Tools and Strategies for Launching a Successful Generic in Today

1
Tools and Strategies for Launching a Successful
Generic in Todays Ultra Competitive Environment

• KATE KUHRT
• BERLIN
• SEPTEMBER 27, 2008

2
BEST OF TIMES

• Population all over the world getting older
• Increase in the size of middle class in many
  countries
• Governments and employers promoting use of
  generic drugs in efforts to slow down increase in
  health care spending
• Increased acceptance of generic drugs by patients
  and physicians
• A number of blockbusters losing patent protection

3
AND WORST OF TIMES

• Innovation drought
• ANDA backlog and authorized generics
• Pressure on prices and diminishing margins
• Government regulation
• Consolidation among wholesalers and retailers
• Increased competition
• Generic filings and approvals at all-time high
• A number of new entrants, many from India, often
  with access to low-cost APIs
• Overcapacity in manufacturing
• Focus on market share rather than bottom line
• Authorized generics in the U.S.

4
ANDA APPROVALS BY INDIAN GENERICS
Through August 15, 2007
Source Newport Strategies Horizon Global system
5
2007 YTD FINAL ANDA APPROVALS BY COUNTRY
Through August 15, 2007
Source Newport Strategies Horizon Global system
6
ARE THE GENERICS INDUSTRTS GOLDEN YEARS OVER?

• Expectation that only the fittest will survive
• Coping strategies aimed at
• Reducing cost
• Reducing risk
• Improving speed to market
• Differentiation
• Achieving critical mass

7
COPING STRATEGIES CONSOLIDATION

• Consolidation expected to continue in pursuit of
• Top-line growth
• Opportunities in new markets
• Synergies
• Example Barrs acquisition of Pliva
• Biogenerics
• New dose forms
• Presence in emerging markets
• Access to API
• Result Industry will likely be dominated by a
  handful of global players plus many small,
  focused players

8
LEAGUE TABLES ARE CONSTANTLY SHIFTING
Source TS Research
9
COPING STRATEGIES GEOGRAPHIC DIVERSIFICATION
EUROPE

• Recent Examples
• Barr-Pliva
• Mylan-Merck Generics
• Hospira-Mayne
• DRL-Betapharm
• Matrix-Docpharma
• Ranbaxy-Terapia
• Aurobindo-Milpharm
• Alkem close to buying two firms in UK and Germany
• Pros
• Counterweight to the U.S. market
• Some markets still focused on branded generic
• Rapid growth of pharma industry in E. Europe and
  Russia
• Cons
• Some markets as competitive as U.S.
• Generic uptake high at the expense of margins

10
COPING STRATEGIES GEOGRAPHIC DIVERSIFACTION
JAPAN

• Pros
• Japanese generics market seen as having a
  tremendous growth potential
• Currently 5 by value, 17 by volume
• Cons
• Some still skeptical about actual market
  potential
• Difficult for foreign companies to do it alone
• Acquisitions, JVs, and marketing agreements
  provide ready access to
• Manufacturing
• Marketing
• Distribution relationships

11
COPING STRATEGIES GEOGRAPHIC DIVERSIFACTION
JAPAN

• Acquisitions
• Zydus Cadila acquired a 100 stake in Nihon
  Universal Yakuhin in April 2007
• Joint Ventures
• In November 2005, Ranbaxy increased equity stake
  in Nippon Chemiphar from 10 to 50
• Marketing Agreements
• In August 2005, Lupin entered into a long-term
  marketing agreement with Kyowa Pharmaceutical
• In March 2006, Hospira-Taiyo agreement to sell
  each others injection agents
• Additional companies to watch
• Continued speculation that Teva will eventually
  acquire a Japanese firm
• Rumors that one of the three large generics
  (Nichi-iko, Sawai, Towa) will come under part
  ownership by a large multinational
• Torrent Pharma opened a fully-owned subsidiary in
  Yokohama in April 2006
• Dr. Reddy's considering setting up an office in
  Tokyo or Osaka

12
COPING STRATEGIES BACKWARD INTEGRATION INTO API

• Recent examples
• Mylan-Matrix
• Barr-Pliva
• Pros
• More control over cost and access to API
• Decreasing number of established API
  manufacturers still independent due to MA
• Different parts of the value chain may make money
  in different products
• Faster response times
• Cons
• No one plant can make all APIs required by a
  typical generic
• Making just enough for captive use often not
  economical
• Other dose companies wary of buying API from a
  competitor

13
COPING STRATEGIES MOVING MANUFACTURING AND RD
TO LOWER-COST COUNTRIES

• Applies to both API and dose
• Examples
• Sandoz multiple units in India
• Teva scientists in Faridabad, acquired Regent
  Drugs (JK)
• Apotex manufacturing and RD facilities in
  Bangalore
• Ratiopharm RD center in Goa
• Stada production sites in Russia, Vietnam
  (5050 JV) and China
• Perrigo JV in China for ibuprofen
• Actavis API development facility and CRO in
  India
• Pros
• Abundance of scientists
• Cost savings
• Cons
• Language barriers
• Potential for intellectual property theft
• Quality control

14
COPING STRATEGIES ALLIANCES WITH COMPANIES IN
LOWER-COST COUNTRIES

• Applies to both API and dose Manufacturing
• Examples
• Alpharma-Shasun
• 2005 agreement for 10 finished dose products and
  undisclosed number of APIs
• Actavis-Orchid
• 2007 agreement involving 9 cephs in Europe
• Development, manufacturing, and distribution
  agreement for 10 non-cephs in the U.S.
• Pros
• Cost savings
• Access to a diverse talent pool
• Cons
• Longer response time to changes in market
  dynamics
• Potential delays due to regulatory issues
• Potential loss of IP
• Challenges with managing long-distance
  relationships

