August 18, 2009

Big pharmas distribute Indian generics

Aug 18, 2009: Pfizer, world’s No. 1 pharma company with revenues of $48.3 billion in 2008 as compared with 2007 full-year revenues of $48.4 billion announced that it has entered into licensing agreements with two Indian pharmaceutical companies namely Aurobindo Pharma and Claris Lifesciences strengthening its position in emerging markets and significantly expanding its portfolio of medicines in its Established Products Business Unit.

Similarly, GlaxoSmithKline, world’s No. 2 pharma company announced an agreement with Dr. Reddy’s Laboratories in June, to develop and market for selected products across an extensive number of emerging markets, excluding India.

Commenting on the deals with the Indian generic players, Jeff Kindler, Chairman and CEO of Pfizer said, “The announcement demonstrates Pfizer’s commitment to improving the global public health landscape by making needed quality medicines—in a range of disease areas—accessible to underserved populations worldwide. The off-patent marketplace worldwide too often suffers from quality and supply reliability issues. With our broad established medicines portfolio and our world-class manufacturing capabilities, Pfizer is in an ideal position to supply high-quality medicines at affordable prices to people around the world.”

Pfizer has been active in generic business through its subsidiary, Greenstone LLC, (the seventh-largest generic pharmaceutical company in the world by volume of prescriptions dispensed).

With the above deals, Pfizer has enhanced its offerings in the emerging markets that are experiencing growth of 12-13 percent to reach $85-90 billion by 2012. The growth is driven by greater access to generic and innovative new medicines. Pfizer hopes to expand its product offerings and pick up enough sales to help cushion the blow when Lipitor goes off patent in 2011.

“It is the era of alliances and partnerships and with the big shifts happening in the global pharmaceutical industry, this relationship will keep Claris at the forefront of change. Through Pfizer, we will get access to extremely competent sales and marketing partner for our regulated markets strategy in order to enhance our existing presence in these markets,” said Arjun Handa, Managing Director and CEO, Claris Lifesciences.

Commenting on the deal with Dr Reddy’s Labs, Mr Abbas Hussain, President Emerging Markets, GlaxoSmithKline said, “This is significant step forward in our strategy to grow and diversify GSK’s business in emerging markets. Growth in both population and economic prosperity is leading to increased demand for branded pharmaceuticals. This new alliance will combine Dr Reddy’s portfolio of quality branded pharmaceuticals together with GSK’s extensive sales and marketing capabilities. Together we’ll be able to deliver more medicines of value to more patients in these countries.” However, Mr GV Prasad, Vice-Chairman & CEO, Dr Reddy’s Labs said, “We combine forces with GSK to fully realise the potential of our strengths in technology, product development and manufacturing across a range of high growth emerging markets. We hope to take our purpose of providing affordable and innovative medicines to a much wider population through this partnership.”

Mr Sujay Shetty, Associate Director, Pharma Life Sciences, PwC, India said “It is a time for collaboration and partnership. In that direction the latest developments are positive developments for both Indian companies and MNCs. For generic companies, the tie ups will open up to offer their affordable and innovative medicines to a much wider population. Without reinventing the wheel, the MNCs can offer quality products by working with partners at affordable price in the emerging markets that are growing faster than the developed pharma markets.”

However, Mr Bibhuti Bhusan Kar, Program Manager, South Asia and Middle East, Healthcare-Pharmaceuticals & Biotechnology, Frost & Sullivan, India, said, “Drying pipeline of new drugs, increased R&D expenditure required to bring a drug to the market, increased pressure in the developed nations to bring down the health care costs are some of the factors that are responsible for the big MNCs to fine tune their business models to enter/increase their portfolio into the branded generics market.”

The other factor that is driving the big pharmas to look at branded generics is strategic shift in the healthcare reform in the US (world’s no 1 pharma market). The pharma majors joined hands recently to reduce the healthcare cost increases by $2 trillion over a decade. These companies can achieve this only by introducing branded generics in the US.

Mr Bhusan further said, “India being a low cost manufacture destination and the fact that India has highest number of US FDA approved plants outside the US and is more experienced meeting the regulatory requirements of the US and EU, Indian manufacturers are the preferred choice as a partner for sourcing the products.”

Reacting to the developments, Hitesh Sharma, Partner & National Leader, Health Sciences Practice, Ernst & Young India, said, “The Indian companies are into similar activities i.e, distributing the products of MNCs in India. Now, MNCs will distribute Indian generics. The companies are always scouting for opportunities for growth and mutual benefits. The deals will happen if it will be win–win for both the parties. However, it is difficult to say how many such deals one can expect in near future.”

“Looking at the present scenario, one can expect more such deals in future as well by these MNCs with generic players especially with the Indian manufacturers, because of their strengths in technology, diversified product portfolio and rich experience in the developed markets,” points out Mr Bibhuti Bhusan.

Entering the new markets, these kinds of deals will be an exciting opportunity for Indian generic companies like Cipla, Wockhardt, Lupin, Glenmark, Sun Pharma, Cadila as they provide stability towards their earnings and accelerate their growth plans.

