Despite speculation, Actavis branches out

Despite the ongoing speculation over the firm’s future, Actavis was busy in March branching out into new geographies. On 9th March 2009, the firm announced that it had entered the Irish market, with plans that will see the creation of up to 25 new jobs, and on 12th March, the firm and Japan’s ASKA Pharmaceutical signed a legal agreement to establish a joint company in Japan. Despite the headline, Actavis’ arrival in Ireland is not entirely new; a unit was set up there in 2008, and currently employs 11 people. However, Actavis’ presence in Ireland was relatively limited, and the new push will boost Actavis’ operations in the country. The firm aims to quickly ramp up its offering in Ireland in all channels, including hospital-specific, prescription and OTC drugs, and Actavis has stated that it has set double-digit growth targets for its first post-announcement year in the country, with an aim to rapidly expand its sales and marketing team in the coming months. Actavis is keen to play up its economic plus-points, noting in its announcement that its generics offer a reduction of up to 60% on the cost of drugs, ramming home the point by adding that there is a potential to save over 22 million euros (US$28.4 million) on six of the 20 new products it plans to launch in Ireland this year. Adding to the argument, Actavis was able to announce on the same day that it was launching gemcitabine in Ireland, along with other parts of Europe, on the day of patent expiry. This, the firm claims, could create savings in Ireland of 1.8 million euros (US$2.3 million), if all currently gemcitabine sales were switched to Actavis’ generic. However, whether such potential savings could be achieved is debateable; Ireland has low generic drug usage rates, and a government that has not shown much interest in changing this.

The move into Japan is entirely new for Actavis, however, and will see the firm set up business in a country it has had no previous business interests in. The agreement between Actavis and ASKA was first announced in November 2008, when the two firms concluded a preliminary agreement to establish a joint venture, to be called Actavis ASKA. Actavis will be the minority partner in the venture, holding 45% of its stocks, with ASKA holding the 55% stake. Japan has tended to be a somewhat difficult market for generic firms; it is second only to the United States in terms of healthcare spending, but the nation as a whole has always favoured the use of branded pharmaceuticals, with the result that generics have only managed to gain a toehold in the country. However, the situation has potential to change through the Japanese government, which, keen to reduce healthcare costs, introduced a generic substitution measure in April 2008, as part of an ongoing effort to increase generic market share in terms of volume. Although Actavis and ASKA have remained tight-lipped over what products will be marketed, the aim of the joint venture is for ASKA to enter the generics market using Actavis’ portfolio.

Ian Platts - Editor, World Generic Markets

Daiichi shocks industry with Ranbaxy share deal

Daiichi Sankyo and Ranbaxy Laboratories have surprised the pharmaceutical industry by entering into a binding share purchase and share subscription agreement, which will eventually leave Daiichi with a controlling interest in the Indian firm. The deal values Ranbaxy at US$8.5 billion and the total transaction value is expected to be between US$3.4 billion to US$4.6 billion. Daiichi Sankyo and Ranbaxy highlighted the complementary business combination that the link-up would create, noting that it would leave Daiichi with an expanded global reach and strong growth potential by complementing proprietary drugs with generics. Daiichi also hinted that it may shift part of its production to India, commenting that it could achieve further cost competitiveness by optimising its new R&D and manufacturing facilities.

The move represents Daiichi Sankyo's first foray into generic drugs, and contrasts with the strategy adopted by its Japanese rivals: Takeda Pharmaceutical, for example, bought biotech firm Millennium Pharmaceuticals in April, while Eisai bought speciality manufacturer MGI Pharma in December 2007. The Ranbaxy deal should bolster Daiichi’s revenues more quickly however, with income from the acquisition expected from the fiscal year after next.

Interestingly, Daiichi is following the model of Novartis by incorporating generic sales into its structure; this strategy has the obvious benefit of maximising the full pharmaceutical life-cycle of products, and also hedges the inherent riskiness of new molecules with a more steady supply of generics. The model follows long-term assumptions over the future of the industry, where a handful of global players will dominate, crowding out all competitors bar the smaller niche-orientated firms.

This major deal in many ways mirrors the divestiture of Merck Generics last spring. That deal saw a brandname manufacturer look to sell its generics division; the race to buy the firm was eventually won by Mylan Laboratories, which had to fight off competition from a number of other major generic firms. These included Ranbaxy, which was an early contender, along with Teva Pharmaceutical Industries and Actavis. At the time, it seemed these three companies would be in the forefront of bidding for the next big generics target; ironically, Ranbaxy itself has now become a target. That flurry of activity after the initial Merck Generics bid could indicate a similar bidding process for Ranbaxy; indeed rumours have since circulated that Pfizer may bid for the remaining shares. However, without the support of the Singh family, Ranbaxy’s largest and controlling shareholders, a counterbid may prove difficult. For now, Daiichi remains in the vanguard.

Jonathan Way - Editor, World Generic Markets