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API for Pharma
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1
80% of the world’s drugs are consumed by only
20% of its people .…they are, not surprisingly,
the rich ones…. The message of the product boiled down to : You
have a Problem, we have the Pill The great competitors of our Industry are facing
each other for domination of the world market...
- from the Book – ‘Merck Vs Glaxo The Billion Dollar
Battle’ by Mathew Lynn 1991
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What Asian Giants can do - Special reference to India
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US: 1-2%; forecast for 2009-10 $287 - $297 Bn EU: 3-4%; forecast in 2009-10 $162 - $172 Bn Japan: 4-5%; forecast in 2009-10 - $88 Bn
Slowing Value Growth in Mature Markets (US & top 5 in EU)
Increased contribution from Emerging Markets
China, Brazil, India, S Korea, Mexico, Turkey & Russia are forecast to grow at a combined 14-15%
Benefit of greater government spending on healthcare and broader public and private healthcare funding
Additional $24 Bn of branded products to lose market exclusivity in top 8 markets in 2009-10; this will contribute significantly to generics
Approx 30 NCEs slated for launch in 2009-10; many of these are focused therapy driven
Niche therapeutic NMEs with comparatively limited Market Potential
Fewer products winning Regulatory Approvals – No Block Busters
Note: Top 5 countries in EU – France, Germany, Italy, Spain & UK
Patent Expiries & Global Melt
Down
Growth in Emerging Markets
Drying Pipeline; Fewer
Block Busters
The imperative to cut costs and improve faster effective delivery is driving Big Pharma towards increased outsourcing, Partnerships, Alliances, Acquisitions etc be it R&D or Manufacturing
Partnerships with Cost-Effective players enhances competitiveness Increasing price pressures for innovators to minimize manufacturing
costs (Merck scrapping of $2bn CAPEX and Pfizer to generate $4bn cost savings)
Increasing reliance on CROs to accelerate product development process Increased demand for niche manufacturing capabilities viz Steroids,
sterile products etc Lowering Input RMCs & Labor alone - may not be the answer; Need for
Innovative Out of the Box Solutions; Alternative technologies? ‘Changing Mindset’ of Big Pharma to partner with Competent Players
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BIGPHARMAs
Rx• CRAMS• Clinical – CRO• Commercial - PIV
Generics• Reverse Engineering• IP Navigation / creation• Clinical Development of Dosages• Post Expiration Launch
Product Development Partnerships
DF Manufacturers
Vaccines & other new opportunity areas e.g Peptides, Immuno, Oncology and Biologicals
API Manufacturers
OCEAN OF PLAYERS
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Ranbaxy – Daiichi Matrix – Mylan Shantha Biotechnics – Sanofi
Acquisition
Aurobindo – Pfizer DRL – GSK Strides– Pfizer
Marketing - Manufacturing
Orchid – HospiraAPI Tie-Up - Exclusive
Consolidation – M&A & Tie- Ups
Torrent – Takeda
Presence in Generics Presence in
Emerging Markets Lowering Costs;
Increasing Margins Marketing
Advantages in EMs
Main reasons for Consolidation:
Survive and Add ValueSurvive and Add Value
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0
50
100
150
200
250
300
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
India USA China Italy Germany
Japan Switzerland Israel Spain England
Source: Newport Horizon Premium™
Year IND CHN
`08 403 116
`09 Q2
177 34
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Sourcing Geographies: Key Differences-APIs
Costs
Technology
API
RMI
Regulated Market Focus
Compliance
Source: UBS + IH
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Phase II
Government Control•Indian Patent Act –1970•Drug prices capped•Local companies begin to make an impact
Phase III Development Phase•Process development
•Production infrastructure creation
•Export initiatives
Phase IV
Growth Phase•Rapid expansion of domestic market
•International market development
•Research orientation
Phase V
Innovation & Research•New IP law•Discovery Research•Collaborative Research •CRAMS•M&A – Tie- Ups
1970 1980 1990 2000 2010
Phase I
Early Years•Market share domination by foreign companies•Relative absence of organized Indian companies
1960
Indian Pharmaceutical - An Evolution
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Generic Value Chain - Process Chemistry & Reverse Engineering Lower Cost of Infrastructure & Skilled Manpower High Quality Manufacturing & Cost Competitiveness Expertise in International Regulatory Compliance Encouraging Government Support - Improved Patent Regulations,