India well positioned to leverage partnering options
Big Pharma has been under strain to sustain its existing revenue levels due to the challenges faced in terms of slowdown in new product launches and thinning of new product discovery pipelines clubbed with a large number of blockbuster drug patent expiries and increasing penetration of generics, particularly in the current market scenario. All this has led Big Pharma to aggressively look at building sustainable diverse business models by foraying into and strengthening new high-growth business.

Foraying into related sectors such as biotechnology, counted among the most promising sectors worldwide. Building generic product portfolios either through acquisitions (such as the Daiichi–Ranbaxy deal) or through strategic alliances (such as the recent GSK–Dr Reddy’s, Pfizer-Aurobindo and Pfizer-Claris deal).

Given the increasing use of generics globally, as governments worldwide as well as private healthcare payers look at controlling rising healthcare costs, the growth of this market outperforms the growth of the overall pharma market, making it an attractive investment opportunity. Further, strategic alliances are a less risky option than pursuing outright buy-outs and are hence emerging as a preferred route.

It may be observed that traditionally there have been similar examples where Big Pharma has built its presence in the generics market through focused business units. However, given the current unprecedented pressures that the Big Pharma is reeling under, this strategy has gained all the more importance and we can expect more such strategic alliances between the Big Pharma and generics players in the time to come.

With India already having made its mark in the global generics market as a supplier of high quality – low cost drugs and its strengths in terms of product development and manufacturing portfolios, niche therapeutic focus and well-balanced geographic mix focusing on both regulated and semi-regulated markets, it is well positioned to leverage the opportunity and further explore such partnering options. Additionally, these companies can strongly benefit in terms of financial support, brand name and well established marketing and distribution channels of the Big Pharma player.

- Source: BioSpectrum Asia Edition, Aug 18, 2009

- Link: http://www.biospectrumasia.com/content/060809IND10235.asp

August 3, 2009

The French connection

BV Mahalakshmi, Sudhir Chowdhary

Posted: Monday, Aug 03, 2009 at 2346 hrs IST
Updated: Monday, Aug 03, 2009 at 2346 hrs IST

Indian vaccine makers seem to have entered good times. As France’s largest drug maker, Sanofi-Aventis, agrees to buy a majority stake in Hyderabad-based Shantha Biotechnics, a sense of excitement combined with renewed confidence has rejuvenated the domestic vaccine makers.
Investor interest has shifted back to the vaccine sector and there is widespread excitement in industry circles that the product portfolios of Indian vaccine companies are niche and less susceptible to competition and are hence attracting global recognition. The Sanofi-Shantha deal has highlighted the increasing potential of Indian vaccine companies in the realm of drug research. Excitement is also on account of the fact that intellectual property and manufacturing facilities of Indian companies will attract strategic investors in the times to come.
The deal has again brought into focus the strong value proposition that Indian vaccine makers such as Serum Institute of India, Panacea Biotec, Indian Immunologicals, Shantha Biotechnics, Bharat Biotech bring with them in terms of strong discovery research, combined with good manufacturing capabilities. They have made their mark as reputed vaccine producers in the world, exporting to a number of countries. The fact that Shantha Biotech was able to attract Sanofi with its intellectual property and good manufacturing facilities is a sign of the maturity of the Indian vaccine industry.
No sooner was the deal announced that the stock prices of domestic vaccine makers skyrocketed, riding on investor interest. A rich product pipeline along with several vaccines under advanced stages of development at domestic companies add to the glitter. Indian vaccine makers have a long history of supporting WHO and UNICEF in developing and supplying affordable vaccines such as, oral polio, measles, combination vaccines etc. Products in the pipeline include vaccines for rotavirus, swine flu, typhoid, various forms of cancer and other adult vaccines.
Perceived as low growth and uneconomical earlier, vaccines have been in focus for global drug companies during the last few years; the sector is currently estimated at $20.6 billion and is said to be growing at 10% compared to the 3-4% growth for the overall global pharmaceutical industry. Hence global drug majors facing patent expiry and shrinking product pipelines are increasingly looking at this segment to maintain their topline and profitability. The vaccine segment continues to enjoy good profitability—thanks largely to the high entry barriers—and hence has been drawing renewed attention of the drug majors.
The US and European vaccine majors have targeted emerging markets as sales in the mature markets of America and Europe slow. For instance, Shantha’s buyout is part of Sanofi-Aventis CEO Chris Viehbacher’s strategy to aggressively grow the company’s vaccine business. As on date, he has inked four vaccine deals—three in emerging markets—since he became the company’s CEO last year. These include a deal for Mexico’s generic maker Laboratorios Kendrick, Brazilian generic drug company Medley, and California-based cancer specialist BioPar Sciences. Sanofi is trying to refill a development pipeline seen as lacking new drugs to replace blockbusters such as Plavix, which is used to prevent blood clots that will soon come off patent and face competition from generic drugs. Moreover, vaccines are considered to be increasingly important as they are typically ordered by governments in bulk and can be administered to large populations.
No wonder, the Shantha Biotechnics buyout did not surprise many. But what left many astounded was the size of the deal. At a buyout price of Rs 3,778 crore, the transaction even exceeded the combined Indian vaccines industry’s revenues of Rs 3,587 crore for the fiscal 2008-09. Equally shocking was the valuation more than eight times of its projected sales of Rs 440 crore for the current year. Analysts reckon the deal has catapulted Shantha Biotechnics into the big league. It is now one of the top 15 drug companies by market valuation, ahead of even the Indian subsidiaries of global vaccine majors in terms of market value.
“The deal sends a strong signal that Indian pharmaceutical and biotech companies are well respected. The high valuation is due to our quality conscious products at low prices. We have been focusing mainly on good quality and developing new products for affordable healthcare,” says KI Varaprasad Reddy, managing director, Shantha Biotechnics. “The valuation comes at a historical cost which created and then distributed wealth in the form of employee stock options. Even the lowest employee got about Rs 4-5 lakh on an average,” he adds.

