Telling signs of a midlife crisis
are apparent among top Indian drug makers as fatigue sets in on a marathon run
of two decades selling generics in the US. A long hold by the US FDA on Indian
manufacturing fa cilities has left the industry with sobered expectations. The
narrative is moving to “building brands,“ “portfolio balancing“ and
“predictable revenues.“ Sun Pharma, Dr. Reddy's, Glenmark, Zydus Cadila,
Aurobindo and their ilk are embracing a new life. Deploying investments to
bolster indigenous research and lapping up late clinical stage drugs or new
brands is heralding a seismic shift from churning copies of drugs to the
daunting world of innovative or differentiated brands.
BUILDING BRANDS
Top drug maker Sun Pharma is the
first off the block in shaping those ambitious plans. Focusing sharply on
ophthalmology, cancer and dermatology products, last month it paid Rs 1,190
crore ($175 million) to Swiss pharmaceutical giant Novartis for rights over
Odomzo, a brand approved in 2015 by US FDA, that helps treat a form of advanced
skin cancer.For the home grown drug maker the task, though uphill, is cut out.
Odomzo will closely rival the $50 billion biotech behemoth Roche's Erivedge. It
is an odd match, critics say, but Sun has finite choices.Its founder and CEO
Dilip Shanghvi is known for strategic manoeuvres that led his company to scale
the top slot among the local peers. Moving into new research drugs over the
next few years seems top of mind for the man thrifty with words.
“Innovative brands as opposed to
supplying generics to distributors is a significant shift. Indian companies are
at a stage of maturity where building a pipeline is important,“ says Sujay
Shetty who heads the Indian lifesciences business for PwC, the global
consulting firm. A similar view is expressed in a note from Chirag Talati of
Kotak Institutional Equities. Talati said Odomzo can generate $80 million in
sales by 2020-21 with peak potential of $120150 million. The forecast appears
modest against the money shelled out by Sun but the excitement is palpable in
adding heft for the future.
“Sun's Levulan drugdevice
combination for actinic keratosis, a form of pre-cancerous cells, gives it
access to dermatologists who account for 70% of prescriptions for laBCC
(locally advanced basal cell carcinoma).Combined with MK-3222 (a drug licensed
from Merck and being developed for psoriasis), we believe Odomzo will help
raise Sun Pharma's brand profile amongst dermatologists and help leverage the
field force to drive prescription share,“ Talati explained.
Assets acquired by Sun over the
last two years brings further clarity. In 2014, it bought MK-3222, a late stage
experimental psoriasis drug from Merck. If approved by the US FDA, Sun will
jostle with Janssen, Eli Lilly and Novartis. Opinion is divided on how well Sun
can manage in reaping the rewards from its psoriasis drug against the
established giants but it is largely seen as a calculated step. In Sept. 2015,
Sun picked InSite Vision, which enabled the recent commercial launch of
BromSite, its first branded eyecare drug. In October 2016, the company acquired
Ocular Therapeutics for $40 million, digging further into the ophthalmology
market. Odomzo could kick start a branded oncology play, as indicated by Kirti
Ganorkar, the global head of business development at Sun Pharma at the time of
announcing the deal.
BRANDED PLAY
“Going forward, we expect
increased R&D spends in development of future product pipeline in specialty
and differentiated products,“ Sun Pharma told ET.While R&D is considered
the engine that helps a company deliver products, brand marketing is an art and
numerous examples abound of wayside kills. Sun Pharma is fueling top dollars to
rope in talent from global drug firms to embellish its marketing unit in the
US. An expert who has studied marketing trends in the US said if the efforts
reach fruition, Sun may see its sales surge past a billion dollars from
specialty and branded or OTC business as its US revenues could double to over
$4 billion by 2020.
PwC's Shetty said the moves to
grow a branding business is expected and will only intensify. “Profits from
generics is cut to the bone except in a few cases.Companies are moving on the
maturity curve and cherry pick brands in the next three to four years,“ he
noted reminiscing how Israeli giant Teva had a head start with its blockbuster
multiple sclerosis drug Copaxone that clocked peak sales of over $4 billion.
A similar roadmap but one that
leans on a differentiated portfolio is being put into play at Hyderabadbased
Dr. Reddy's Labs. The company that reported revenues of $2.4 billion last year
has for the past few years devised its differentiated strategy. It has about 85
pending filings (ANDANDA). Almost two-thirds of these are complex generics or
those that have limited competition. Drilling further, injectables are likely
to be a key growth driver accounting for a third of the revenues by 2020, the
company told ET.
