Opportunity An Opportunity To Beat Generic Cliff

Summary

The Hatch-Waxman Act shook up the generic drugs business in 1984, and almost 30 years later, it’s safe to say the law had its desired effect. About 84% of the 4 billion prescriptions written each year are for generic drugs, saving patients and government programs billions of dollars a year. In other words, generic drugs are big business. And with a slew of blockbuster brands now off patent, it’s a big business with growing pains. But it is even a bigger business for Meda, when it contributes to the efficacy and safety of these patent expired drugs.


The Industry and Life Cycle Management

In addition to the benefit of a more effective drug delivery system, and by extension allowing for decreased dosages and the reduction or possible elimination of side effects, the cash cow for this company lies in its ability to potentially extend patent protection for the horde of multibillion dollar blockbuster drugs facing the dreaded patent cliff.

During 2012–2018 over US$290 billion of sales are at risk from patent expirations. In fact, in 2013 alone patents will expire on drugs with yearly sales of US$29 billion. Generics are expected to grab 70% of those sales.

In the past 10 years, a huge amount of money has been thrown at acquisitions and the restructuring of research and development (R&D), in an attempt to replace the revenues that are under threat from patent expiries. Over the same time, Evaluate Pharma estimated that $1.1 trillion has been invested in R&D in a bid to revitalize pipelines.

In 2010, the pharmaceutical industry had sales of $860 billion worldwide, up 3% from 2009. Just 133 blockbuster drugs accounted for $295 billion of those sales — about 34% of the market. Of those blockbusters, 13 are set to lose patent protection through 2017.

Meda is position itself only to exploit the drugs that has problems of their optimal uses with respect of its bioavailability, optimal dose and toxicity. The unique technology discovered by Meda Biotech does not have any competition. Discovery does only resolved the bioavailability problem but added synergistic and potentiating effects to treatment.


Patents Expired in 2012

Drug Condition Company 2010 U.S. Sales
Plavix anti-platelet Bristol-Myers Squibb $6,154,000,000
Seroquel antipsychotic AstraZeneca $3,747,000,000
Singulair asthma Merck $3,224,000,000
Actos diabetes Takeda $3,351,000,000
Enbrel arthritis Amgen $3,304,000,000
$19,780,000,000 

Patents expired in 2013 - $29,000,000,000

Meda’s technology will allow drug companies to modify the delivery, pharmacokinetics and dosage that, in addition to significantly reducing or eliminating side effects, it would be patentable. New patents can run for 20 years.

Cholesterol fighter Lipitor held the title “best-selling drug” for a few years, and had been a major source of income for the world’s biggest drug company, Pfizer.

Lipitor (atorvastatin) was released in 1998, and by 2006 it had reached worldwide peak sales of $12.9 billion, accounting for 27% of the company’s revenue.


2010

In 2010, with $10.8 billion in sales, Lipitor still accounted for 15.8% of Pfizer’s total revenue. Unfortunately, Lipitor lost its patent protection and cut Pfizer’s total net income by 50%. Pfizer’s CEO Ian Read stated on January 31, 2012, in USA TODAY: “Patent losses cost the company 5 Billion Dollars.” Aspirin, Advil and so on an endless opportunity.

Meda’s technology has a potential to rejuvenate ageing pharmaceutical assets to counteract generic threats and preserve market share and income streams—it could become one of the more successful specialty pharmaceutical companies in memory.

Pharmaceutical companies desperately need to protect their revenue streams especially towards the end of their patent life as this is when their products are most profitable. For that reason, upfront and milestone payments should be significant and commensurate to the perceived value brought to the project by adopting HYBRID-NANOENGINEERINGTM technology.

In addition to milestone payments, royalties would continue for the life of the newly patented product. For drug delivery companies, royalty rates are generally accepted to be in the 7% to 12% range. Meda is providing much more than just delivery system.

