Company acquisitions continue apace

A number of company acquisitions were made in June, which will have a bearing on the global generic markets, with acquisitions taking place in the Americas and Europe. In addition, a new strategic agreement was signed in South Africa.

In Argentina, GlaxoSmithKline announced that it had acquired Laboratorios Phoenix. GlaxoSmithKline commented that it was making the acquisition to help accelerate sales growth and further extend its product portfolio in Argentina and Latin America. Laboratorios Phoenix was founded in Buenos Aires in 1939, and manufactures branded generic products covering therapeutic areas such as cardiovascular, gastroenterology, metabolism and urology. GlaxoSmithKline's acquisition follows a recent trend of branded firms taking a closer interest in generic firms.

Along similar lines, although not an acquisition, was the announcement made by Adcock Ingram and Merck & Co, through its MSD trading name, of a strategic collaboration in South Africa. The collaboration is to co-promote and distribute a number of MSD products in South Africa, including both prescription medicines and over-the-counter products. Merck reasoned that it sees the emerging markets as becoming an important contributor for future performance and growth, and expects such markets to account for over 25% of its global pharmaceutical and vaccine revenues in 2013. Merck has thus become one of a number of large branded companies in recent times to see a future in the emerging and developing markets, leading to strategic tie-ins with local firms. There has been most notably a surge of multinational firms making deals with particularly Indian generic companies.

However, the Indian firms themselves have also shown this to be a two-way street. India's Orchid Chemicals & Pharmaceuticals announced in June that it was to acquire a US-based generic manufacturing and sales services company, Karalex Pharma. Orchid declined to name its price; the acquisition was completed on 2nd July. Orchid aims for the acquisition to help it create itself as a US-based generic pharmaceutical company, and the move gives the firm a presence in the front-end US market. Separately, in March 2010, Orchid sold its generic injectable business to Hospira, completing a US$400 million deal which was announced in December 2009. Coincidentally, alongside Orchid's Karalex acquisition, Hospira announced its first generic drug launch from its Orchid acquisition, with the launch of its meropenem for injection, a generic equivalent of AstraZeneca's Merrem IV.

Elsewhere, in Europe, Lithuania's Sanitas announced that it had sold the manufacturing site of its Slovakian subsidiary, HBM Pharma, to a Latvian firm, Liplats 2000. HBM Pharma had, prior to Sanitas' own acquisition of it, been known as Hoechst Biotika, and Sanitas had acquired it in 2005 from sanofi-aventis. However, Sanitas is keeping hold of HBM Pharma's marketing, sales and regulatory divisions, located in Bratislava and Prague. After Sanitas acquired HBM Pharma from sanofi-aventis, the firm worked to integrate the business into the Sanitas group as a manufacturing unit and as a hub to commence sales and marketing in neighbouring countries. This part of the business is clearly still of interest to Sanitas.

Ian Platts – Editor, World Generic Markets

SOHM branches out

In late May 2010, SOHM announced that it was branching out, with a sales and marketing agreement to sell its branded generics in Uganda, Tanzania and Zambia and a purchase order for generics for distribution in the Philippines. SOHM is a relative newcomer to the generics industry; it has global headquarters located in North America but has manufacturing sites in India; the firm chose to set up its manufacturing operations in India in order to take advantage of the country's strong marketing set up, low prices and the fact that it uses English as a business language. The firm produces and markets generics with an eye on distribution in the emerging markets in Africa, Latin America and Southeast Asia. SOHM's strategy is to increase its market share in the firm's defined key markets in the emerging world, arguing that growth is shifting away from the developed markets of the United States and Europe and toward emerging markets as less developed countries prosper and spend more on healthcare.

The recently-announced Philippines purchase order is worth US$750,000, and covers primarily metformin and sildenafil citrate; a rather odd combination of a type 2 diabetes treatment and the generic form of Pfizer's Viagra, which says as much about SOHM's production capabilities as it does about medical and lifestyle conditions that are becoming increasingly profitable in the Philippines. In July 2009, the firm announced that it had received Philippine Bureau of Food and Drug Administration (BFAD) registration for generic pharmaceutical sales. SOHM was more circumspect about its new African operations, declining to name either the branded drugs at the heart of the sales and marketing agreement or the African partner it was teaming up with.

SOHM has over the past 18 months made agreements with a number of companies, and has, on the whole, been careful not to divulge too much information. In January 2009, the firm announced an exclusive private label and development agreement with an Indian firm, which it refused to name, but noted that the two firms had formed a global platform for the introduction of the SOHM brand of generics into the African, Latin American and Southeast Asian markets. Under this agreement, generics would be labelled under the SOHM brand and would be distributed directly under the firm's manufacturing licence in India. In September 2009, SOHM announced that it had launched 26 branded generics in India, adding that it had appointed two distributors in Northern India, which were again unnamed. In February this year, the firm announced it had signed another marketing agreement which would add 75 branded generics for distribution across India, taking the firm's total offerings to 135; again the name of the company it had signed the agreement with was not revealed. Around the same time, SOHM reported that it had signed a strategic alliance with an injectable manufacturing unit in India. The firm said little else, but noted that the agreement would add another 89 injectable and drops-based generics to its portfolio, bringing the total to 279. In May, the firm announced this figure had risen to 280.

Aside from generics, the SOHM has also recently announced that it has expanded its manufacturing operations in Ahmadabad, India, to include improved nutraceutical product production. A new facility will concentrate on neutracueticals, leaving the pharmaceutical manufacturing facility free to focus on generic drug orders exclusively. At the same time, the firm announced a purchase order for nutraceutical products in India valued at US$350,000.

