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Reflections on the Global Generic Pharmaceuticals Marketplace

Reflections on the Global Generic Pharmaceuticals Marketplace. Dr. Brian W Tempest www.briantempest.com 7 th Annual Global Generics Strategy Summit Barcelona – 4 th March 2008. www.briantempest.com. Asia’s Share of World GDP (at PPP). The View from Europe. Source – FT.

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Reflections on the Global Generic Pharmaceuticals Marketplace

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  1. Reflections on the Global Generic Pharmaceuticals Marketplace Dr. Brian W Tempest www.briantempest.com 7th Annual Global Generics Strategy Summit Barcelona – 4th March 2008

  2. www.briantempest.com

  3. Asia’s Share of World GDP (at PPP)

  4. The View from Europe Source – FT

  5. The View from India

  6. The View from the USA

  7. The View from Japan

  8. Reflections • Market drivers • Competition is rising • Branded generics • IP changes in USA • M&A and Private Equity • East-West Alliances

  9. The Asian Productivity Advantage India a usa Pharma view USA 1 chemist Better education x 1.3 1 chemist 70 hours/week Longer working time x 1.3 50 hours/week $ 800 monthly Lower cost x 20 $ 12,000 monthly Sources: IPHMR Conferences, New Delhi August 2004

  10. The Asian Education Advantage

  11. The Asian Education Advantage Engineers/Science graduates p.a – India 0.7m, China 0.5m, EU 0.5m, USA 0.4m, Japan 0.3m

  12. Asia’s Youthful Advantage Percentage of Population aged 65 and older 29.2 22.7 21.5 21.4 18.7 14.8 14.7 2000 A 13.2 12.3 2025 E 2050 E 8.3 6.9 5 China India Europe North America

  13. Patent Expiry Dates Expiry 2010 Expiry 2011 Expiry 2012 Company % at Risk Sources: AXA Framlington

  14. Asian Competition is Rising CPHI Attendees, Milan,2nd – 4th Oct’07 As registered on July 25, 2007

  15. Generics – API’s USA DMF filings by India % Share of USA DMF filings IndiaChina 2005 37% 10% 2006 44% 14% Q1’07 48% 17% Q2’07 37% 18% Q3’07 42% 16% Source: US FDA / J P Morgan, 2 may 2007 IndiaChina 2004 187 48 2005 252 87 2006 357 128 Source: US FDA / J P Morgan, 6th August 2006 Source: US FDA, Credit Suisse

  16. Generics - ANDAs - One in every four ANDAs filed by Indian Companies in top USA FDA filers Source: KPMG - No Chinese generic company has yet filed a USA FDA ANDA but expected in 2008 ANDA Filings in USA by Indian Companies 250 144 64 46 24

  17. Top 5 Global Pharma Markets 2020 Sources: Goldman Sachs 2007

  18. The Rise of the Indian Middle Class

  19. R&D Productivity is Falling

  20. Pharma Performance

  21. Shareholder Value

  22. BCG 100 Challengers CountryTotal StatePrivate China 41 29 12 India 20 0 20 Brazil 13 1 12 Russia 6 3 3 Source BCG

  23. Speed of Clinical Trials in India EUIndia Patients 85 650 Sites 22 5 Time 36m 18m Neck Cancer CT Plan Actual Patients 100 130 Sites 10 9 Time 5m 2.5m Overactive bladder CT • No. of USA investigators: 2001 - 2006 26,000 18,000 • 300 patients, 30 sites $5.6m EU/USA vs $ 1.8m plus 30% faster at $800K per day savings Sources: CT Outsourcing Conference, 24th July 2007, Mumbai

  24. Electronic Data Capture in India Accuracy - 300 GSK Staff - 2.2m Clinical Data sheets - 450 Trials - No data security issues - Error rate <0.01 / 100k Source: BCG report “Looking Eastward, Sept’2006” % Trials in EDC 2005 2007 25% 45% Savings Paper EDC $2.8m $ 0.5m 2004 data Sources: CT Outsourcing Conference, 24th July 2007, Mumbai

  25. Branded Generics • Promotion to doctors rather than pharmacists • Consistent sales year on year • No huge highs & lows for sales and profits • Need field force to promote products • Tend to be profitable • Promoted in conventional manner • Global generic brands • Relevant to Central Europe, East Europe, Latam, Asia • Ranbaxy half branded generics & half commodity generics