Crown’s Strong patent estate and low development costs for new formulations appears to provide for the least expensive and expedient method for preserving patents and revenue.

In addition to milestone payments, royalties would continue for the life of the newly patented product. For drug delivery companies, royalty rates are generally accepted to be in the 7% to 12% range depending on the time and expense of adopting the extended release mechanism.

Crown’s Strong patent estate and low development costs for new formulations appears to provide for the least expensive and expedient method for preserving patents and revenue streams.

As companies bulked up to take on copies of the world’s best-selling drugs, a wave of mergers has swept the industry. Many credit Actavis ($ACT) CEO Paul Bisaro with starting that trend; then the Watson CEO, his 2012 takeover of Actavis sent a clear message of “go big or go home” reverberating throughout the generics business. Another message will come soon “make the patent expired better or go home. There are new technologies to make a big difference in old drug’s efficacy and safety, you can say biobetter or chemobetter.Actavis hasn’t stopped scouting for deals, and many of its peers have followed suit.

Companies are joining forces to take on new markets, too. Like branded drug makers, generics companies are looking toward emerging markets now that some of the biggest blockbusters have already fallen to generic competition and Western markets are stagnating. Many generics makers have teamed up with or bought local companies that can help with manufacturing, marketing and distribution. Big Pharma companies add their names–and lend their prestige–to domestically made products to differentiate them from the masses of competition. And joining forces with the locals can sometimes be a requirement. To sell one of 70-plus essential drugs in South Africa, companies have to make those drugs in South Africa. Russia requires foreign drug makers to partner with local companies and share technology to get in on the action in that market.

It’s not only emerging markets that are promising growth opportunities for generics makers. Japan, with its aging population and eye on increasing generics usage, has become a prime target for out-of-town generics makers. The Japanese newspaper Nikkei expects the country’s market for generics to expand by 8% per year, hitting $13.2 billion in 2017. Others, like Spain, are looking to bring healthcare costs under control. The country has introduced mandatory generics prescribing where available, a measure that some expect could save it €2 billion a year. Not all countries are quite so eager to attract foreign investment, however. India is one. It boasts a strong generics industry of its own, and its companies led the way worldwide in terms of approvals last year, with 205.


Generic Business – A brief overview

  • Teva represents the leading generics company in both the U.S. and Europe, which generated 51% and 28% of the company’s 2012 sales, respectively.
  • Novartis’ ($NVS) Sandoz may have hauled in nearly $9 billion in generics revenues last year, but net sales for the unit decreased by 8%.
  • Mylan and Agila will boast more than 700 injectable products with a pipeline of 350 more — not bad, with the generic injectables market tagged for compound growth of 13% through 2017.
  • For Abbott Laboratories, generics is a business abroad. The company markets branded generics outside the U.S., with those sales making up its Established Pharmaceutical Products unit.
  • Japan’s Daiichi Sankyo stepped into the generics arena in 2008 with a $4.6 billion deal to become the majority shareholder of India‘s largest generics maker, Ranbaxy Laboratories.
  • Hospira has plans to keep its generics business fruitful. In 2012, more than half the generics in its pipeline fell under oncology or anti-infective drugs–areas it expects to grow.
  • Actavis, which Watson grabbed for $5.9 billion in 2012 to become the world’s third-largest generic drug maker.
  • Sanofi’s generics presence in rapidly expanding markets. Just before he took the helm, Sanofi had picked up Czech generics company Zentiva for $2.6 billion.
  • Sun’s most recent quarter registered 28% higher year-over-year, and as of August, shares sat about 50% higher than they had 12 months earlier. Overall, Sun’s share price has increased sevenfold since 2007.
  • Aspen‘s leadership seems to have one word on its mind: global. The company supplies branded and generic products in more than 150 countries worldwide and boasts 12 manufacturing sites on 6 continents. These produce generics ranging from antidepressants to antibacterials in tablets, injectables, liquids, semi-solids and several other forms.
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