The dollar figures SOHM is dealing in are perhaps small by the standards of most generic firms with international operations, and certainly tiny in comparison to other generic firms based in North America. The Philippine drug order and the Indian nutraceutical order have a combined value of US$1.1 million, which is a reasonable total, but far from stellar. Nonetheless, SOHM's talk is all about expansion and tapping into growing markets in previously under-represented regions. This can be seen in the firm's financial performance. In May 2010, the firm announced revenues for the first quarter ended 31st March 2010 worth US$200,324; again, tiny by international standards, but an improvement over the prior year period's US$29,598 of over 600%. Especially in the current economic climate and despite countries in North America, Europe and Japan announcing determination to increase generic spending to reduce healthcare budgets, the vast majority of generic firms around the world can only dream of increasing revenues by such an amount.

Ian Platts - Editor, World Generic Markets

Orbus files for bankruptcy

Canada's Orbus Pharma announced in May 2010 that it had gained protection from its creditors under the provisions of the Bankruptcy and Insolvency Act. The move came as a result of a number of financial difficulties the firm has faced in recent times. Orbus was originally known as Bovar, created in Calgary, Alberta in June 1977. In May 2002, the firm completed the purchase and subsequent amalgamation with Orbus Life Sciences, a firm which had begun operations in April 2000. Bovar changed its name to Orbus Pharma in May 2003 to better reflect the activity of the company. Orbus develops generic versions of oral dosage products, which it then licenses to sales and marketing organisations which then distribute the products under their own names, ideally under five year supply agreements. The firm targets Europe and Canada as its primary markets, but had an eye on the United States as well.

Orbus' website lists four prescription products which have been completed. Amitriptyline, which was completed in the first quarter of 2009; cefuroxime axetil, which has been approved in Denmark and Canada; oxcarbazepine, which was completed in the third quarter of 2009; and moduret hydrochloride / amiloride. Another three products are listed as being under development: fluvastatin XR, metoprolol XR and a 600 mg oxcarbazepine tablet. Over the years, Orbus has signed a number of agreements with a range of companies, with a view to marketing its products in various countries. Amongst the most recent has been an agreement with Intas Pharmaceutical for worldwide rights, excluding the US and China, for Orbus' metoprolol succinate.

However, despite the progress which the firm had made in its product portfolio, Orbus suffered from financial weaknesses; in its most recent annual report, for 2008, the firm noted it had seen disappointing results in both product development timelines as well as the large amount of cash used in operations. This led to the President and CEO stepping down from his position. The new interim manager reviewed the company's business, and found weaknesses in a number of areas, leading to measures including cost reduction programmes and rationalisation of Orbus' product offering. In January 2009, the company announced that it may be up for sale, having previously announced in October 2008 that it was planning to sell its cephalosporin manufacturing facility and product line. An agreement was reached for China's Nanjing Sanhome Pharmaceutical to acquire at least 51% of Orbus' issued and outstanding common shares, and this looked to be progressing. However, in March 2010, Sanhome withdrew from the private placement. Orbus ultimately had nowhere else to turn, announcing in April 2010 that it was discontinuing its pursuit of a private placement after determining that no market was available for its common shares; neither was there any other source of financing available. The firm also decided to discontinue operations at a second site, leaving limited operations at its Markham facility.

Seeking protection under the Bankruptcy and Insolvency Act was by now the most likely way forward for the firm. The move will enable Orbus to continue with efforts to restructure its business whilst being protected from its creditors. Whilst announcing the move, Orbus also announced that it was to close its operations at its Markham facility, and would put the site up for sale. The firm does have assets, in terms of products and intellectual property. Perhaps the firm will be able to trade its way out of its current difficulties; otherwise its best hope will be to be acquired by another firm.

Ian Platts – Editor, World Generic Markets

Watson faces legal battles

Watson Pharmaceuticals has found itself at the centre of a slew of legal battles which hit the firm over a period towards the end of April 2010 and the beginning of May 2010. The challenges kicked off on 26th April 2010, when the firm confirmed that a subsidiary of Teva Pharmaceutical Industries had launched a lawsuit against Watson Laboratories after it filed an ANDA for synthetic conjugated oestrogens. Watson's ANDA, which contained a Paragraph IV certification, was for a generic version of Cenestin, used in treating postmenopausal women. The product has one patent, which expires in July 2015. The patent is listed to Duramed, Barr Pharmaceuticals' subsidiary.

Two days later, Watson confirmed that it was being sued by Pfizer and its Wyeth subsidiary in connection with Watson Laboratories' ANDA for sirolimus tablets. The product, a generic equivalent of Wyeth's Rapamune, is used in patients with renal organ transplants, and has a number of patents, the last of which expires in September 2018. Once again, Watson's ANDA contained a Paragraph IV certification, although this is only challenging the first of the patents, which expires in early 2014. Whether Watson is planning to challenge the other patents remains to be seen, but the firm noted that it believed it could be entitled to the 180-days marketing exclusivity for being the first to file.

Two days after that, on 30th April 2010, lawsuit numbers three and four were announced, with Watson confirming that its Watson Laboratories subsidiary had been sued by Abbott Laboratories and Fournier Laboratories after filing an ANDA for choline fenofibrate, a generic version of Trilipix, used in the treatment of high cholesterol. In this case, Watson is challenging the one patent listed in the FDA's Orange Book, which expires in January 2025.

