12

3. Topical Delivery System 16

4. Generic Injectables 18

5. Biosimilars 21

6. US Market Opportunities for Specialty Generics 23

A. Market dynamics 23
B. Market opportunity 24
C. R&D investments 24
D. Product filing pattern 25

7. Current & Future Opportunities 26

A. Disease portfolio for specialty medicines 26
B. Innovative drug delivery systems 26
C. Focused R&D to deepen anchorage 27
D. Understanding the market demands and 27
transforming rapidly

8. Recommendations & Way Forward 28

Bibliography 31

Abbreviations with their Expanded Forms 32

EXECUTIVE SUMMARY
The journey of Indian pharma, and its transition from
vanilla generics to specialty segment is encouraging,
and at the same time filled with challenges as Indian
companies navigate in uncharted waters. Especially,
choosing differentiated generics and targeting one
of the most stringent markets of the world in terms
of quality, the US, has been very demanding. The
severity of pricing pressure in the US generic space
took Indian players’ off-guard and led to declining
sales and profitability. The changing political
scenarios in US have added to the woes. Indian
pharma players are in their preparatory phase and
have been investing in complex generic assets, as
they are putting a lot of effort in biosimilars, complex
injectables and inhalers.
Trends Redefining Pharma Strategies
Diverse US market:
steady demand & Shrinking margins
dynamic political of 'me too'
scenario generics
Demands of specialized
therapeutic procedures
to handle disease
burden
6 | Indian Pharma: Transitioning to Specialty Generics
Dual opportunity of demand & profitability
Staying profitably relevant in the market is the key
as Indian players are investing on new product
and technology acquisitions or identifying relevant
business partners to ensure deeper penetration
in the US market. US is by far the largest and the
most diversified pharmaceutical market in the world.
Its healthcare expenditure is also highest, which is
about USD 3.12 TN (almost 17.4% of its GDP as in
2016). The US Generics market is valued at ~USD
70 BN with specialty generics having a significant
share of the pie and increasing. The much appreciated
greater participation of the government in-terms of
investing in healthcare along with the ever growing
demand of more effective treatments has created a
Boosting R&D
capabilities to
strengthen
specialty range
Market More thrust
consolidation, towards quality
M&As to diversify
specialty portfolio
huge opportunity for the pharmaceutical sector to
serve. Margins are healthy for such niche products
which have fewer competitors. The generic market
of injectable is USD 8 BN in US and has the potential
to easily cross CAGR of 10 percent, especially
with new technologies and improvised state-of-
art delivery procedures. Consolidation is a trend
which is also catching up to fuel rapid growth, as
the bigger it gets the better it is to tide neck-to-neck
competition.
Value creation with R&D
The rapidly ageing population and associated rise in
chronic diseases, increased urbanization and higher
disposable incomes are some of the reasons why
the US market is a preferred destination for many
international players. In past couple of years the
specialty drugs in US are in higher demand, as
almost two-thirds of the overall medicines spend
are on specialty drugs or complex medicines in
many households. Pharma companies in India
are waking up to this opportunity. Indian pharma
industry can derive great value if it adapts its
research and manufacturing capabilities and look
for opportunities in niche therapies such as cancer,
dermatology, ophthalmology, orphan diseases, etc.
or those which involves superior drug delivery or
usage of alternate routes of drug-administration.
To create a niche portfolio some bold Indian players
have invested millions of dollars, as their overall
R&D expense has gone up to 10 percent range
which was a meagre ~3% five years ago. On the
other side the USFDA has also strengthened its
internal processes via GDUFA guidelines not only to
ensure approvals come in time for the applicants,
but also companies who are not complying to GMP
gets heavily penalized.
“ We believe India pharma has
the capabilities to overcome the
near term hurdles and emerge
victorious over the long run.
”
Indian Pharma: Transitioning to Specialty Generics | 7
1. Journey of India Pharma -
An Introduction
Indian pharma companies championed the art
of manufacturing generic medicines in the past
decades and were actively capturing markets
with their differentiated strategies and strong
adaptability in global markets. Its medicines were
manufactured at a lower cost domestically as
compared to its foreign competitors which helped
India to carve its position in generic space. The
Indian pharma companies clocked healthy sales in
not only huge markets of US and Europe but also
in the emerging markets of Latin America, ASEAN
countries and CIS nations. The US market has been
the strongest growth driver for the Indian pharma.
Indian companies have managed to expand their
outreach in tightly regulated markets, augmented
their product portfolio and increased presence
through brown field overseas acquisitions. The
past decade was not only about flexing its muscles
through top line and bottom line but also through the
number of ANDA filings, and showcase diversity in
the range of generic products serving a wide range
of therapies the company offers. But that’s a thing
of the past now, as there are compelling reasons to
climb-up the value ladder.
A. Climbing the value ladder
Climbing the value ladder with the help of specialty
generics remains the obvious choice for the Indian
Pharma for further expansion, as India today stand
globally 13th in terms of value while 3rd in terms
of volume. This easily showcases the gap that India
has to go a long way in terms of positioning itself
in terms of value, and this can only be achieved
through increasing its portfolio with a wide range
of specialty products. Indian players were placed
mostly in the traditional generic market, which
8 | Indian Pharma: Transitioning to Specialty Generics
is already crowded. Additionally, there is an ever
increasing competition and pricing pressure faced
from global companies and new US regulatory
policies emphasizing on price control measures and
repealing Obama Care were adding more pressure
to the existing as well as new players. Indian
companies roughly contribute about 10 % (by value)
towards US generic market. The market share of
non-complex generics addressed to US population
is just 20% (by value). The bigger piece is mostly
specialized high value therapeutics. However, with
increasing focus on the other half of the US generic
market which consists of specialty generics, Indian
players can sustain strong growth in long term as
huge opportunities exist, going forward.
B. Securing position as a market leader
India along with many other players who were selling
their products in the US market faced intense generic
competition that had resulted in significant erosion
of market share for many of such companies selling
their branded products. Such commoditization has
also given payers greater control over drug prices
in primary care therapeutic classes, where close
substitutes and potential generics were available.
Specialty generics slowly picked up its pace from
vanilla generics after its market capture with low-
cost production capabilities, mostly from India. Their
entry further firmed up due to the arising patent
cliff (patent expiry of blockbuster medicines) which
began from 2011 onwards. The patent cliff was a
huge issue with the innovator companies while for
generic player it was a blessing in disguise. Generic
medicine is poised to drive 52 percent growth in
global medicine spending from 2014-18 (IMS Report
on Global outlook for medicines through 2018).
Figure 1: Global generics outlook (USD BN)

CAGR , 15-20’
Percentage
292
272
253 40 9%
236 37
220 34
206 31
28
China 26 109 10%
99
90
82
Growth 75
69
Markets 48
43 46 6%
38 41
EU + Japan 36

79 82 86 90 94 5%
75
US

2015 2016 2017 2018 2019 2020

Source: Teva Investors Presentation, YBL Research

The pharmaceutical industry went through a huge change in the era of patent protection and when it was
over, generic manufacturing came into focus and continues to do so. The patent cliff mostly began in 2011
and reached its peak in 2012. Block buster drugs like Lipitor (atorvastatin), Plavix (clopidogrel), and Singulair
(montelukast) faced patent expirations and had increased competition in the US market. About USD 120 BN
worth sales were lost due to patent expiration between 2009 to 2014 and more than USD 200-215 BN worth
sales are soon to be at risk due to ongoing patent expiration between 2015-2020.