15
COPING STRATEGIES SOURCING API FROM LOWER-COST
COUNTRIES

• Examples
• Teva, Apotex, Watson has been sourcing from India
  for years
• Indian companies increasingly sourcing out of
  China
• Pros
• Cost savings
• Many qualified API sources to choose from
• Cons
• Many API sources with limited track record
• FDA inspections more lax overseas?
• Language barrier
• QA costs
• Potential shortages due to stricter enforcement
  of local environmental laws

16
COPING STRATEGIES SOURCING API FROM LOWER-COST
COUNTRIES (cont)
33
Change from 2006
7
2
4
-1
2
Source Newport Strategies Horizon Global
17
COPING STRATEGIES FOCUS ON NICHE PRODUCTS

• Examples
• Ranbaxy, DRL eyeing Bradley Pharmaceuticals
  (dermatology)
• Pros
• Less competition
• Margins in difficult formulations likely to
  remain higher
• Inhaled products, certain injectables, controlled
  release
• Cons
• Even 20M products attracting interest
• If multiple generics get involved, may not recoup
  investment
• Costly barriers to entry for certain products

18
COPING STRATEGIES INNOVATION

• New formulations
• Andrx Altoprev (controlled-release lovastatin)
• Ranbaxy Riomet (metformin oral solution)
• New molecules
• Best known examples Pliva Zithromax
  (azithromycin), Teva Copaxone (glatiramer)
• Ranbaxy expects to be the first Indian pharma co
  to launch a new NCE (exp. 2011)
• Pros
• Potential for big returns during patent and
  exclusivity period
• Cons
• Original RD very expensive and risky It may
  take 1000s of failures before a successful NCE
• Possible reimbursement issues and higher
  marketing costs for generic plus products

19
COPING STRATEGIES PARAGRAPH IV PATENT CHALLENGES

• Pros
• Generic companies can make a considerable amount
  of money during the 180-day exclusivity period
• First-to-market generic company often maintains a
  big market share even after the end of the
  exclusivity
• Cons
• Expensive and risky
• Authorized generics and shared exclusivity reduce
  the potential payoff from the initial 180 days

20
PARAGRAPH IV PATENT CHALLENGES

• As of September 7, 2007, challenges on products
  encompassing
• 341 unique brand names
• 282 unique molecules or molecule combinations
• 48 unique dose forms
• In 2006, 27 molecules (or new combinations) first
  were exposed to patent challenges
• So far in 2007, 17 molecules (or combinations)
  have seen their first patent challenges

Source FDA, Newport Strategies Horizon Global
21
TOP 10 COMPANIES BY NUMBER OF PATENT CHALLENGES
Source Newport Strategies Horizon Global
22
IMPORTANCE OF API IN PATENT CHALLENGES

• Risk of supplier failure is high for companies
  involved with patent challenges
• Even one day of delay can cost the company FTF
  status
• Risk is also high for API manufacturers
• Generics may settle with innovators or do deals
  with other generics who use other API sources
• If dose company is backward integrated into API,
  may switch to internal API source when convenient
• If development starts too early, product may be
  withdrawn from market
• Backward integration into API may provide crucial
  advantages
• Coordinated API and dose development
• Coordinated regulatory submissions
• Speedy addressing of any issues
• Improved knowledge of polymorphs

23
INDIAN COMPANIES () ARE CLEARLY BASING THEIR
PARAGRPH IV STRATEGY ON BACKWARD INTEGRATION
Source Newport Strategies Horizon Global
24
COPING STRATEGIES SOPHISTICATED PRODUCT SELECTION

• Companies need to pick products for development
  very carefully
• It is not enough to look at sales data!

Data Needs during Product Selection

• Pharmacodynamics
• Toxicity
• Country Regulations
• Pack Pricing
• Reimbursement

• Approvals
• API Sources
• Company Data
• Manufacturing Capabilities
• Bioequivalence
• Stability

• Sales
• Dose Form and Strength
• Patents, Patent Challenges
• Labeling
• Chemistry, Synthesis
• Data Exclusivity
• Market Exclusivity

25
COPING STRATEGIES SOPHISTICATED PARTNER SELECTION

• Companies need to pick partners and acquisition
  targets carefully

Data Needs during Partner Selection

• Patent portfolio
• Patent challenge experience
• Approvals
• Backward/forward integration
• Current alliances
• Location

• Product portfolio
• Product pipeline
• Geographic reach
• Financials
• Regulatory experience
• Manufacturing capabilities

26
TOOLS TO TH RESCUE!

• Access global market, intellectual property and
  product info
• Predict key data in advance (e.g.
  competitiveness, generic launch date)
• Flexible, fast searching across multiple,
  exacting criteria
• Identify early, viable source of API supply and
  backup sources
• Spot in- and out-licensing capabilities
• Identify potential partner companies with
  multiple, exacting criteria
• Keep a watchful eye on potential acquisition
  targets and track competitors

27
THANK YOU!

• Kate Kuhrt
• Newport Strategies
• Thomson Reuters
• 215 Commercial Street
• Portland, Maine 04101
• USA
• 1 [phone] x26
• kaire.kuhrt_at_thomsonreuters.com