On 5th May 2010 came two separate announcements of lawsuits. The first was filed by Eli Lilly, after Watson Laboratories filed an ANDA for raloxifene hydrochloride tablets, a generic version of Evista, an osteoporosis drug used in postmenopausal women. In this case, Watson is challenging three patents, which all expire in March 2017. These are not the only patents protecting the drug according to the Orange Book, but they are the last to expire; the other patents all expire in either July 2012 or March 2014. The second lawsuit to be announced on 5th May was the second in this batch to be filed by Abbott, this time in response to Watson Laboratories filing an ANDA for niacin extended release / simvastatin tablets. As with the other Abbott-related challenge, this is a product used in the treatment of high cholesterol. The product is protected by a number of patents, with expiration dates ranging between September 2013 and March 2018.

However, Watson's litigation news has not been all one way. On 7th May, Watson announced it had reached a settlement with Teva with regard to a second legal battle between the two, this time over an oral contraceptive. As with the other Teva battle, this revolved around a product which had originally been manufactured and marketed by Duramed. In this case, Watson has admitted that the patents being challenged are valid and enforceable, but in return has been granted a licence.

Of course, patent challenges are the bread and butter of generic firms, and whilst a sudden burst of lawsuits may appear to be bad news for Watson, the situation is also a sign that the firm's R&D has progressed well, enabling Watson to develop a number of new potential products for its pipeline. From the figures Watson has given, the products being challenged have a combined market value of nearly US$2.2 billion. As a generic competitor, Watson is only likely to see revenues worth much less than this, if all the challenges are successful, but nonetheless it will provide a good boost to the firm's fortunes. In the meantime unless settlements are reached out of court, the firm's lawyers will be busy in US District Courts in New Jersey, Delaware, Florida and Indiana.

Ian Platts – Editor, World Generic Markets

Strides Arcolab expands US presence

India's Strides Arcolab has expanded its presence in the United States through its partnership with the Illinois-based Sagent Pharmaceuticals. The partnership was formed in late 2007 with the finalisation of an agreement to jointly develop, supply and market over 25 injectable products for the US. Under the terms of the agreement, Strides is responsible for the development and supply of the products, whilst Sagent is responsible for their marketing in the US. The first product under the agreement, azithromycin, was approved in March 2009; this was followed in September 2009 with the approval of adenosine. Approval number three was in February 2010, for labetalol hydrochloride. The agreement now appears to be gaining momentum: April 2010 saw approvals for granisetron, mesna injection and metoprolol, with a tentative approval for adenosine in new dosage strengths.

Strides' partnership with Sagent is not its only agreement covering the US, nor was it the first. Strides has made partnering a key element of its business strategy. Asides from its agreement with Sagent, Strides also has a joint venture serving the US which it formed with another Illinois-based firm, Akorn. The 50:50 joint venture was created in 2004; similarly to the partnership with Sagent, Strides is responsible for developing, manufacturing and supplying products to the joint venture, whilst Akorn is responsible for sales and marketing on behalf of the joint venture. This agreement saw 20 injectable generic drugs earmarked for development; the ANDA for the first product was filed in April 2006. By October 2006, the joint venture had filed ten ANDAs, and the two firms expanded the agreement to cover 29 products in December 2007. Akorn-Strides' first ANDA approval, for keterolac tromethamine, was approved in 2007. Since then, the joint venture has had eight products approved, with the most recent, vancomycin, gaining approval in December 2008 and being launched in April 2010.

In total, Strides claims to have partnership agreements with more than ten of the world's top 50 pharmaceutical companies in Australia, South Africa, Europe and the US. The firm has certainly been busy so far in 2010. Perhaps the most notable deal has been its collaboration with Pfizer's Established Products Business Unit, which was signed in January. Pfizer will commercialise sterile injectables supplied by two Strides joint ventures, Onco Laboratories and Onco Therapies. The other partner in the Onco joint venture is South Africa's Aspen Pharmacare. In March, Strides and Aspen announced a restructuring of their arrangements related to these two oncology joint ventures, with Aspen selling its 50% ownership to Strides for US$117 million, making Strides the sole owner. At the same time, Strides entered into another understanding with Aspen to acquire the South African firm's facility in Campos, Brazil, for a consideration of around US$75 million. Campos is a speciality injectable business; Strides' agreements with Sagent and Akorn both revolve around injectables, highlighting the importance of this market niche to Strides. Also in March, Strides made a non-binding and conditional proposal for a potential acquisition of all the shares of Ascent Pharmahealth, an Australia and Singapore-based generic, consumer skincare and OTC supplier with a customer base in Australia and Asia. Strides is currently the largest shareholder in Ascent, currently controlling around 57% of Ascent's ordinary share capital. As yet, the proposal has not produced any concrete agreements, and there is no certainty that it will. Ascent had been known as Genepharm Australasia, and in 2008, Genepharm acquired Strides' Australian and Asian businesses, ultimately providing Ascent's initial Singapore link; this deal looks to be coming full circle. Interestingly, in October 2009, Ascent entered into a distribution and services agreement with Pfizer, a deal which mirrored Strides' own agreement with Pfizer this year, and suggests the influence Strides has had over Ascent. Strides certainly seems to be developing a reach that goes beyond the company's appearance on paper.