Figure 2: Worldwide sales at risk of patent expiration in USD BN (2008-22)

80 8%
7%
70 6% 7%
6%

60 6%
5%
50 5% 5% 5%
4% 52 4% 52
4% 4% 50 4%
48 4%
40 4%
40
38
30 3% 35 34 2% 3%
33 32
29 29 2%
20 26 2%
23 24
20 21 20 23
19 18
16 17 16 16
10 1%
12 12 12
10 9
0 0%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Total Sales at Risk Expected Sales Lost %Market at Risk

Source: Industry, YBL Research

Indian Pharma: Transitioning to Specialty Generics | 9

C. US market insights
USA represents 30-40 percent of the global market
and the highest spender on generated prescriptions.
Last couple of decades were more profitable for the
US-based pharmaceutical companies, especially
because of the Affordable Care Act (ACA) or
popularly known as the Obamacare, which came
into law on 23rd March 2010. The Obamacare rapidly
extended insurance coverage to a larger pool and
covered acute and chronic conditions thus resulting
in an increase in overall healthcare spending in US.
It increased the sales of prescription-based drugs to
about 4,368 MN in 2015 which is about increase of 1
percent from previous year and 2% rise from other
previous years. Expansion of the Affordable Care Act
through Medicaid Expansion was the main driver of
retail prescription. The health expenses reached to
USD 3.12 TN, which is approximately USD 10,000
per person and pegs the GDP to 17.4%. This clearly
projects the huge opportunity in the US market
with the ever-increasing demand. The healthcare
spending are sometimes double when compared
with other developed nations.
Pharmaceuticals and biotechnology companies
along with public funded research institutes such as
the National Institute of Health (NIH) are playing a
key role in drug discovery in USA. The companies
further undertake drug development and seek
approval from Food and Drug Administration (FDA)
to bring them to the market.
Figure 4: US Pharma Distribution
Source: YBL Research
10 | Indian Pharma: Transitioning to Specialty Generics
India based companies such as LUPIN is among the
top 5 players in US generics along with other global
giants like TEVA, Mylan, Pfizer, etc.
Figure 3: Top US Generics players
(by market share)
Teva
18%
Mylan 10%
Sandoz 7%
Pfizer 4%
Endo 3%
Lupin 3%
Source: Teva Investor Presentation, YBL Research
In US there are only few whole sellers who directly
purchase from the pharma companies (in bulk) which
are also the middlemen and further they sell to the
retailers earning huge profits, who further sell it to
the consumers directly. These consumers either buy
the medicines directly at a steep market rate from
retail pharmacies or present a ‘health card’ given
by Pharmaceutical Benefit Managers (PBMs) or the
TPAs (Third Party Administrators). Heath insurance
companies outsource the prescription benefits to
PBMs for creating formularies, corresponding co-
pay levels, discounts and rebate arrangements.
Price erosion due to stiff competition in the US Buyers or whole seller dominate generic
market by pharma companies brought a situation purchasing in US:
where 80 percent of the market was controlled by
just three major whole sellers in US. Government’s McKesson Corp bought Celesio AG for about
focus on regulating prices over the past few years $5 BN in 2014 in order to gain influence in
(which will also continue) has led to moderate drug distribution
growth in the generic pharma. The major buyers in
US like the big retail giants including CVS Health CVS, through its partnership with Cardinal
Corp. and Walgreens Boots Alliance, etc. dominates Health Inc.
the US Pharma market which resulted in shifting
Walgreens Boots Alliance Inc., through its
of the bargaining power from manufacturers to
collaboration with AmerisourceBergen Corp.
wholesalers fuelling price erosion while increasing
the profit margin of the wholesalers. Such big
buyers got even stronger and bigger with new Wal-Mart Stores Inc.
acquisitions and mergers. Speciality generics are a
respite as they are more insulated when compared
to the simple generic which are commoditized in
current market.

“ To neutralize the effect of such channel consolidation, an

enhanced mix of speciality medicines, especially those in the
difficult-to-develop space which can have fewer competitors
seems to be the only way out
”

Indian Pharma: Transitioning to Specialty Generics | 11

2. Specialty Generics

Specialty generics are classified as high-cost, high
complexity and/or high touch generics. Biologics
that are injectables or infused and are used to
treat complex or rare chronic conditions such as
cancer, rheumatoid arthritis, haemophilia, psoriasis,
inflammatory bowel disease (IBD), Hepatitis C, etc.
are some common areas. There are two categories
of specialty generics:
A. New Therapeutic Entities (NTE)
Value-added generics are the improved or enhanced
version of approved drugs (patented or generics)
developed through a new route of administration,
strength, dosage form, and combinations or device
innovations to address specific patient needs. Like
pediatric dosage forms, fixed dose combination,
modified release versions etc.
B. Complex generics
These are mostly large and complex (niche)
molecules by nature and are made of complex
active ingredients (may be a complex biological
molecule) or may have a complex formulation
process or a complex delivery system or an alternate
delivery route involved or may be a combination
of both complex drugs and device. Such complex
or specialty generics are used to treat complex
diseases which may be chronic by nature or life
threatening like Hepatitis C, Cancer, CNS, etc.

Complex generics could be classified into four categories:

Complex Active Complex Natural Source

Peptides
Ingredients Mixtures Products

Complex Liposomes Iron Colloids

Formulations

Complex Route Locally Acting

of Delivery Drugs

Complex DPI MDI Transdermal System

Drug-Device (Dry Powder Inhalers) (Metered-Dose Inhalers) (Medicated Adhesive
Combinations Patch)