Pharma Parks Entrepreneurial Spirit Capital Inflows FDI - Unprecedented growth – Pharma Sector
Outperforms; Less volatile
Pros Numerous units with regulatory filings Lower cost of API Rich talent pool (>125,000 chemical
engineers every year) High English speaking population
Cons Poor networking in innovation
chain Weak policy framework to
support innovation Investments in R&D
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The API Supplier’s View - Supplying Big Pharma
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Long Term Tie-Up – Sustainability Long term, Strategic & Symbiotic Business Relationship Purchase Commitment- Inventory Price Protection Clause Extension Arm of the Big Pharma
Technology and Other Support Technology & Regulatory Support – need based Process Optimization Support – Mutual Gain Sourcing & Supply Support – situation based
Financial Concerns and Expectation Reasonable Revenue Partner – Margins - do not squeeze too
hard Capacity Utilization – Under writing capacities specifically
created Business Associate Vs mere Supplier/ Vendor
Win - Win Vs
Win - Lose
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Big Pharma Views –
In Collaborating with API
Manufacturer
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Big Pharma Expects
Cost Drivers
Manpower Excellence
Servicing
Quality
Infrastructure & Facilities
Softer Issues
API Cost Drivers – KSMs Vs RMIs, Backward Integration
Cost Containment - strategy to remain Cost Competitive
Inventory Policy – for Advance Intermediates / KSMs
Formal Agreement - Securing RMIs / KSMs & COO
Quality Compliance & Consistency Commitment to adhere to Process and Parameters TSE/ BSE & other Statutory Compliances – PCB Regulatory Compliances and periodic Statutory
Approvals
Information sharing – Need to Know basis NDAs and strict compliance – IP Security Skilled & Adequate Man Power – Employee
Retention Strict adherence to SOPs IP & Technology Secrecy – CONFIDENTIALITY
Capacity Concerns – augment capacities – if required
Dedicated facility Vs Multi Purpose facility
Safe Operations (SHE) – Plant, Personnel & Environment
GMP & EHS Compliance – Corporate Citizenship
Servicing Timelines Compliance
Exclusive, Semi-Exclusive Arrangements
Patent Strategy – API manufacturers response Geographical and Political Stability Infrastructure Capability – impacting Inland Logistics Material Handling and Storage - Cold Chains etc
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Quality Systems
Manufacturing Practices
Safety Practices – Safety Health & Environment (SHE)
Personnel Protection and Welfare
Chemistry Strengths – ability to work on leads- NCEs
Managing Facility – to maintain and update
Company Character & Business Ethics
Complex Chemistry – Simplify and Economic process
In hard times there is only one viable balance: Win - Win
Sharing Risks & Sharing Rewards – is the Big Pharma / Manufacturer ready??
‘….the greatest threat to the drugs industry is not a lack of innovation, because there will always be plenty of problems to solve….the biggest problem is the trouble the government and society will have in providing the healthcare for an ageing population with greater and greater need. The economics of the provision of healthcare is the big problem, and if the Industry doesn’t see that, then it is looking down the wrong end of the telescope…’
- from the Book – ‘Merck Vs Glaxo The Billion Dollar Battle’ by Mathew Lynn 1991
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D-I-Y to D-I-T (Do It Yourself to Do It Together)
Burst of Talent and Capabilities
Collaborate, Cooperate & Consolidate
Trust & Faith in your Partner- Invest for Mutual Gain
Business Associate – A Strategic Partner Vs a mere Vendor
End User taking up sudden costs due to factors like - stricter
norms, New Regulatory Compliances, New Regulations, etc
Business Cooperation with Indian API is an acquired taste…..
......it grows on you ----leaving a warm, satisfying
after taste
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Acacia Life SciencesAlekhya DrugsAnjan DrugsCovalent LaboratoriesGenerics BulletinIMSMegafine Pharma Morgan Stanley ResearchMSN Organics Newport Horizon Premium
Thank You
Newport Horizon Nivika ChemopharmaPorus DrugsShilpa Medicare LimitedStratVi ConsultingSuven Life SciencesTimes NowTimes Of IndiaUBSWHOUS FDA
Thank You!
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