Ian Platts – Editor, World Generic Markets

Glenmark advances in the US and Europe

March and April have proved to be busy months for the India-based firm, Glenmark Generics. On 11th April, Glenmark reported that it had settled pending patent litigation with GlaxoSmithKline regarding Glenmark's generic equivalent of the pharmaceutical giant's atovaquone and proguanil hydrochloride product, Malarone. Glenmark believes it is the first company to file an ANDA with a Paragraph IV certification for this product, and so will be entitled to the 180-days marketing exclusivity allowed under the Hatch-Waxman Act, once approval for its version is given. The patent litigation commenced in August 2009 in the US District Court for the District of Delaware; the settlement will enable Glenmark to launch its version in the third quarter of 2011, well before the expiration of the three patents in the FDA's Orange Book covering the product. All three expire on 25th November 2013, but all three have additional paediatric exclusivity periods until 25th May 2014. A paediatric dosage version of the product forms part of GlaxoSmithKline's NDA, but Glenmark is not challenging this version. Following on from its US approval for ropinirole in February 2010, on 7th April 2010, Glenmark announced that it had gained UK approval for the drug. The product, a generic equivalent of GlaxoSmithKline's Requip, is indicated for the treatment of restless legs syndrome.

Asides from its entanglements with GlaxoSmithKline, Glenmark has also had two other ANDAs approved in March and April in the US. On 26th March, its ANDA for 0.005% calcipotriene ointment was approved. The product, a generic equivalent of Leo Pharmaceuticals' Dovonex ointment, is indicated for the treatment of plaque psoriasis in adults. Leo's version is no longer marketed in the US, having been discontinued for reasons of commercial viability in April 2007. Glenmark appears to have the only marketed ointment version of the drug in the US; however, the fact that the branded version was discontinued for commercial reasons raises questions. Leo currently markets topical cream and solution variants of Dovonex; three generic versions of the topical solution variant are also marketed, by Tolmar, Hi-Tech Pharmacal and Nycomed. A few days later, on 1st April, Glenmark announced FDA approval for its 7.5 mg and 15 mg moexipril hydrochloride tablets. The product is a generic version of Schwarz Pharmaceuticals' Univasc, used in the treatment of hypertension. Branded revenues for the drug appear to be relatively small, and Glenmark's version joins long-established versions marketed by Teva Pharmaceutical Industries, Paddock Laboratories and Apotex. Glenmark noted that this approval complemented an approval for moexipril hydrochloride and hydrochlorothiazide, which was gained on 17th March 2010. On 31st March, Glenmark reported that NDAs for oxycodone hydrochloride capsules and liquid solution had been submitted by its partner, Lehigh Valley Technologies, to the FDA. The FDA has now begun reviewing the applications. Plenty of versions, both branded and generic, of oxycodone are currently marketed in the US, but these appear to all be in tablet form, which would perhaps explain why Lehigh has filed an NDA rather than an ANDA. Glenmark's partnership with Lehigh goes back to 2006, with an agreement covering two unnamed liquid generic pharmaceutical products. This was then extended some months later with an agreement covering another seven products for the US market.

However, the period has not been all plain sailing for Glenmark. On 16th March 2010, the FDA announced that it had ordered the firm to stop marketing unapproved nitroglycerin tablets. The FDA sent a warning letter requiring the tablets to be removed as part of the FDA's Unapproved Drugs Initiative, and gave Glenmark 15 days to respond with a discontinuation plan, and 90 days from the date of the letter to cease manufacturing. It is likely that Glenmark's ultimate response will be to file an ANDA for its version, in order to be able to bring it back to the market.

Ian Platts – Editor, World Generic Markets

AstraZeneca enters generics agreement with Torrent Pharmaceuticals

AstraZeneca has announced that it has entered into a licence and supply agreement with India's Torrent Pharmaceuticals. The firm has been vague on details, but said that the agreement would cover 18 products in nine countries, with the option to expand the agreement to cover more products and more countries. The countries are described as being emerging markets, which AstraZeneca believes will contribute around 70% of pharmaceutical industry growth in the next five years. The firm added that branded generics in these markets account for around 50% by value. The agreement will see Torrent manufacture and supply a portfolio of generics to AstraZeneca for which Torrent already has licences.

Exactly which countries AstraZeneca is referring to as emerging markets is open to debate, but Torrent claims a presence in a number of markets around the world. Included in these are African operations, including Zimbabwe, Kenya, Uganda, Nigeria, Ghana and South Africa. The firm claims it has 355 product registrations covering 14 countries in Africa, where it has seen revenues double since 1999/2000. Torrent also has made inroads into the Middle East, entering an agreement with a local producer in Saudi Arabia, and gaining approvals in Kuwait, Oman and Libya. The firm also has an eye on other markets in the Middle East, including Egypt, Syria and Jordan. Operations in Asia include a presence in Sri Lanka, Vietnam, Burma and the Philippines. Torrent also has a subsidiary in Brazil. Clearly, Torrent has developed a strategy of establishing commercial operations in the parts of the world that can be considered as emerging markets, which AstraZeneca will be well placed to exploit.

In making this agreement with Torrent, AstraZeneca is following in the footsteps of other large multinational innovator companies. Most notable in recent months has been Pfizer, which has entered into a series of agreements with Indian generic firms, similarly to AstraZeneca's tie-up with Torrent. Pfizer's agreements are the result of something of a change of heart for the firm, which until recently has been staunchly anti-generic in its outlook, despite the generally down-played existence of its Greenstone subsidiary, which produces generics. The firm has developed an Established Products Business Unit, specifically set up to exploit the international demand for generics; the shift in Pfizer's thinking perhaps underscoring the financial difficulties being faced by large innovator firms during globally economically constrained times.

Perhaps this is also the basis for AstraZeneca's similar change of heart. AstraZeneca has a stated aim to increase its penetration of emerging markets, although this is not specifically through generics. As with Pfizer, AstraZeneca's relationship with the generic industry has been somewhat fraught up until now. The firm's bitterly-fought battle to keep generic omeprazole off the global markets for as long as possible at the turn of the current century was something of a case study in aggressive legal tactics and market manipulation, and AstraZeneca was able to stave off the inevitable, and prolong its monopoly on the drug for some time past the expiration of the basic patents. The firm has not had a generics subsidiary, but has often reached settlements with generic firms in patent challenges, and in recent years has also fought generic competition by entering into authorised generic agreements, taking advantage of an issue that has split the generics industry in the United States. This latest agreement, linking the firm with a generic manufacturer, coupled with Pfizer's similar recent moves, perhaps reveals a sea-change in outlook for the branded industry.

