While drug makers around the world are lamenting the death of their patent rights on many blockbusters, there is a certain tribe smiling about it – the Indian generic tribe
A year back, when John Lechleiter took charge as the CEO of the $21.8 billion-a-year earning US pharma giant Eli Lilly, he decided to send his top executives a gift. It was a digital clock, which counted backwards, second by second. The clock was programmed to stop ticking precisely 48,384,000 seconds later. The deadline – October 23, 2011, the day when Eli Lilly’s top-selling (which raked-in $4.9 billion in 2009) schizophrenia pill Zyprexa would go off-patent, setting-off the alarm for generic drug companies to work double-time. This is however, not the only heartache in store for Lechleiter. Besides two more blockbusters losing their exclusivity rights by 2016 (its second-best selling Cymbalta expires 2013 and its third-best Alimta in 2016 – two drugs that make for another $4.8 billion-a-year), two of its most promising compounds failed the final clinical trials last year. Result: Lilly’s stock could not withstand the shock that the company had no new compound ready to hit the global market, while standing to lose close to $10 billion (of its $21.8 billion revenues FY2009) by 2016. It became the worst performer amongst the eleven S&P pharma stocks, and fell by 11% in just the year 2009. This is however just the beginning of the landslide for Eli Lilly, and much remains to be seen. As for the clock, it has started ticking backwards, and it’s the generic challengers that are waiting for the time, to make most of the misery of the once-proud patent holders, Lilly being just an instance.
When shareholders don’t like you, they let you go sans remorse. Much as this sounds a “generic” take on shareholder activism, it is true. Jean-Paul Garnier was voted out despite trying hard for seven-and-a-half years to revive the GlaxoSmithKline stock. Busy ensuring delivery of drugs at cost and selling 90% of its vaccines at not-for-profit prices in developing economies, it lost focus on new drug discovery. During his tenure, the GSK stock had fallen by 41%. He got the boot in May 2008. His successor Andrew Witty hasn’t made amends yet. Since February 2009, the company has enforced price cuts on its patented versions, in more than 50 countries, while winning just one patent (on a vaccine for H1N1 influenza). Witty is dreading the day when the second-highest selling drug in history, the $7.8 billion-a-year earning Advair, expires on April 1, 2011. Pfizer, the biggest pharma giant is no exception. CEO Henry McKinnell was booed-out in June 2006, following a stagnant stock price. His successor Jeff Kindler hasn’t been an exception. Under him, Pfizer’s stock has touched the sub-$18 level for the second time in over a decade and its bottomlines for 2009 have shown a drop of 57% as compared to pre-Kindler days. Worse, despite losing patents on 14 big drugs by 2014 (representing 70% of its annual revenue for 2009), its new launches have simply been shadows. Of the biggest setbacks will be the losses of Lipitor’s patent (the largest-selling drug ever) in 2011, and that of Viagra in 2012 and Celebrex in 2013 – add the losses from these two, and you would have Pfizer’s revenues being reduced by an alarming $13.74 billion (as per Evaluate Pharma, loss of revenues, post-patent expiry, is estimated at 85%). “Pfizer has a number of downward revenue revisions. You have to believe board members are scratching their heads,” says David S. Moskowitz, Analyst at Friedman, Billings, Ramsey Group Inc. The company has 148 compounds in the early developmental stages, but hopes of producing another blockbuster drug remains a fantasy.
Time is running out fast for these Benjamin Buttons of the pharma world, and of the lot most hated by them, the Indians are definitely on top of the list! But the volume-playing generic players in the country won’t mind it. The potential that lies in wait to be tapped by the Indian players can be imagined by the fact that despite being the third largest player in terms of volumes in the world, the Indian pharma market is still 14th in terms of value ($21.04 billion, as per Department of Pharmaceuticals, Ministry of Chemicals and Fertilizers). A market which was written-off about half-a-decade back, when the world was heaving forward at a great rate of knots to catch the patent blockbusters bus, is now chugging ahead faster than imagined before. While the domestic market alone is expected to grow at a CAGR of 12-15%, as opposed to a global average of 4-7% during 2008-2013 (according to an October 2009 report released by research firm IMS Health), Indian pharma companies are finding the proposition of lapping up the opportunities granted by the patent expiries simply irresistible. Over the next two years, more than 26 bestsellers, with an annual value of $70 billion (Rs.3.1 trillion) are going off-patent, representing 240% of the current Indian pharma space. This justifies well why despite struggling to win approvals for generic versions from the USFDA, Indian drugmakers are filing for generic licences at a brisk pace. Indian companies have filed for approvals to market 11 of 15 drugs that go off-patent by 2010 and 22 of the 26 that expire by 2012. “These developments present large opportunities to the Indian pharma companies and with their low-cost manufacturing capabilities India is well-positioned to tap the opportunities,” says Animesh Kumar, Principal Consultant, Datamonitor Healthcare to B&E.