  26. Branded Generics - the Analyst’s view • “Branded Generics are the most profitable place to be in generics and there are a few markets with better branded characteristics than those of the Middle East and North Africa region” Frances Cloud Nomura September 14 2007

  27. Different Global Generic Market Sizes $bn

  28. Top 10 ROW Generic Markets $b

  29. IP – USA Pendulum • “A key USA Supreme Court ruling KSR VS Teleflex led to Pharmaceutical patents being more easily challenged on the grounds of obviousness, a ruling which immediately came into play when J&J & Merck had a US patent for Pepcid Complete (Famotodine) found to be obvious”. • Scrip, July 6th 2007, p3 • The full beneficial impact of this ruling on the generic industry is yet to be seen .

  30. Bilateral FTAs - USA Pendulum • Democrats now chairing Committees- Ways & Means • USTR legally required to work within TRIPS • USA has been incorporating TRIPS PLUS IP protection into bilateral free trade agreements • Corrections to bilateral trade agreements eg Peru, Columbia, Panama FTAs TRIPS • Basic product patent • Data protection TRIPS PLUS + Data exclusivity + New forms, isomers etc + New Indications + New Combinations

  31. 82% of the world population accounts for only 12% of the Global pharmaceutical sales • Sources: • IMS Midas, March 2005 • Earth Trend Data Tables 2005

  32. Should IP be the same across all Countries? USD Per Capita Expenditure on Healthcare 2002 USA Brazil Thai China India Sources: World Health Report 2005

  33. Enforcement or Evergreening ? India IP 02/03 06//07 Filed 11466 28882 Examined 9538 14119 Granted 1379 7359 - 140 patent examiners 2007 - 600 more planned - Attrition an issue - Weekly patent journal - IP Appellate Court Source: Business Standard, 16th Aug’2007 • 1995 – 2005 FDA cleared 327 drugs • 95% pre 1995 – before WTO deal • 16 basic patent molecules possible • However 9000 Pharma applications • - for evergreen changes • - for new indications Source: Gopa Kumar “Centre for Trade & Development, Delhi”

  34. M&A Building the Top Players in the Global Generic Market

  35. M&A activity in India is rising

  36. M&A in India YearDealsInvestments 2005 467 $ 18 b 2006 782 $28 b 2007 >1000 $ 70 b Source Grant Thornton Deal Tracker

  37. Private Equity Investment in India YearDealsInvestments 2004 60 $ 1 b 2005 124 $ 2 b 2006 302 $8 b 2007 405 $ 19 b Source Grant Thornton Deal Tracker

  38. Key Challenges to the Asian Scenario

  39. Potential Challenge – Asian Flu* *50% of world chickens bred in Asia

  40. Potential Challenge – Climate Change CO2 emission - % of World total in 1990-2000 USA 23% EU 25 17% China 14% Russia 7% Japan 5% India 4% – source: WRI, EIA

  41. Potential Challenge – Infrastructure “Our greatest potential will be realised only if we can ensure that our Infrastructure does not become a severe and critical handicap” Source – Manmohan Singh

  42. Corruption Perception Index RankCountry 1 Finland, Iceland, NZ 5 Singapore 11 Austria, Luxemburg, UK 16 Germany 20 Belgium, Chile, USA 42 Mauritius, S.Korea 51 South Africa, Tunisia 70 Brazil, China, India, Mexico 121 Philippines, Russia 163 Haiti Sources: Transparency International 2006, selected countries only

  43. Potential challenge – Oil prices Source – BP • A war against Iran could drive oil > $200 a barrel - ‘Times’ 22nd June 2006 • India is expected to import 85% of crude oil by 2012 from 70% today Source – Assocham

  44. Potential Challenge – over the border

  45. Potential Challenge – Currency volatility

  46. The Tempest Crystal Ball • India will continue to be a Key Driver in the Global Generic Industry • Competition is rising – Post TRIPs Indian companies will evolve • Discovery companies will continue to be attracted to India for CT, EDC, • MO. China will be perceived to be stronger in biology/ toxicology • IP changes in US will slowly favor Generics • Alliances between Western Biotech and Asians companies will expand. • M&A PE deals will grow. Singapore, Vietnam, Bangladesh & Nepal will take a rising importance • How to use Asia in Drug Development will become the key opportunity

  47. Thank You

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