Ian Platts – Editor, World Generic Markets

Ethex reaches the end of the road

KV Pharmaceuticals has announced that it is ceasing the operations of its generics subsidiary, Ethex. The move came as a result of a settlement agreement with the US Department of Justice and the US Attorney for the Eastern District of Missouri, which saw Ethex plead guilty to two felony charges, earning a fine of nearly US$26 million. However, KV noted that Ethex was a distribution operation, whilst KV owns all manufacturing and related intellectual property, meaning that KV will be able to continue to operate in the generics sphere in time.

The legal moves should herald the end of a very difficult period for KV, which has threatened to end the firm's existence. In May 2008, KV received complaints from a pharmacy in California and a distributor in Canada of oversized morphine sulphate products. In response, KV recalled specific lots in June 2008; that month Health Canada also issued a warning to consumers not to use the ratiopharm product, ratio-morphine, which was supplied by KV. KV's production began to unravel; in December 2008, the firm voluntarily suspended all shipments of FDA-approved drug products in tablet form, in order to allow the firm to review its manufacturing and quality systems. As part of this, Ethex recalled a single lot of hydromorphone tablets; as with the May 2008 complaint, the issue was one of oversized tablets. The FDA announced an inspection the same month.

This was followed by an announcement in January 2009 that the firm had voluntarily suspended the manufacturing and shipping of all of its products, with most products being recalled. The recall was initiated because the products may not have been manufactured under cGMP conditions. Adding to the firm's problems, in February 2009 it announced the loss of 700 jobs, as KV's lack of income began to bite. However, the situation began to stabilise in March 2009, when the firm announced it had entered into a consent decree with the FDA, giving KV an avenue to restart production once the conditions of the consent decree had been met.

The charges Ethex faced revealed more to the situation. When the May 2008 complaints arose, Ethex was required to submit Field Alerts to the FDA, which are required whenever a manufacturer receives information concerning a significant chemical change in a distributed product. KV did indeed issue a Field Alert for the morphine product, but the Department of Justice alleged that in the internal investigation sparked by this, the firm discovered incidences of other oversized drugs, including dextroamphetamine sulphate and propafenone. The DoJ alleged that these did not lead to Field Alerts being raised, a charge that Ethex has accepted.

In total, Ethex has been fined US$25.8 million in response to its guilty plea, and KV has announced that Ethex will cease operations. The firm is clearly hoping that ending Ethex will put a line under the issues it has faced, and give the firm a clean break to rebuild its operations and reputation. The manufacturing issues that ultimately led to the felony charges are still in the process of being resolved; but the FDA's consent decree should see the firm emerge from under this cloud in time. The news that Ethex wilfully hid the extent of the problems from the FDA, and thus from the public, was a more difficult stain to remove, and so terminating Ethex was perhaps KV's only real option to restore public confidence in its products once production restarts. The firm has sailed perilously close to disaster, but the settlement now announced should hopefully see it move it towards calmer waters.

Ian Platts – Editor, World Generic Markets

FDA pushes for generic drug user fees

FDA Commissioner, Dr Margaret Hamburg, has made an appeal for the introduction of generic drug user fees in order to bring new funding to the FDA's Office of Generic Drugs (OGD). Speaking at the Generic Pharmaceutical Association (GPHA)'s Annual Meeting, Dr Hamburg admitted that the backlog of pending applications was not acceptable, acknowledging that it would soon hit the 2,000 mark, and argued that the situation could only be resolved with the introduction of user fees. In its budget request for FY2011, the FDA proposed that introducing generic drug user fees would add just over US$38 million to its coffers. This, the FDA believes, would go a long way to reducing review times. By the end of the first five years following the introduction of user fees, the additional money would enable a complete review and response for an estimated 80% of applications within 12 months of receipt.

The GPhA responded to the plea for a user fee programme by saying it would welcome re-engaging in negotiations over the issue. The GPhA has generally been cool on the proposal, as its latest response shows. This is not really surprising, as the user fee proposal would of course mean hitting generic firms financially, with firms then having to try to either pass the costs on to consumers by raising prices in an already highly competitive market, or else absorbing the costs themselves, leading to reduced margins and profitability on sales. However, a particular sticking point has always been getting value for money, and ensuring that the increased costs will actually lead to faster approval times and a regulatory process that flows smoothly. The branded industry already has a user fee programme in place; in previous years when the idea of generic drug user fees has been mooted, the GPhA and others have responded by pointing out that unlike the branded industry, the generic industry faces other delays in the form of legal challenges from the branded industry. As a result, introducing user fees may not make a difference to approval times, as generic companies will still have to fight time consuming legal battles. The GPhA has said in the past that it would be willing to go down the user fee route if there was certainty that it would lead to reduced delays. This is a concern that Dr Hamburg has picked up on; in her address, she noted that a fee programme would have to include measurable results, something which has certainly been received positively by the GPhA. Of course, what those measurable results may be, and whether the generic industry agrees with them, remains to be seen.

One criticism that has been raised about a user fee programme in general is that it blurs the line between the industry and its regulators, a criticism that has been levelled at the branded industry's user fee programme. If the industry is paying the regulators, the danger will always be that with the money will lead to undue influence, especially if the regulators need to show they can provide value for money. Whether it is possible to safeguard against this is a particularly tricky issue.