12 | Indian Pharma: Transitioning to Specialty Generics

Some of the above mentioned complex generics
are discussed below in details:
A peptide is a compound of two or more amino
acids in which a carboxyl group of one is united with
an amino group of another. Peptides regulate critical
functions such as burning fat, building muscle, and
serve as hormones and neurotransmitters. Some
of the peptides have the capability to pass through
cell membranes, they can deliver drugs that fight
cancer and other serious diseases affecting the
cardiovascular, respiratory, gastrointestinal, and
nervous systems. Peptide-based drugs accumulate
in low levels in body tissue, which reduce toxicity
levels. They are highly selective which makes them
effective at lower doses and, on such basis, with
less serious side effects. Most are administered
parenterally since their oral bioavailability is extremely
low. Peptide production is still considered a young
market with promising therapeutic capabilities and
exciting potential for the API industry.
Natural source products also constitute as a key
source of pharmacologically active ingredients in a
variety of novel agents with therapeutic potential in a
wide range of diseases. Pharmaceuticals containing
natural products or compounds derived from natural
product scaffolds or templates have to undergo the
same stringent approval process as obtained from
purely synthetic origin.
Liposomes are of the most promising among the
existing drug delivery systems because of their
biocompatible composition, as well as superior
efficacy due to significant improvement in drug
circulation and distribution. Liposomes are round
bubbles consisting of an aqueous core encapsulated
by natural or synthetic phospholipids. This structure
turns liposomes into ideal drug carriers, since
hydrophilic drugs tend to be entrapped in the core;
while hydrophobic ones will be entrapped within the
lipid bilayers. Doxil was among the first approved
liposomal pharmaceutical product.
Iron colloids are a type of complex formulations
where the API is a macromolecular complex with
an iron containing core encased in a hydrophilic
carbohydrate shell. Eg: Iron colloid such as ferric
gluconate, chondroitin sulfate iron colloid, etc.
Locally acting drugs such as orally inhaled drug
products are restricted to local site of application
as they do not rely on systemic circulation. They
can be a dry powder inhaler, metered-dose inhaler
or a nebulisation product. Unlike traditional dosage
forms, most inhalation products are designed to be
locally acting.
Indian Pharma: Transitioning to Specialty Generics | 13
A dry-powder inhaler (DPI) is a device that delivers
medication to the lungs in the form of a dry powder.
DPIs are an alternative to the aerosol-based inhalers
commonly called metered-dose inhaler (or MDI).
Most DPIs rely on the force of patient inhalation to
entrain powder from the device and subsequently
break-up the powder into particles that are small
enough to reach the lungs. DPIs are commonly
used to treat respiratory diseases such as asthma,
bronchitis, emphysema and COPD although DPIs
(such as inhalable insulin Afrezza) have also been
used in the treatment of diabetes mellitus.
A metered-dose inhaler (MDI) is a device that
delivers a specific amount of medication to the
lungs, in the form of a short burst of aerosolized
medicine that is usually self-administered by the
patient via inhalation. A metered-dose inhaler
consists of three major components; the canister
which is produced in aluminium or stainless steel
by means of deep drawing, where the formulation
resides; the metering valve, which allows a metered
quantity of the formulation to be dispensed with
each actuation; and an actuator (or mouthpiece)
which allows the patient to operate the device
and directs the aerosol into the patient’s lungs. It
is the most commonly used delivery system for
treating asthma, chronic obstructive pulmonary
disease (COPD) and other respiratory diseases.
The medication in a metered dose inhaler is most
commonly a bronchodilator, corticosteroid or a
combination of both for the treatment of asthma
and COPD.
Transdermal Drug Delivery System (TDDS) are
self contained, discrete dosage forms which are
also known as “patches”. When patches are applied
to the intact skin, it delivers the drug through the
skin at a controlled rate to the systemic circulation.
TDDS are dosage forms designed to deliver a
therapeutically effective amount of drug across a
patient’s skin. It reduces the load that the oral route
commonly places on the digestive tract and liver.
Benefits of TDDS are: 1) It improves bioavailability,
2) leads to more uniform plasma levels, 3) longer
duration of action resulting in a reduction in dosing
frequency and 4) reduced side effects and improved
therapy due to maintenance of plasma levels up to
the end of the dosing interval compared to a decline
in plasma levels with conventional oral dosage
forms.
Table: 1 An overview of list of companies and Table 2: ANDA filings overview for
their complex generics portfolio key Indian generics

Complex Generics Companies investing Company Name No. of Brand value

in the area Complex of CG filed
Generics (CG) (USD MN)
Peptides Aurobindo Pharma Alembic Pharma 1 335
Sun Pharma, Alkem Lab 1 779
Liposomes
Dr. Reddy's Labs Aurobindo 9 6,349
Cadila Healthcare 15 4,796
Sun Pharma, Lupin,
Locally Acting Drugs Dr Reddy's Lab 25 18,335
Glenmark
Glenmark Pharma 9 5,278
DPI (Dry Powder
Cipla, Lupin Lupin 30 8,732
Inhalers)
Natco Pharma 13 14,411
MDI (Metered Dose
Cipla, Lupin, Glenmark Sun Pharma 27 12,779
Inhalers)
Torrent Pharma 4 6,871
Transdermal System Cadila, Dr. Reddy's Labs Wockhardt 10 6,445

Source: YBL Research Source: YBL Research

Table 3: Companywise complex generic filings

Company Name Molecule Brand Indication

Sun Pharma Oxycodone Oxycontin Moderate To Severe Pain

Sun Pharma Cinacalcet Sensipar Secondary

hyperparathyroidism
Sun Pharma Abiraterone acetate Zytiga Oncology
Sun Pharma Atomoxetine Strattera ADHD
Sun Pharma Sodium Oxybate soln Xyrem Narcolepsy
Lupin Transdermal Androgel 1.62% Hormone replacement
testosterone gel therapy
Lupin Mesalamine Lialda Ulcerative Colitis

Lupin Sodium Oxybate soln Xyrem Narcolepsy

Lupin Ranolazine Ranexa Chronic Angina Pectoris

Lupin Colesevelam Welchol High Cholesterol

Dr Reddy's Glatiramer Acetate Copaxone Multiple Sclerosis

Dr Reddy's Imatinib Gleevec Chronic Myeloid

Leukemia
Dr Reddy's Buprenorphine HCl and Suboxone sublingual film Maintenance treatment
naloxone HCl of opiod dependence
Dr Reddy's Cinacalcet Sensipar Secondary
hyperparathyroidism
Dr Reddy's Daptomycin Cubicin MRSA (infections)

Cadila Healthcare Atomoxetine Strattera ADHD

14 | Indian Pharma: Transitioning to Specialty Generics

Company Name Molecule Brand Indication
Cadila Healthcare Mesalamine Lialda Ulcerative Colitis

Cadila Healthcare Dexmethylphenidate HCl Focalin XR ADHD

ER Capsules
Cadila Healthcare Palonosetron Aloxi Chemotherapy Induced
Nausea & Vomiting
Cadila Healthcare Rivastigmine transdermal Exelon Patch Dementia related to
Alzheimer's disease
Natco Pharma Lenalidomide Revlimid Multiple myeloma

Natco Pharma Glatiramer Copaxone Multiple Sclerosis

Natco Pharma Imatinib Gleevec Chronic Myeloid

Leukemia
Natco Pharma Fingolimod Gilenya Multiple Sclerosis

Natco Pharma Budesonide capsule 3mg Entocort EC Crohn's disease

Source: YBL Research

Indian Pharma: Transitioning to Specialty Generics | 15

3. Topical Delivery System
Topical products are niche range of specialty
medicines and involve alternate dosage forms and
routes of administration. These products cannot be
categorized therapeutic area-wise as several of these
topical products are dermatology-related products
while sometimes they are therapy focussed as
well (including pain, allergy, CNS, respiratory, etc.).
Topical products here refers to those products that
are delivered by means of contact mostly with an
external bodily surface like creams, ointments,
gels, lotions, foams, nasal sprays, buccal tablets,
suppositories, patches and inhalables.