Explaining his company’s outlook in the generics space, Ramesh Adige, President, Ranbaxy tells B&E, “Ranbaxy is today well positioned in the global generics space and is amongst the top 10 generic companies globally offering products in over 125 countries. With over $80 billion of drugs going off patent by 2012, the generics market will continue to provide attractive growth opportunities in future.” Even Uday Baldota, VP – Investor Relations, Sun Pharma tells B&E, “In our view, generic drugs is a significant, growing and profitable opportunity, worldwide. We are working towards getting a meaningful presence in the worldwide generic industry over the longer term.” As per a report by HDFC Securities, 34 Indian players are looking ahead to play this game. While Dr. Reddy’s stands to gain the most, there are others like Ranbaxy and Sun Pharma (despite their troubles with USFDA), which are amongst the top gainers. Even Cipla, which has so far avoided the US market, has filed for permission to market generic/low-cost editions of drugs that make over $45 billion annually! While 10 Indian firms have seeked permission to sell generic versions of the highest-selling Lipitor, in US alone, it is Merck’s Cozaar (anti-diabetic drug) and Astra Zeneca’s Arimidex (anti-cancer), which have received the maximum number of applications from the country.
A year back, when John Lechleiter took charge as the CEO of the $21.8 billion-a-year earning US pharma giant Eli Lilly, he decided to send his top executives a gift. It was a digital clock, which counted backwards, second by second. The clock was programmed to stop ticking precisely 48,384,000 seconds later. The deadline – October 23, 2011, the day when Eli Lilly’s top-selling (which raked-in $4.9 billion in 2009) schizophrenia pill Zyprexa would go off-patent, setting-off the alarm for generic drug companies to work double-time. This is however, not the only heartache in store for Lechleiter. Besides two more blockbusters losing their exclusivity rights by 2016 (its second-best selling Cymbalta expires 2013 and its third-best Alimta in 2016 – two drugs that make for another $4.8 billion-a-year), two of its most promising compounds failed the final clinical trials last year. Result: Lilly’s stock could not withstand the shock that the company had no new compound ready to hit the global market, while standing to lose close to $10 billion (of its $21.8 billion revenues FY2009) by 2016. It became the worst performer amongst the eleven S&P pharma stocks, and fell by 11% in just the year 2009. This is however just the beginning of the landslide for Eli Lilly, and much remains to be seen. As for the clock, it has started ticking backwards, and it’s the generic challengers that are waiting for the time, to make most of the misery of the once-proud patent holders, Lilly being just an instance.
When shareholders don’t like you, they let you go sans remorse. Much as this sounds a “generic” take on shareholder activism, it is true. Jean-Paul Garnier was voted out despite trying hard for seven-and-a-half years to revive the GlaxoSmithKline stock. Busy ensuring delivery of drugs at cost and selling 90% of its vaccines at not-for-profit prices in developing economies, it lost focus on new drug discovery. During his tenure, the GSK stock had fallen by 41%. He got the boot in May 2008. His successor Andrew Witty hasn’t made amends yet. Since February 2009, the company has enforced price cuts on its patented versions, in more than 50 countries, while winning just one patent (on a vaccine for H1N1 influenza). Witty is dreading the day when the second-highest selling drug in history, the $7.8 billion-a-year earning Advair, expires on April 1, 2011. Pfizer, the biggest pharma giant is no exception. CEO Henry McKinnell was booed-out in June 2006, following a stagnant stock price. His successor Jeff Kindler hasn’t been an exception. Under him, Pfizer’s stock has touched the sub-$18 level for the second time in over a decade and its bottomlines for 2009 have shown a drop of 57% as compared to pre-Kindler days. Worse, despite losing patents on 14 big drugs by 2014 (representing 70% of its annual revenue for 2009), its new launches have simply been shadows. Of the biggest setbacks will be the losses of Lipitor’s patent (the largest-selling drug ever) in 2011, and that of Viagra in 2012 and Celebrex in 2013 – add the losses from these two, and you would have Pfizer’s revenues being reduced by an alarming $13.74 billion (as per Evaluate Pharma, loss of revenues, post-patent expiry, is estimated at 85%). “Pfizer has a number of downward revenue revisions. You have to believe board members are scratching their heads,” says David S. Moskowitz, Analyst at Friedman, Billings, Ramsey Group Inc. The company has 148 compounds in the early developmental stages, but hopes of producing another blockbuster drug remains a fantasy.