The issue of introducing generic user fees is not new, and has been rattling around the federal government for some years. It is as uncertain now as it has ever been whether or not such a programme will be introduced. Of course, the US is currently in the throes of a bitterly divisive battle over reforming the healthcare system as a whole, which has so far resulted in a stalemate with the legislative bills introduced to Congress thus far unlikely to be passed. Given the political atmosphere in Washington at the moment, any attempt at reform may have to be scaled back and introduced in piecemeal fashion. It is quite possible that a user fee programme may get lost in the process.

Ian Platts – Editor, World Generic Markets

Watson hits 2010 running

Watson Pharmaceuticals has had a busy start to 2010, with a number of events underscoring its future plans. On 28th January 2010, Watson announced that it had completed its acquisition of Eden Biopharm, in a deal worth some US$15 million. The acquisition of the Liverpool, UK-based Eden was part of Watson's larger acquisition of the Arrow Group; Arrow had owned a 36% stake in the firm, a biopharmaceutical development and contract manufacturing company. Eden will become part of Watson's Global Brands Division, maintaining its contract services model whilst providing Watson with biopharmaceutical development and manufacturing capabilities; something which must surely have been a bonus to Watson in its plans to acquire Arrow. A week before, Watson held an Investor Day meeting in New York in which the firm provided an overview of its expanded global operations, during which the firm reported that it expected 2010 revenues to be worth around US$3.5 billion, substantially up on the US$2.5 billion it reported for 2008. Much of the boost will come from the acquisition of Arrow, which Watson is to use to reshape its generics business. The acquisition will give Watson a presence in a number of international markets, whereas before the firm has concentrated its business in the United States. Watson believes its generics business will account for sales worth some US$2.3 billion in 2010.

On 1st February 2010, India's Indoco Remedies announced that it had finalised a generic product development alliance with Watson to develop and manufacture a number of sterile products for the US market. Indoco did not comment on what those products were, but noted that they formed a sizeable chunk of revenues. Indoco will develop, manufacture and supply the products, whilst Watson will deal with the regulatory issues to get them approved, and will then market, sell and distribute them across the US. The agreement was a significant deal for Indoco, giving the firm an alliance with a sizeable generic company. However, it was also an interesting move for Watson: forming an alliance with an Indian firm is not a common occurrence for the firm, and is perhaps a taster of the direction Watson will be moving in.

On the same day, Watson announced that it had entered into a licensing agreement with HRA Pharma through which Watson would become the commercial partner for ulipristal acetate in the US. The product is already marketed by HRA in Europe, and has been filed in the US as an NDA. Watson will make payments to HRA, and the firm commented that the move fitted in with its strategy to expand its position in the women's healthcare market. The agreement will no doubt also add to Watson's innovative products division, a much smaller part of the company than its generics division, but nonetheless significant for the firm.

In a related vein, on 8th January 2010, Watson filed an ANDA with the FDA for a generic version of Duramed's oral contraceptive, LoSeasonique. The ANDA was filed towards the end of 2010, and has led to a patent infringement lawsuit being filed against Watson in the US District Court for the District of New Jersey. Duramed was part of Barr Pharmaceuticals, which of course is now part of Teva, leading to the spectacle of one generic company suing another for alleged patent infringement. This is potentially one of two lawsuits Watson will start the New Year with. On 19th January 2010, Endo Pharmaceuticals announced that it was in receipt of notification that Watson had filed an ANDA for a generic version of Lidoderm, a lidocaine topical patch. At the time of writing, Endo had yet to say whether it would file a lawsuit against Watson as a result, but it seems that this will be a likely course of action. Watson has certainly started the year with a sense of determination.

Ian Platts – Editor, World Generic Markets

Pfizer and Strides collaborate on generics; Luitpold acquires PharmaForce

On 6th January 2010, Pfizer and Strides Arcolab announced a new collaboration, through which Pfizer will commercialise off-patent sterile injectable and oral products in the US, supplied by Strides and two of Strides' joint ventures with South Africa's Aspen Pharmacare: Onco Laboratories and Onco Therapeutics. The collaboration is expected to deliver 40 off-patent products, many of which will be oncology therapeutics, and will bring the total number of products in-licensed by Pfizer's Established Products Business Unit to more than 200.

Pfizer's Established Products Business Unit was created in 2008, and marks something of a departure in Pfizer's thinking about generics, bringing its own generic operations more out of the shadows. Pfizer has previously been known to take an opposing line to generics, although its acquisition of Pharmacia had given the firm Greenstone, a generics subsidiary which Pfizer re-launched in 2004 to manufacture and market Pfizer brands that had lost patent protection. However, the firm seldom talked about Greenstone, even after the re-launch. The Established Products Business Unit similarly had a muted debut, but its efforts to strike deals with generic companies are a new departure for Pfizer. Interestingly, the unit has focused on dealing with Indian generic companies: before Strides Arcolab, the unit signed deals with Aurobindo Pharma and Claris Lifesciences.

Also on 6th January, Luitpold Pharmaceuticals' acquisition of PharmaForce was announced. Luitpold, these days based in New York and a US company of Daiichi Sankyo, is also the owner of American Regent. Luitpold was founded in 1910 in Bavaria, Germany, but established itself in the United States in 1978. It was sold to what was to become Daiichi Sankyo in 1991. Of course, one of Daiichi Sankyo's more recent acquisitions was that of Ranbaxy in 2008, making the Indian giant a stable-mate of Luitpold. Luitpold develops both branded and generic products, with its most recent generic approval being for caffeine citrate in November 2009. The company also provides contract manufacturing services to other pharmaceutical firms.