An overview of the topical drug market and

market consolidation

In the US market the top 10 generic topical players

have a control of the 80 percent of the market
share. The top players including Sandoz (Novartis),
Sun/Taro, Perrigo, Akorn and Teva/ Actavis are well
positioned as there have been steady rise in approval
of generics. Below demograph depicting the most
prominent ones in the generic topical space:

Figure 5: Companies with the largest number of topical ANDA approvals

Sandoz 122
Sun/Taro 88
Perrigo 81
Akorn 61
Teva/Actavis 60
Valeant 48
G and W Labs 39
Apotex 23
Glenmark 20
Tolmar 19
Wockhardt 16
Mylan 14
Endo 14
Lupin 8
Hikma 6
0 20 40 60 80 100 120 140

Source: YBL Research

16 | Indian Pharma: Transitioning to Specialty Generics

The above chart shows the number of ANDA
approvals of topical drugs depicting Sandoz as the
undisputed leader with 122 ANDAs to its credit.
However, the India based companies like Sun/Taro
has 88 ANDAs to its credit, while Glenmark had
20, Wockhardt had 16 and Lupin had 8 ANDAs to
their credit in 2015, as per FDA Orange Book. The
chart below shows the market share of the generic
companies in 2015 based on the topical drugs
prescribed which further reinstates performance
of India’s Sun Pharma with a 7.1 percent of market
share.

Figure 6: Top 10 players in topical drugs (by market share)

Market share based on prescription of topical drugs

Others
Sandoz
17.9%
16.7%
Wockhardt
2.2%
Xttrium Perrigo
2.4% 11.3%
Teva/Actavis
6.6%
Sun/Taro Valeant
7.1% 10.0%
Apotex Akorn
7.2% Hikma 9.5%
9.1%

Source: Industry,
Sandoz YBL Research
Perrigo Valeant Akorn Hikma Apotex Sun/Taro
Teva/Actavis Xttrium Wockhardt Others
Even though the US market had competition the companies have been constantly equipping
catching-up on topical drugs fronts, US stayed as themselves with newer and focussed acquisitions
the largest and the most crucial market poised like Novartis/Sandoz acquired Fougera, Akorn
to grow and further consolidation to take place purchased Hi-Tech and Versapharma, Watson’s
to venture into alternate dosage forms to stay acquisition of Actavis, Endo acquired Par and Teva’s
ahead of competition. To fuel such a high growth acquisitions of Actavis.

Table 4: Key acquisition in the topical medicine area

Acquirer Acquired company Deal value (USD MN) Deal announcement Year
Teva Allergan (generics) 40,500 2015
Lupin Gavis Pharma 880 2015
Endo Par Pharmaceuticals 8,000 2015
Akom Versapharm 440 2014
Akom Hi-Tech Pharmaceutical 640 2013
Sandoz Fougera 1,525 2012
Watson Actavis 5,900 2012
Perrigo Paddock 540 2011
Sun Taro 454 2007
Wockhardt Pinwood 150 2006

Source: YBL Research

Indian Pharma: Transitioning to Specialty Generics | 17

4. Generic Injectables
Complex injectables are also considered to be Table 5: Injectable portfolio of Indian companies
among the valuable specialty range of therapeutics
which includes injections containing high potent Company Injectable
drugs, some of them are lyophilized products
Lupin 3
delivered through innovative liposomal technology
or with the help of other novel drug delivery systems Dr. Reddys 12
(NDDS), long-acting suspensions manufactured Cadila healthcare 3
through cutting edge technologies, etc. NDDS
also includes injections such as user friendly self- Sun Pharma 27
injection devices or injection pens giving patients Aurobindo 33
the extra comfort to use them on their own. Driven
by patent expiry of key injectables like generic Wockhardt 12
Vidaza, Dacogen, etc. and many others along with
price erosion, especially after the product goes off- Source: Orange Book, YBL Research
patent, the generic injectables have been a source
of respite to earn significant revenue for many
Indian generic companies.

The US generic injectables market size is estimated at USD 8.4 BN and is expected to grow at ~10% CAGR
between 2015-2020. A quick look at the therapy-wise break up given below:

Figure 7: Therapy wise injectable market break-up (%)

Therapy wise market break-up (%)

Beta-Lactam
antibiotics 8%

Generic
injectables Oncology 17%
73%

Others 2%

Source: YBL Research

18 | Indian Pharma: Transitioning to Specialty Generics

Figure 8: Key players in US injectable market of the operations which created a gap in adherence
(by market share) to GMP protocols, and led to stricter actions by
US Generic injectable Market Share (US$ Mn)
USFDA.
Pfizer (Hospira)
APP While on the other hand ongoing investments in
maintaining quality standards were not justified
by margins offered by various Government-run
Sandoz

programmes such as Medicare, also which led

Mylan
Hikma
to rationalization of product portfolio for several
Dr. Reddys players. Drug shortages led to improved pricing
Grifols power for the injectables industry and reflected in
Baxter the contrasting volume and value growth during
the 2008-2013 periods. Between 2008-2013 the
injectables segment grew at a CAGR of 19.6% in
Sagent

terms of value, against the volume growth of mere

Teva
0 5 10
2012 2015
Source: Industy, YBL Research
A. Opportunity for Indian players due
to shortage of injectables supply in US
market
Shortage of injectable drugs in US were on rise as
cost of production of old molecules were higher in US
and so they shifted their base to low cost countries
such as India and China and further to bring down
the prices the US companies subsequently started
consolidation by acquiring the smaller players. Rise
of quality issues took place as post-consolidation
set-up demanded rapid integration and streamlining
15 20
1.6%,
25
which clearly indicates the supply shortage
and the prevailing higher price during the period.
While multiple companies have received approvals
for launch of the products with improvement in
supplies, generic injectables market continues to
remain an attractive for Indian companies.
Manufacturing of injectables involved complex
machineries and higher adherence to regulatory
compliance which created high entry barriers.
Companies could only survive through consolidation
due to higher capital and operational cost which
resulted in a market consolidation. The top five
players controlled 73% of the market volume and
50 % by value (year 2015). Pfizer emerged as the
largest player in the injectables category post
acquisition of Hospira in 2018.

Table 6: A quick look at the market consolidation activities through M&A

Price
Acquisition Year Location consideration Rationale
(USD MN)
To accelerate Baxter’s strategy to
Baxter Claris 2017 India 635 become a global leader in the injectable
pharmaceuticals space

Fosun To bolster capability in technology used for

2017 India 1,477
Gland Pharma injectable formulations

To expand its presence and become the

largest player in generic injectables and
Pfizer acquired Hospira 2015 Global 17,000
biosimilars category and grow its pipeline
significantly.

To strengthen its capabilities in complex

Pfizer acquired Inno injectable manufacturing like injection
2014 USA 360
Pharma pens, depot injections along with other
delivery technologies.

Hikma Pharma Plc.

Strengthen its R&D pipeline and prepare it
acquired Bedford 2014 USA 375
for US generic market.
Laboratories (Assets)

Indian Pharma: Transitioning to Specialty Generics | 19

 Price
Acquisition Year Location consideration Rationale
(USD MN)

Hikma Pharma. Plc.