Abhijit Mukherjee, COO, Dr.
Reddy's said most branded products have evolved out of in-depth research and
work with physicians and patients. “We continue to work with physicians to
create the Rx (prescriptions) pull and at the same time, collabo rate with
payers to have enough coverage for these drugs.“ Between dermatology and
neurology drugs alone, Dr. Reddy's has fanned out over 100 sales employees in
the US.
Last year it launched Zembrace
SymTouch, a novel drug and device combo to treat acute episodes of migraine
pain. With its R&D spend spiraling to 11%-15% of sales, Dr. Reddy's is
hoping to gain further traction in its US brands business. It has identified
drugs that require complex characterization, novel regulatory pathway and are
approved at the back of large and complex clinical studies. Although its
biosimilars ambitions is moving at a slow clip in India, its US filings for
cancer drugs rituximab and Peg-GCSF as early as 2014 indicates interest in
selling drugs with higher regulatory benchmarks, even it the clinical trials
take a substantially longer time for regulatory reviews..
RIGHT REVENUE MIX
Utkarsh Palnitkar, head of KPMG's
lifesciences practice said brand-based growth may take time to build but it is
far less risky for larger companies as compared to generics. Over time it may
help change the revenue mix, he said.
Aurobindo Pharma is another
company that is expected to dive deeper into selling complex drugs.Experts
noted AB rated drugs in the US or drugs that show therapeutic equivalence to
other drugs may be a potential area being explored by the company. The company
did not respond to mails from ET.
One market analyst believed
Aurobindo's contribution from complex generics could vault five-fold from a low
base of $37 million in 2015-16 to about $200 million in 2020. Against that, its
revenues from plain generics may seek a slower uptick from $753 million to
$1.28 billion during the same time frame.Over its most recent earnings call, N.
Govindarajan, Managing Director, Aurobindo Pharma informed analysts about plans
to develop complex products like hormones, oncology, liposomal and microsphere
depot injectables which can be expected to be filed from the beginning of the
2017-18. Mumbai-based Glenmark is another drug maker to have a strong ambition
on discovering new drugs.With arguably the most successful track record in
researching drugs and out-licensing them among its Indian peers, Glenmark
envisages at least a third of its revenues to come from specialty and
innovative drugs by 2025. At a recent media briefing, Glenmark showcased nine
drugs that are in the works at its network of research labs based in the UK,
Switzerland and India. Through its proprietary BEAT (Bispecific Engagement by
Antibodies based on T-cell receptors) technology, Glenmark has built a pipeline
of biological drugs to treat cancer. Company executives believe these have the
potential to compete against drugs that are considered to be best in class at
present.
Zydus Cadila, the low profile
Ahmedabad-based drug maker has similar plans on branded drugs. The drug maker
is conducting Phase II trials for its flagship drug Saroglitazar in the US for
diabetic dyslipidaemia and NASH (non-alcoholic steatohepatitis) commonly known
as the fatty liver disease.
CHALLENGES AHEAD
While the market opportunities to
sell brands appear optimistic, that road is less treaded by Indian companies
and obvious challenges can lead to adversities.Developing drugs is a costly
affair and in popular estimates a global drug maker typically spends close to
$2.5 billion to get a drug from the lab to the market. Plus, regulatory
clearances go through a tough screening process. That apart, acceptance in the
market is subject to comparative effectiveness against competing brands and
reimbursement by insurance companies. Drug makers are also besieged by
manufacturing lapses at their Indian sites. Perpetual scrutiny by the US
regulatory agency has dented confidence as barring a few exceptions, most firms
are battling fundamental quality issues, some of which require serious remedial
action failing which they may risk reputation.
In the opinion of an analyst who
has held a negative view on the sector growth, deficiencies at Indian sites may
cloud near to medium term earnings. Although a few others believe the
observations are on expected lines and may be resolved over two to three years.
Also, an ongoing investigation by US federal agencies and the US Department of
Justice could deter companies from charging a high price for the brands to the
patients.“Although known to be business friendly, healthcare is a high decibel
debate in the US. The new President will keep a tight lid on pharmaceutical companies
both generics and branded. It's a leap of faith,“ he cautioned.
Source: THE ECONOMIC TIMES-7th January,2017