PharmaForce was founded in 1999, and is a manufacturer, developer and marketer of sterile products and generic injectable products. The firm is headquartered in Columbus, Ohio, and should prove to be a good fit for Luitpold, which noted that the acquisition would further diversify its product portfolio and generate additional growth. The acquisition will also give Luitpold three large facilities.

Ian Platts – Editor, World Generic Markets

Taro / Sun dispute boils over

The long-running bitter spat between Taro Pharmaceutical Industries and Sun Pharmaceutical Industries boiled over during December 2009, as Taro prepared for its Annual General Meeting on 31st December 2009. The two companies have been engaged in a bitter dispute for over 18 months, after Sun entered into negotiations to acquire Taro. The bid began amicably enough, with Sun forwarding a large sum of money to Taro in order for the Israel-based firm to avoid going bankrupt, and Sun's attached bid price for Taro's shares was met with approval from Taro's Board of Directors. However, after that, events became very sour, as Taro's fiscal position improved and the company claimed that Sun's offer was too low. What began as a friendly takeover bid has become increasingly fraught, with the issue being brought to Israel's Supreme Court; the legal issues remain unresolved.

Prior to the AGM, Taro's Chairman, Barrie Levitt, sent a letter to the firm's shareholders, containing the usual encouragement to vote at the AGM. However, the letter, along with a second letter sent out a few days later, took the opportunity to warn shareholders of what Taro believed was Sun's attempts to take over the firm by more stealthy means, through voting down the Taro Board's recommended nominees. Mr Levitt claimed in his first letter that Sun had been trying to take Taro over by every conceivable means bar one: offering a fair price to shareholders for the firm's shares. By way of a warning should Sun succeed, the letters pointed to Caraco Pharmaceutical Laboratories, the US-based company that is majority-owned by Sun. Caraco had a difficult year in 2009, with the FDA shutting the firm's manufacturing plant down and seizing its products; Taro saw this as an example of Sun's management inabilities.

Naturally, Sun refuted Taro's allegations. In a letter sent to Taro's shareholders by Dilip Shanghvi, Sun's Chairman and Managing Director, itself rather an unusual move, Sun claimed that it had been wronged by Barrie Levitt and his family, with complicity from Taro's Board of Directors, in moves which were designed to prevent Taro from carrying out its contractual obligations. Sun's letter countered Taro's allegations about Caraco, and instead turned attention to Taro's financial situation. The letter noted that Taro has been unable to file valid financial data for some time. Sun claimed Taro's share price had decreased by 86% over the past six years, resulting in the loss of US$1.6 billion of shareholder value. In contrast, Sun said that its share price had increased by 406%, adding US$5.1 billion in value for Sun's shareholders. Taro, on the other hand, claimed that its results since 2007 had seen a turnaround and exceptional growth in Taro's sales and profitability.

What were the other shareholders to make of this spat? Predictably for this battle, their response was unclear. Following the AGM, both Taro and Sun claimed that shareholders had more or less voted in their favour. Taro was able to report that shareholders approved the election of all the Directors who had been up for election. However, shareholders had not approved the appointment of nominated external Directors. Sun in turn claimed that the shareholders had sent a decisive message that they would no longer welcome the leadership of Mr Levitt and his Board, seeing the non-vote of the external Directors as evidence. Despite the overall approval, Sun argued that in fact 78% of Taro's minority shareholders had voted against the continued service of current Directors, and claimed that shareholders holding over two-thirds of Taro's equity had voted to remove the Levitt family and their associates. However, this had not been reflected in the overall vote because Taro's capital structure gave the Levitt family extra voting power. In a further move, in January 2010, Sun sent a letter to Taro's Directors threatening legal action if they did not respond to wishes of Taro's minority shareholders and reverse their course of action. Clearly, for these two firms, the bitter claims and counter-claims continue. Perhaps Israel's courts will be the only entity that can resolve their differences.

Ian Platts – Editor, World Generic Markets

Watson completes Arrow acquisition

Watson Pharmaceuticals announced on 2nd December 2009 that it had completed its acquisition of Arrow Group. Watson announced that it had entered into a definitive agreement to acquire Arrow on 17th June 2009, in a deal that would cost US$1.75 billion in cash and stocks. Watson commented that it believed the transaction would be accretive to cash earnings per share in 2010, as a result of Watson needing a relatively small amount of additional debt to complete the deal. Watson added that the acquisition would create a company with over US$3 billion in annual revenues. Watson's total revenues in the year ended December 2008 were worth over US$2.5 billion, and the firm commented that Arrow's revenues in 2008 were worth over US$650 million.

Arrow Group was founded in 2000, and Watson has commented that it is one of the fastest growing generic pharmaceutical companies in the world, with a compound annual growth rate of 67%, taking its revenues from US$18 million in 2001 to the US$650 million reported last year. The firm has three factories, in Canada, Malta and Brazil, with the first two being FDA and EU-approved. Over the past seven years, Arrow has invested more than US$320 million in product research and development and markets over 100 molecules including more than 50 internally developed products. Arrow claims 60 products developed in six years, with 55 European submissions and 50 in the US. Watson noted that Arrow's product development activities are supported by state-of-the-art R&D centres in Melbourne, Australia, and Toronto, Canada. Watson added that as a result of the acquisition, it was also acquiring a 36% ownership interest in Eden Biodesign, a company which provides development and manufacturing services for early-stage biotech companies. This will provide Watson with a foundation for generic biologics.

