Understanding and succeeding in generics markets
*efp: Like other aspects of the pharmaceutical industry, generics are facing many changes in the marketplace. What are the current trends in generics markets?*
By on Apr 27, 2006efp: Like other aspects of the pharmaceutical industry, generics are facing many changes in the marketplace. What are the current trends in generics markets?
MR: I'sve been in generics since 1978 and in those days you didn'st have to work as hard to make money. On a world scale, the industry has gone from a specialist field to a commodity. It's getting really tough. It used to be that there was enough out there for everyone. The generics companies were competing with the brands and the brands didn'st really know how to cope with generics and with strong pipelines, quite frankly, didn'st worry about it too much.
Now you have a lot of generic companies with a much more limited series of targets with people talking about the pipeline crisis and therefore they are competing with each other. The biggest thing for me is that the generics companies are now patenting their own formulations to make entry harder for the next guy. Now some generic companies have more patents on the chemical entities, polymorphs and synthetic routes than even the brands have and that's making it tough, except for the lawyers.
In Central and Eastern Europe, where I am, I think we'sre going to have a huge shakeout. Companies are going to disappear; you'sre looking at a lot of mergers.
efp: Speaking of CEE, what are the specific regional market trends?
MR: Generic companies in the CEE are still sitting there in luxury with branded generics and gross margins of 60-70%. I tell this to my colleagues in England and they look at me in horror, because they'sre lucky to get 10%. But somebody in CEE will wake up and go to INN and then, I would say, most of the CEE companies will have a shock.
There are going to be fewer generic players more mergers and acquisitions and a lot of smaller companies are going to go out of business. In CEE, they'sre still trying to adjust to being European. Basically it's moving too fast for them. It's a little bit like shooting at the moon, and for some companies here, they haven'st noticed that you need to shoot in front of it rather than at it and I think they'sre going to get there too late.
efp: Will the acquisition route be a successful strategy for those trying it?
MR: It will be very interesting management-wise to see if they can cope with it. It's one thing to acquire a company, but something else entirely to make it run smoothly. One of the areas that interest me is the cultural differences. Basically, most of us regarded the CEE as a homogeneous block and then suddenly, in the 90s, we discovered that these countries are all independent and different. I think the majority of people outside the CEE probably don'st see a difference and there are huge differences.
If you ask an Englishman how he works with the French well it isn'st automatic just because they are both from Western Europe. So there is no reason why a Hungarian, a Lithuanian and a Pole should have any less issues. If you look at Teva, they have been phenomenally successful in the US, but not comparably so in Europe. But then look at Merck Generics- they'sve been successful in Western Europe, but not really in the US or in the CEE. It comes down to management styles.
In Europe you have to be local to succeed. You have to have your own sales force, because you'sre still branded generic. The Indian companies have realized that I think. And we'sll see what happens when they try for Europe. I think they'sll do it by acquisition. Dr. Reddy's bought a German company and Ranbaxy has been acquiring in Belgium, Italy and Romania and that's probably the way to go. You inherit the infrastructure and put Indian-made generics through into an already established system, rather than trying to build it yourself.
efp: What about deals and collaborations between brands and generic companies? Will that help either or both sides?
MR: It depends on who the brands do their deals with, but the generic company is basically going to be competing with the other generics and they'sre going to pull the price down. So, I don'st think it's going to be that significant.
So you come on the market 6 months earlier at 85% of brand price, but the minute 10 generics get launched, it's not going to help them very much and I suspect the branded companies will wake up to that. It may work well in the CEE where it's still branded generics and there are only a few big players, but the minute it goes INN I can'st see it making much difference.
These deals take an enormous amount of time to set up, so somebody's got to be doing something really special say multi-dose inhalers. Then it's great, because there's not going to be too many generics. But I suspect the brands will notice that as well and ask themselves why they'sre giving it away.
efp: Many generics are talking about working in niche areas? Will that be successful?
MR: I would be talking about niche in terms of specialty technologies, rather than niche just small products. You'sve got to have a barrier. It's no good to just say I'sm going to concentrate on ordinary solid dosage forms, but I'sm not going to do blockbusters; I'sll do products that have sales of $50 million.
All of the companies can do that. They'sre all desperate and they'sre all going to be looking at niche products. So instead of 15 companies sharing a blockbuster, you'sll have 15 sharing a niche product.
It has to be something like an anti-cancer drug that's got a high entry barrier, because you have to have cytotoxic facilities, for instance. Or it could be an area like creams and ointments companies like Taro, which is doing very well out of its Canadian operation, because there are only one or two generic players.
But it's not so easy in Europe, because it's a divided market. The total market is smaller and you'sve got to launch in 25 countries and it's not easy. Some generic companies may have a go at innovative dosage forms Andrx-style and that's a good approach. You have to have one or two bright scientists and the rest becomes routine. And one or two companies are looking at combination products. But outside of that it's going to be tough.
To learn more about generics strategies and trends, make plans to attend eyeforpharma's 2nd Annual Generic Marketing and Sales Summit in Berlin, May 16-17. To get more details and to register, visit www.eyeforpharma.com/generics2006 or call the eyeforpharma team on +44 (0) 207 375 7500.