According to Nitin Deshmukh, head of private equity at Kotak Mahindra Bank, the valuation is justified and the Sanofi-Shantha Biotech deal is not a one-off deal. “Finally, there is recognition for intellectual property being generated by an Indian vaccine company. There are a number of biotech companies which are not in the public domain and yet, they are doing some significant work. As they approach the market with their product, I am sure we could expect similar valuations for them too,” he adds.

Without any doubt, the deal is seen as a strategic fit for both Sanofi-Aventis and Shantha. While the French firm would benefit by acquiring a slew of new vaccines under development at Shantha facilities, the Indian company would gain access to new technologies and the global market. “Shantha would provide Sanofi Pasteur with a portfolio of new vaccines in development which complement Sanofi Pasteur’s current vaccines, positioning the company to accelerate its growth in strategically important emerging markets,” says Viehbacher. “Shantha’s manufacturing facilities allow Sanofi Pasteur to gain high quality capacity in order to enable us to provide important vaccines at affordable prices to many people around the world,” he reiterates. Clearly, it is the lure of the rich product pipeline of Shantha Biotech which attracted Sanofi-Aventis to go for the acquisition. The Indian company is developing generic biologicals, therapeutic antibodies, proteins and vaccines in the fields of oncology, infectious diseases and platform technologies. The new products being developed at the Hyderabad facility include rotavirus vaccine for infant diarrhoea, conjugated typhoid vaccine and human papillomavirus vaccine for cervical cancer.

In addition, most of the existing vaccines in the Indian company’s pipeline are ready for use. Besides, Sanofi will also be able to take advantage of Shantha’s manufacturing facilities in Hyderabad. Nevertheless, this deal will definitely have a positive outlook for the Indian vaccine sector. There are other companies such as Biocon, Panacea Biotec, Serum Institute, Bharat Biotech to name a few among the major ones, which boast of a rich product pipeline.

Post Sanofi’s buyout of Shantha Biotech with such a good deal, other companies may not mind looking for such a deal if they get such a valuation, opines Bibhuti Bhusan Kar, programme manager, South Asia & Middle East, healthcare—pharmaceuticals and biotechnology, Frost & Sullivan.

Krishna Ella, chairman, Bharat Biotech says, “There is a good recognition for Indian vaccine manufacturers. Companies manufacturing vaccines from the country are being approached world over as there is a huge demand.”

The key drivers for global vaccines market has been mass immunisation programmes in emerging markets like Brazil, Cuba, India and Russia and various developed countries agencies stocking up in anticipation of diseases. Besides this, developments occurring in pediatric vaccines have been astounding.

The sector has also been boosted by funding from various governments and private agencies as well as better and more innovative combination products/delivery systems being developed, informs Navroz Mahudawala, associate director with Ernst & Young’s health sciences practice.

There are two important strategic reasons because of which the interest in India and Indian markets would continue. India is slowly emerging as a global manufacturing base for low cost vaccines. “From a demand angle, while the emerging markets currently represent around 75% of volumes; they actually contribute less than 25% in value. This dichotomy will get corrected over a period of time; with increasing purchasing power and increased spending from organisations like UNICEF,” says Mahudawala.
Besides most Indian manufacturers have a robust product pipeline with several products in advanced stages of development. This is expected to be well received in various developed markets.

The other factor is India’s domestic market potential itself. According to industry sources, the Indian vaccines market is currently Rs 3,587 crore in size and is expected to grow at a CAGR of 20-25% over the next few years. Although the size of the market is relatively low, it is expected to grow owing to factors like government immunisation programmes and increased disease awareness. India offers huge potential to offer products from their global portfolio. Given the above factors, it is expected that global vaccine majors will look to increasingly expand their presence in India either organically or through strategic alliances or even acquisitions. The action seems to have just begun.

- Source: The Financial Express, Aug 03, 2009

http://www.financialexpress.com/news/the-french-connection/497143/3