To boost manufacturing and R&D in
acquired Ben Venue 2014 USA NA
injectables
Labs. (Assets)

To expand its portfolio with 14 specialty

Par Pharmaceuticals injectable products and also boost its
Inc. acquired JHP Group 2014 USA 490 pipeline with another 34 products to
Holdings secure a strong foot hold in the growing
specialty market

To expand its product portfolio with 1,200

Mylan Inc. acquired Agila approved injectable products globally
2013 Global 1,850
Specialities along with addition of 900 more in product
pipeline

Source: YBL Research

B. Investment by Indian pharma to
improve positioning in the injectables
market
Indian companies realized that injectables business
has better margins to offer and the US market was
facing shortage of such preparations. However,
regulatory barriers were very stringent and facilities
meeting such criteria along with the requirement of
skilled human resource were a key issue for them.
The best way to fill this gap was through focussed
acquisitions during the juncture, however, US was a
huge market and had wide range of players operating
with a range of capabilities. Indian players decided
to do several small acquisitions as the pocket size
was not huge that time, but they had faith in the
new technology. Below are some Indian players
with their agile steps to strengthen their portfolio in
generic injectables range:

Table 7: M&A to stregthen injectables portfolio

Strategy: Strengthen foot hold

Company Name Acquisitions done with rationale
in injectables
Acquired Pharmalucene Inc. in 2014
for their sterile injectables, which was
Sun Pharma
also supported by their in-house R&D
capabilities
Acquired OctoPlus NV (2013) having
proprietary new drug delivery technologies
Dr. Reddy’s Laboratories
such as automatic injectables and had a
pipeline of complex sterile injectables
Acquired Naomi BV in 2014 which had a
Lupin
significant pipeline of sterile injectables
Strengthen its portfolio of
generic injectables to increase
business not only in terms of
volume but also in value-terms
To enhance capabilities on new
drug delivery systems and to
strengthen its portfolio as market
leader
To foray into complex injectable
products as they provide better
insulation from price erosion

Source: Investor Presentation, YBL Research

Though capital investments are on the higher side for generic injectables when compared to the vanilla
generics, gross margins have increased over the years. This justifies investment in terms of capex for
adhering to USFDA cGMP standards and thus bringing a sustained growth pattern.

20 | Indian Pharma: Transitioning to Specialty Generics

5. Biosimilars
Manufacturing of biologics is a complex process
as biological macromolecules are sensitive and
are produced from living cells. The complex
manufacturing procedures can require fermentation,
aseptic processing, storage and testing. Although
the active ingredient of a chemical pharmaceutical
is usually a unique molecule subject to well-
established analytical tests, but for biologics, the
active component often is a portion of a large
macromolecule. That macromolecule is in turn a
modification of the original protein or polypeptide and
other biological substances that may not be clearly
characterized. Protein and polypeptide products
can contain variable complexes, meaning that they
have variable numbers of identical components in
the molecules. Also, biologics may have differences
in their surface sugars (glycosylation) or folding
patterns, depending on how they are produced. With
biologics, there is also potential for microbiological
contamination of the starting materials.
Biologics are often heterogeneous molecules and/
or polypeptides present, they have an impurity
profile that depends on — and can vary with —
the processes used to make and test each batch.
With biologics, the protein mix must be defined,
and the active agent and supporting agents must
be characterized. In other words, the product does
not need to be homogeneous if the biologic acts via
a molecular group. Blood, for instance, is a biologic
(according to U.S. Food and Drug Administration
classification) which is not composed of a single
uniform molecule.
However, this doesn’t mean that there is a lack of
quality-control measures for biologic manufacture;
actually, just the opposite is true. A typical
manufacturing process for a chemical drug might
contain 40 to 50 critical tests. The process for
a biologic might contain 250 or more. Biologic
Indian Pharma: Transitioning to Specialty Generics | 21
production uses specialized processes that do not
always resemble facilities, machinery, or equipment
used to produce chemical drugs. Construction and
validation of new facilities is disproportionately
expensive and also time consuming. This helps
explain the global shortage of bio-manufacturing
capacity and the cost differential between biologic
and chemical drugs.
Some key categories of biological agents or
complex medicines
Hormone
A substance, usually a peptide or steroid,
produced by one tissue and conveyed by the
bloodstream to another to effect physiological
activity, such as growth or metabolism.
Interferons
Proteins that are normally produced by cells in
response to viral infection and other stimuli.
Interleukins
A large group of cytokine proteins. Most are
involved in directing other immune cells to
divide and differentiate.
Monoclonal Antibodies
A single species of immunoglobulin molecules
produced by culturing a single clone of a
hybridoma cell. Monoclonal Antibodies (Mabs)
recognize only one chemical structure, i.e.,
they are directed against a single epitope of the
antigenic substance used to raise the antibody.

Polypeptides
Peptides containing ten or more amino acids.
Typically, a peptide consists of fewer than 50
amino acids, while a protein has more than 50
amino acids.
Proteins
Naturally occurring and synthetic polypeptides
having molecular weights greater than about
10,000 (the limit is not precise).
Vaccine
An agent containing antigens produced
from killed, attenuated or live pathogenic
microorganisms, synthetic peptides, or by
recombinant organisms. Used for stimulating
the immune system of the recipient to produce
specific antibodies providing active immunity
and/or passive immunity in the progeny.
Dosage and distribution
Biologics can cost thousands of dollars monthly and
require special handling, as they are often less stable
than chemically derived drugs and require controlled
temperature and light, as well as protection from
jostling when in liquid form. For example, many
large proteins cannot be shaken to reconstitute, as
shaking can destroy the protein structure.
Biologics are medications targeted to specific
genotypes or protein receptors. They are most
commonly stored, handled, and delivered by
specialty pharmacies, distributors that specialize
in administering complex-molecule products for
small populations and have specialized handling
and processing and mailing processes in place to
accommodate these complex medications. In many
ways, biologics are considered designer drugs that
are targeted for patients with uncommon diseases
or for genetic subclasses of patients who have
widely prevalent diseases.
22 | Indian Pharma: Transitioning to Specialty Generics
Dosage forms of chemical drugs are highly variable,
and concentrations usually are easy to determine.
Yet, because biologic molecules are too large to be
taken orally without being destroyed before passing
through the intestine into the blood stream, they
usually are injected or infused. Also, potency is
more difficult to quantify for biologic agents, and
monitoring is a key component of early therapy.
New modes of administration, such as via food
that is directly or indirectly transgenic, are being
studied. An example of the latter is goat’s milk that
produces an anti-malarial compound. Transdermally
administered vaccines also are under investigation.
Regulatory issues
With biologic products, the manufacturing process
is a part of the patent and is subject to regulatory
approval. Process changes trigger the need for new
clinical trials, yielding greater development costs.
Partly to remedy this, the FDA’s Center for Biologics
Evaluation and Research (CBER) has developed
draft guidelines for a post approval comparability
protocol allowing companies to combine several
manufacturing changes into a single abbreviated
post approval application when they change their
process. Companies are not required to duplicate
clinical studies after a drug manufacturing change, if
they can show that it is bioequivalent and causes no
new adverse reactions.
Within the USFDA there are two centers- Center
for Biologics Evaluation and Research (CBER) and
Center for Drug Evaluation and Research (CDER)
responsible for approving biologic products. CBER
works on vaccines, gene therapies, antitoxins and
blood, while CDER works on monoclonal antibodies,
growth factors, enzymes and immunomodulators.
6. US Market Opportunity for
Specialty Generics
Indian pharma’s most attractive market, the US still
maintains its sheen, not just because it had the
culture to invest in cutting edge R&D and innovation,
but also because of ever-challenging demand of
procuring medicines for its own citizens. India once
again sees tremendous opportunity, but this time
in specialty range, as the vanilla ones are no longer
profitable due to the stiff competition.
A. Market dynamics
In order to understand why specialty generics are
the new attraction for at least another 5 years, one
has to understand the contrasting strategies of big
pharma of the US market with complex or specialty
pharmaceuticals. The big pharma companies
existing in US market are all vertically integrated
companies and have capabilities to perform tasks
right from scratch till finished products and covers
global market. Their operations include drug
discovery, drug synthesis, pre-clinical research,
clinical development, and regulatory work, scale
up and manufacturing. Such big pharmaceutical
companies traditionally work in 4-6 therapy areas, as
they have the bandwidth, as well as capital to fund
the entire process. Midsized-to-smaller companies
seek to commercialize drugs in new markets through
acquisitions from academia, research institutions or
other companies and focus on specialty range for
quick success. However, in this dynamic scenario
even the traditional-big pharma companies are also
creating specialty divisions. Following are some key
advantages of specialty range of medicines:

Higher margins due to entry barriers (regulatory / legal barriers & technology barriers) as non-
oral solids or alternate dosage medicines encounter higher regulatory/ legal barriers and require
1 complex technology for manufacturing which helps the generic manufacturer quote for a higher
values and provide insulation from price-erosion to some extent.

First to market advantage to avoid pricing pressure associated with commoditization by targeting
2 niche disease range with specialty group of medicines to gain the first mover advantage

Focused therapeutics for targeted patient populations, also including drugs related to orphan
3 diseases which has benefits of quick approvals and extended patent life

Existence of complex diseases including chronic ones which requires personalized medicines,
4 complex procedures and technological advancements have enabled such specialty range of
medicines to be on a priority

Indian Pharma: Transitioning to Specialty Generics | 23

B. Market opportunity
India, with its advantage of low cost-high quality
generic manufacturing capability and being one
of the largest provider of generic medicines,
accounting for about 20 percent share of the
global generics market supply (by volume) makes it
optimally suited to for improve penetration into the
US market. USA is the largest and the most crucial
market India’s pharmaceutical exports contributing
almost 27%, followed by the UK, South Africa,
Russia, Nigeria, Brazil and Germany. India accounts
for around 30% (by volume) and 10 per cent (by
value) in the US$ 70 MN US generics market, while
there is generic opportunity worth 20 BN dollars
is knocking at the doors as patents of several key
drugs are set for an expiry in USA. Many block-
buster molecules lost protection, generating a huge
opportunity for the generic medicines industry.
This trend was at its peak in 2012, since then there C. R&D investments
were fewer major patent expiries (several of which
In order to cope-up with the US market in terms
were respiratory products associated with device).
of better value generation and to deal with price-
Indian companies have realized that specialty range
erosion the large India pharmaceutical companies
of medicines oncology injectables, nasal sprays,
operating in the US market have stepped forward
vaccines, transdermal patches, etc. has better
to make focussed investments in R&D towards
margins. Specialty medicines enjoyed protection
strengthening their portfolio in specialty range.
from generic competition with sales of oral solid
In the past few years the India’s business in US
crossing ~USD 30 BN in 2016 represented 50%
have been adversely impacted due to reasons
of the total US generics market (excluding branded
such as currency fluctuation, price erosion, global
generics). However, the number of players in oral
competition, etc. and hence thinking out-of the-box
solids is huge with intense competition.
was all the more necessary, especially from future
Table 8: Select dosage forms still represent perspective for long term benefit, hence companies
attractive markets like Sun Pharma, Lupin, Dr Reddy’s, started
spending almost 10% of their sales in R&D. Indian
Total Worldwide Generic companies are expected to spend overall more
Alternate than ` 105 BN by FY 2017. Sun pharmaceutical is
market size market in the
Dosage Forms expected to invest close to 460 MN US dollars while
(USD BN) US (USD BN)
other players like Lupin, Glenmark and Dr Reddy’s
370 (includes are also catching-up.
Injectables 8.0
biologics)
Transdermal 30 1.5 Figure 9: Investment scenario in complex
generics
Ophthalmic 25 1.3
Respiratory
Delivery System
28 1.7
products Biosimilars

Implants 11 NA
Respiratory
R&D (Delivery) Complexity

Complex Injectables
Liquids NA 1.9 Dermatologicals

Dermatology 90 6.0 Transdermal

Injectables & Opthal

Nasals 11 0.5 Modified-release dosage

Source: YBL Research Traditional generics

Source: YBL Research

24 | Indian Pharma: Transitioning to Specialty Generics

Table 9: Players in the specialty range in US

R&D Spends (` MN) % of Sales (` MN)

FY16 FY17 FY16 FY17
Sun Pharma 23,000 23,100 Sun Pharma 8.3% 7.6%
Lupin 16,038 23,101 Lupin 11.8% 13.5%
Dr Reddy's 17,834 19,551 Dr Reddy's 11.5% 13.8%
Cadila 6,810 6,653
Cadila 8.0% 6.9%
Torrent 246 432
Torrent 3.7% 6.9%
Glenmark 7,660 10,890
Glenmark 9.9% 11.7%
Cipla 10,353 10,305
Cipla 7.7% 7.2%
Aurobindo 4,770 5,430
Aurobindo 3.5% 3.7%
Alembic 2,646 4,216

Biocon 1,467 1,707 Alembic 9.0% 14.0%

Total 90,824 1,05,385 Biocon 4.2% 4.2%

Source: YBL Research

D. Product filing pattern

There has been a change observed in filing pattern
by Indian generic players in the initial phase of R&D
expansion, while now it has given ways to change
in dosage forms, their routes of administration, etc.
For example Lupin’s R&D expansion, coupled with
the Gavis acquisition, indicates a marked difference
between filed products and those that are in
development. The thrust, as seen in the chart below,
is toward inhalers, injectables and ophthalmic
products. Similarly, Dr. Reddy’s filing comprises
products based on complex characterisation, novel
regulatory pathway and large & complex clinical
studies.

