Big pharmas distribute Indian generics

Narayan Kulkarni

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