Time is running out fast for these Benjamin Buttons of the pharma world, and of the lot most hated by them, the Indians are definitely on top of the list! But the volume-playing generic players in the country won’t mind it. The potential that lies in wait to be tapped by the Indian players can be imagined by the fact that despite being the third largest player in terms of volumes in the world, the Indian pharma market is still 14th in terms of value ($21.04 billion, as per Department of Pharmaceuticals, Ministry of Chemicals and Fertilizers). A market which was written-off about half-a-decade back, when the world was heaving forward at a great rate of knots to catch the patent blockbusters bus, is now chugging ahead faster than imagined before. While the domestic market alone is expected to grow at a CAGR of 12-15%, as opposed to a global average of 4-7% during 2008-2013 (according to an October 2009 report released by research firm IMS Health), Indian pharma companies are finding the proposition of lapping up the opportunities granted by the patent expiries simply irresistible. Over the next two years, more than 26 bestsellers, with an annual value of $70 billion (Rs.3.1 trillion) are going off-patent, representing 240% of the current Indian pharma space. This justifies well why despite struggling to win approvals for generic versions from the USFDA, Indian drugmakers are filing for generic licences at a brisk pace. Indian companies have filed for approvals to market 11 of 15 drugs that go off-patent by 2010 and 22 of the 26 that expire by 2012. “These developments present large opportunities to the Indian pharma companies and with their low-cost manufacturing capabilities India is well-positioned to tap the opportunities,” says Animesh Kumar, Principal Consultant, Datamonitor Healthcare to B&E.
Explaining his company’s outlook in the generics space, Ramesh Adige, President, Ranbaxy tells B&E, “Ranbaxy is today well positioned in the global generics space and is amongst the top 10 generic companies globally offering products in over 125 countries. With over $80 billion of drugs going off patent by 2012, the generics market will continue to provide attractive growth opportunities in future.” Even Uday Baldota, VP – Investor Relations, Sun Pharma tells B&E, “In our view, generic drugs is a significant, growing and profitable opportunity, worldwide. We are working towards getting a meaningful presence in the worldwide generic industry over the longer term.” As per a report by HDFC Securities, 34 Indian players are looking ahead to play this game. While Dr. Reddy’s stands to gain the most, there are others like Ranbaxy and Sun Pharma (despite their troubles with USFDA), which are amongst the top gainers. Even Cipla, which has so far avoided the US market, has filed for permission to market generic/low-cost editions of drugs that make over $45 billion annually! While 10 Indian firms have seeked permission to sell generic versions of the highest-selling Lipitor, in US alone, it is Merck’s Cozaar (anti-diabetic drug) and Astra Zeneca’s Arimidex (anti-cancer), which have received the maximum number of applications from the country.
Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
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IIPM: Indian Institute of Planning and Management
IIPM makes business education truly global
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An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
Prof. Rajita Chaudhuri's Website
domain-b.com : IIPM ranked ahead of IIMs
Arindam Chaudhuri's Portfolio - he is at his candid best by Society Magazine
IIPM Best B School India
Management Guru Arindam Chaudhuri
Rajita Chaudhuri-The New Age Woman
IIPM's Management Consulting Arm-Planman Consulting
Professor Arindam Chaudhuri - A Man For The Society....
IIPM: Indian Institute of Planning and Management
IIPM makes business education truly global
IIPM B-School Detail