Figure 10: ANDA pipeline in FY17

Biosimilars,
Penicillin Oral
15%
& Injectables Depot
1% Injectables, 2%
Oral Solids Penem
Injectables & Injectables Injectables, 5%
34% Complex Ophthalmics 2%
oral Solid20% 24% Opthalmics, 3%
Oral
& Injectables Dermatology / Oral Solids /
Topical/ Topicals, 3%
Transdermal 1% Liquids, 59%
Controlled
5% Oral
Substances, 5%
Softgel/ Formulations
Injectables 72% Inhalation, 8%
Ophthal
13%
5% Complex
Injectables /
Sterile 23%

Dr. Reddy’s Aurobindo Lupin

Source: YBL Research

Indian Pharma: Transitioning to Specialty Generics | 25

7. Current & Future Opportunities in
Specialty Products
High end drugs and complex treatment procedures
for chronic and niche-acute conditions have given
birth to specialty generics, having the potential
to capture half of the market by 2020. Majority
of Indian players growing in the range of 20%
during the year 2010-15 were mainly due to the
patent cliff advantage, along with their capability
to manufacture low cost vanilla generics, through
which they captured almost 25% of the US market.
During the initial years only few companies managed
to invest and create a portfolio in complex generics
category which includes orals, injectables, nasals,
derma, inhalers, etc., though the margin offered
in regulated markets was way higher in these
segments, in spite of the high entry barriers. An
overview of the different approaches taken by the
pharma industry to get into specialty segment are
as given below:
A. Deep dive into specific disease portfolio
for specialty medicines
Some bold Indian pharma companies started
leveraging the opportunity and subsequently started
diversifying their specialty portfolio in the following
disease segments:
Oncology Opthalmology Dermatology
CNS Pediatrics Respiratory
Indian companies like Dr Reddy’s US subsidiary
Promius Pharma manufactures dermatology product
range, while Lupin is operating in pediatrics category
with Alinia and Locoid lotion. Cipla came-out with
its respiratory range of products through a licensed
tie-up with Meda AB. Section 505 (b) (2) of the US
Food Drugs and Cosmetics Act has been deeply
26 | Indian Pharma: Transitioning to Specialty Generics
explored by Indian companies which allows filing
NDAs for drugs and relies on data not developed
by the applicant or the applicant has not obtained a
right of reference. This pathway to approval saved
pharmaceutical sponsors both time and money. The
pathway approves the following modifications: new
formulations, new combinations, new derivatives,
new manufacturer, new indication, new molecular
entities, etc. Indian companies having the desire
to expand in specialty portfolio made use of the
new formulations category, which is also the
most sought after category driven by market need
especially with qualities such as abuse deterrence,
sustained release, etc
B. Innovative drug delivery systems for
targeted delivery
The job of a drug delivery system is to develop
products that could unleash the full potential of a
drug (i.e. by releasing its active ingredients only
in the target area of the body) with an aim to
maximize efficacy, safety and convenience. Pharma
players realized that a patented release or delivery
technology or creation of a new dosage form can add
tremendous value to the whole medicine and provide
insulation from price erosion to some extent. Eg of
such a technology-Sun Pharma’s Lipodox, which is
a pegylated liposomal doxorubicin formulation (a
generic version of Janssen’s Doxil). Sun Pharma
sold the product prior to the patent expiry of Doxil
in 2012 and still continues to be the only generics
drug. The other forms of delivery system and their
preference depend on the following: the desired
effect, the type of disease and finally the type of
product. Broadly drug delivery routes are commonly
of four types:
Oral routes which are also the most common or
oldest route for novel drug delivery. It is the most
preferred one having the ease of administration, and
are also the highly accepted ones by the patients.
Parenteral route, which refers to administering
medicines into patient body using routes
other than the oral ones. Such route includes
commonly intramuscular, intravenous, intra-arterial,
subcutaneous routes.
Transdermal route, through this route the medicine
is applied on dermis or the skin or at the mucosal
membrane. Such route of administration is
significantly associated with local effect rather than
systematic effect. Such routes directly transfer the
active ingredients to the systemic circulation without
involving liver or gastrointestinal metabolism.
Inhalation route is a preferred option mainly for
respiratory diseases which is targeted to the lungs
and bypass systemic effect.
C. Focused R&D to deepen anchorage into
specialty generics business
In the past 6-7 years some Indian companies realized
that to stay relevant in the generic market they will
have to make investments in R&D and secure their
presence for longer period rather than focusing on
short-term gains. Through a sustained investment in
R&D, companies like Sun Pharma (with its presence
in derma, sterile injectables), Dr Reddy’s (injectables
and complex OSDs), Alembic Pharma (505(2) route)
and Aurobindo (mainly in the injectables segment)
have transformed themselves from a pure-play plain
vanilla generic manufacturer to tide the growing
competition and provide themselves with the
necessary shielding from price erosion to carve a
niche market with limited competition.

D. Understanding the market demands and transforming rapidly

Key strategies adopted by Indian players to keep themselves abreast in the specialty segment:

Quick moves in the market through licensing & partnerships

Glenmark, to fuel its growth in complex

Dr. Reddy’s, to capture
global market in derma
range of products, signed
licensing agreement with
Foamix, an Israel based
formulations major for
development of novel
foam based emollient
against Psoriasis.
Lupin’s US subsidiary
enetered into a strategic
licensing agreement with
MonoSol Rx in 2016 for its
proprietory PharmaFilm
drug delivery technology to
develop multiple pediatric
products.
generics (in a limited competition
opportunity in 2016) collaborated with
Particle Sciences, a US based company to
develop and market a generic version of
Celgene’s ABRAXANE product-paclitaxel
protein-bound particles for injectble
suspension. Particle Sciences develops
this product exclusively for Glenmark,
while Glenmark has obtained exclusive
marketing and distribution rights.

Strategic M&A to stay ahead of market

Lupin is among the top

Indian pharma players
making big acquizitions
in US market. In the year
2015 Lupin acquired
New Jersey based Gavis
Pharmaceuticals LLC for
880 MN USD to strenthen
its position in dermatology
and controlled substances.
Sun, the fifth largest global
Cadila made its mark into
generic drug company had build
specialty pain management
its strength in opthalmology
segment by foraying into 8 BN
through acquizitions. It acquired
USD pain management market
InSite Vison, USA for BromSite.
of USA with the acquizition of
In 2016, it also acquired Ocular
Sentynl Therapeutics, as it gets
technologies to secure its rights
access to its distribution network
for Seciera cyclosporine opthalmic
and customer base.
solution for treatmnt of dry eye.

Indian Pharma: Transitioning to Specialty Generics | 27

8. Recommendations & Way Forward
The Indian pharmaceutical companies operating in
US have already tasted the low hanging fruits in
the form of US patent cliff (which have significantly
contracted with USD 120 BN worth products which
has gone off patent by 2009 and rest close to
USD 55 BN of drugs, including biologics going off
patent within another couple of years). The Indian
pharma players have already entered into a phase
where they are following a differentiated market
approach as some players have already stepped
into manufacturing and distribution of complex
range of products. To create a niche portfolio some
bold Indian players have invested millions of dollars,
as their overall R&D expense has gone up to 10
percent range which was a meager of 2-3% five
years ago. On the other side the USFDA have also
strengthened themselves as they had revised the
GDUFA price not only to just ensure approvals come
in time for the applicants, but also companies who
are not complying to GMP gets heavily penalized.
Few recommendations and suggestions pertaining
to the specialty range are listed below:
A. Address concerns regarding regulatory
interventions by USFDA
The US regulator in the past 2-3 years has increased
their scrutiny on Indian pharma, which has dented
confidence of many aspiring companies. These
companies have just started to explore the US
market with opportunities to play their respective
innings, as the bigger firms are still battling with
quality issues, some of them require immediate
remedial measures failing which their reputations
can be at a serious stake while for most of the
others, it may possibly be a behavioral/ culture issue
which can only be taken care with the intervention
at the decision maker’s level.
28 | Indian Pharma: Transitioning to Specialty Generics
B. Increase investment in R&D as a key to
succeed in specialty generics
A considerable increase in R&D budget to stay
ahead of competition potentially runs the risk of
longer gestation period. Specialty drugs or the high-
entry barrier drugs requires multi-pronged approach
which includes following strict regime on areas such
as safety and efficacy of drugs, navigation through
patents (non-infringing), device acceptability, and
higher clinical trial data requirements in regulated
markets are some of the necessary features.
Companies aiming to be leaders in the regulated
market shouldn’t deter from high investments, also
returns may not come immediately but in long term
value appreciation is on the higher side.
C. Improving manufacturing capabilities
Availability of highly skilled manpower and
infrastructure are important considerations for
manufacturing specialty product range. Specialty
drugs including biologics and plasma are highly
sensitive molecules. For specialty biologics cold
chain management and temperature controls are
critical to the product being received by the end user
in manufacturer-recommended conditions. Since,
it is the manufacturer who chooses a distribution
partner, a regular audit of these processes is very
crucial. These external factors intensify the unique
needs related to specialty distribution and supply
chain. Increasingly, the Food and Drug Administration
(FDA) is asking for Risk Evaluation and Mitigation
Strategies (REMS) to be in place, in-order-to give a
go ahead to the manufacturer for FDA approval for a
new and/ or existing specialty drug.
D. Exploring best-fit strategy to grow in specialty pharma
Indian pharma companies aspiring to grow big in the US market and to register a sustained growth in
specialty segment can identify their core strengths in the following business models:

Specialty Generic
Company

Drug Delivery
Experts

Licensing Experts

Portfolio Adapter

Some companies are experts in niche therapeutic
areas, orphan diseases, etc. focussing on segments
which requires high end approach for therapy,
especially complex therapeutic areas like genetic-
metabolic disorders, cancer, rheumatoid arthritis,
hepatitis C, etc.), others focus on reformulating
their existing branded generic products to increased
therapeutic effect. Some are portfolio adopter
which identify product portfolio which are de-
prioritized by big pharma, after carefully assessing
market potential and future growth in terms of
projected increase in sales volume by means of
additional development investments and intensive
marketing. Licensing experts focus on early and
late stage development candidates, as they hand
hold such candidates towards final approval. Drug
delivery experts target generic molecules and
strategize on reformulating them to enhance their
therapeutic applications, availability, etc. are some
examples of the various business models operating
around specialty or complex range of therapeutics.
Each of these business models provides various
growth possibilities while combining them together
represents the entire specialty range.
E. Strategic partnerships to climb up the
value ladder
To augment pipelines and diversify portfolio the
new and vibrant specialty pharma emerging today
is going to significantly impact the overall industry
with its functioning. Activities like M&A, strategic
partnership, collaborations, cross licensing, etc. are
going to be the key, as the trend is moving towards
personalized medicines. On one hand a sound
infrastructure with highly skilled workforce would
be critical for growth, while on the other hand in
a dynamic scenario the specialty pharmaceutical
manufacturers will have to seek partners that
have expertise in orphan drugs or partners who
will take care of the supply chain management,
inventory services across the board, etc. in order
to have access to innovations and also adds on to
capabilities that can drive future internal R&D and
streamline processes.

Indian Pharma: Transitioning to Specialty Generics | 29

Some key characteristics to succeed in specialty generic space:

STRENGTHENING PRODUCT PORTFOLIO

• Understand & assess market size, patient population, epidemiology and explore opportunities, future
threats and disruptors

• Understand and stay informed about late-stage pipeline activities like new dosage forms (new
product technology) about to reach the market, readily assess the potential commercial success of
the product

• Build and manage a development pipeline and diversify portfolio. Identify gaps in target portfolio and
acquire smaller portfolios to diversify and expand business. Manage a strong pipeline of company
acquisitions to stay competitive

REGULATORY ADHERENCE

• Thoroughly understand and strictly adhere to regulatory compliance as per USFDA guidelines &
procedures

• Monitor changes in regulations & adapt accordingly

• Understand IPR nuances such as the patent landscape, the overall associated risk involvement,
creation of new patents, etc. Assess infringement risk, legal positioning, patent challenges, and
freedom

30 | Indian Pharma: Transitioning to Specialty Generics

BIBLIOGRAPHY
We would like to thank some of the illustrious bodies, news agencies and research journals with the help of
whose publications we have been able to compile this report:
• Centers for Medicare & Medicaid Services (CMS.gov)
• Orange Book, USFDA
• Zydus Investor Presentation
• Annual Report-Dr Reddy’s Laboratories
• Annual Report-Lupin
• Anual Report-Sun Pharmaceutical Industries
• Dr. Reddy’s JP Morgan Annual Healthcare Conference 2016
• Annual Report-Teva Pharma
• ASSOCHAM Conference: MEDCON 2017
• Pharmaceutica Analytica Acta
• JM Financial–Entering a New Regime
• Recent trends in specialty pharma business model, Journal of Food & Drug Analysis, Elsevier
• US Generic Injectables Market, ICRA
• Pharmerging markets, Quintiles-IMS Health
• Why we need Generic Medicines, Quintiles-IMS Health
• Specialty Pharmaceuticals, J.P.Morgan
• Pharmatix
• India Pharmaceuticals, HSBC Global Research
• Pharmaceuticals, Jefferies
• India Pharma, Macquarie Research
• TNN, Times of India
• India Pharma Sector, Credit Suisse
• Specialty Pharmaceuticals, Bank of America-Merrill Lynch
• FiercePharma (Questex)
• Business Standard
• World Preview 2016, Outlook to 2022, EvaluatePharma
• Nirmal Bang Pharmaceutical Sector Report 2017

Indian Pharma: Transitioning to Specialty Generics | 31

Abbreviations with their Expanded Forms
GDP Gross Domestic Product
USFDA United States Food and Drug Administration
GDUFA Generic Drug User Free Amendment
GMP Good Manufacturing Practice
ASEAN Association of South East Nations
CIS Commonwealth of Independent States
ANDA Abbreviated New Drug Application
CAGR Compound Annual Growth Rate
ACA Affordable Care Act
NIH National Institute of Health
FDA Food and Drug Administration
PBM Pharmaceutical Benefit Managers
TPA Third Party Administrators
HIV Human immunodeficiency virus
IBD Inflammatory Bowel Disease
NTE New Therapeutic Entities
DPI Dry Powder Inhalers
MDI Metered Dose Inhalers
CNS Central Nervous System
NDDS Novel Drug Delivery Systems
cGMP Current Good Manufacturing Practices
PCR Polymerase Chain Reaction
CBER Center for Biologics Evaluation and Research
CDER Center for Drug Evaluation and Research
NDA New Drug Application
REMS Risk Evaluation and Mitigation Strategies

32 | Indian Pharma: Transitioning to Specialty Generics

NOTES
NOTES
36 | Indian Pharma: Transitioning to Specialty Generics