Arrow has a presence in the UK, Ireland, France, Germany, Poland, Scandinavia, Slovenia, Malta, South Africa, India, China, Australia, New Zealand, Brazil, the US and Canada. Its US presence is in the form of Cobalt Laboratories, which has gained a number of ANDA approvals in recent years, including three first-time generics: acarbose tablets in May 2008; and topiramate tablets and capsules in March 2009 and April 2009, respectively. However, it is likely to be Arrow's international operations that will be of most interest to Watson. The firm had previously considered its operations to be based predominantly in the US and India, with its key commercial market being the US, and so the acquisition of a company with a presence in so many other countries will increase Watson's scope considerably. So too will the included 36% stake in Eden Biodesign, through which Watson clearly sees scope for entering the biosimilars market. With the growing likelihood of a regulatory biosimilars pathway emerging in the US, it makes sense for a company the size of Watson to seek ways to gain a toehold in this arena before the competitive floodgates are opened.

Ian Platts - Editor, World Generic Markets

AARP, PhRMA clash over drug pricing

On 16th November 2009, AARP issued a report that found that manufacturer prices for brand name drugs had risen over the last year, despite a negative general inflation rate. By contrast, the report also found that generic drug prices had fallen over the same period. The report looked at drugs widely used by Medicare Part D beneficiaries; in the case of brand name drugs, the report looked at 219 products, and found that 96% of these had seen price increases, with the remaining 4% seeing no change. Of the top 25 products, as ranked according to prescriptions processed by the Medicare Part D plan provider during 2006, price rises ranged from between 4.8% and 19.7%. The 4.8% rise was for the fourth-ranked drug, Wyeth's Protonix 40 mg tablets (pantoprazole sodium), whilst the 19.7% rise was for Boehringer Ingelheim's Flomax 0.4 mg capsules (tamsulosin hydrochloride), which was ranked at number 17. The top-ranked drug was AstraZeneca's Nexium 40 mg capsules (esomeprazole), which saw a rise of 7.1%, whilst the second-ranked drug, Bristol-Myers Squibb's Plavix 75 mg tablets (clopidogrel bisulphate) saw an increase of 8.2%.

With regard to generics, although AARP's report saw prices decreasing by an average of 8.7%, the breakdown of the top 25 generics paints a slightly different picture. Only four of the top 25 saw any price changes, but in this case, all four had significant price falls. The four were all from Teva Pharmaceutical Industries, and were: simvastatin 20 mg tablets (ranked at number one), which saw a price drop of 77.7%; simvastatin 40 mg tablets (ranked at number two), which saw a price fall of 79.8%; metformin 500 mg tablets (ranked at number four), which saw a drop of 85.2%; and pravastatin 40 mg tablets (ranked at number 10), which saw a drop of 68.9%. Teva accounted for nine of the top 25 drugs, with Sandoz accounting for another nine, and thus between them accounting for 72% of the top 25.

Unsurprisingly, PhRMA, the Pharmaceutical Research and Manufacturers of America organisation, was unimpressed with AARP's report and challenged its findings. Accusing AARP of having a 'skewed view of the world', PhRMA began by arguing that looking at drug prices overlooked the savings they provide in the form of fewer medical procedures needing to be carried out and increased productivity through better prevention and management of diseases. However, turning to the price statistics themselves, PhRMA argued that AARP had taken a selective view, which did not take into account discounts and rebates for brand name drugs. PhRMA noted that the Medicare Trustees had reported that rebates in the Medicare drug prescription programme had reached 20% to 30% for many brand name drugs, and added that there was a 50% discount companies would provide to most seniors and disabled Americans who had reached the 'donut hole' in the Medicare Part D programme. PhRMA was able to provide data from IMS, the Centers for Medicare and Medicaid Services (CMS) and the Congressional Budget Office (CBO) which countered AARP's claims. IMS data showed that prescription drug spending growth had fallen to 1.3% in 2008, whilst the CBO found that drug expenditures grew by 3.2% between 2004 and 2007.

The charges and counter-charges between AARP and PhRMA shows above all that when it comes to healthcare costs, the old maxim remains the case that there are lies, damn lies and statistics. Both organisations can be accused of being selective in their figures, with AARP taking figures that, in not taking into account deals and rebates, provide arguably misleading results. For its own part, PhRMA can also be accused of the same, using figures spread over longer time frames than the AARP report. As is often the case, the truth of the matter no doubt lies somewhere between the two.

Ian Platts, Editor, World Generic Markets

Oxfam / HAI criticise EU for threatening access to medicines

Oxfam and Health Action International issued a report in late October 2009 which alleged that the European Union was contradicting world trade rules by pandering to the interests of Big Pharma ahead of the needs of people in less developed countries to gain access to essential medicines. The report, Trading Away Access to Medicines: How the European Union's trade agenda has taken a wrong turn, argues that the EU has become guilty of double standards. It notes that the EU Member States and the European Commission have taken steps to improve access to health services in developing countries, and has acted to reduce the price of medicines within the borders of the EU, but argues that the EU now has a trade agenda which acts directly against these same objectives in developing countries. The report claims that the EU is pushing for a range of intellectual property measures that would support the commercial interests of the pharmaceutical industry whilst damaging the opportunities for innovation and access to medicines in developing countries. The report goes so far as to say that the EU's demands exceed those pursued by the Bush administration in the United States, whose intellectual property policies were criticised for their detrimental effect on developing countries.

In the report, the two organisations urge that the EU adopt a number of positions, including honouring commitments under the Millennium Development Goals, the Doha Declaration on TRIPS and World Health Assembly resolutions on innovation and access to medicines; and ensuring that its trade policy is in line with its development objectives, particularly with regard to access to healthcare and medicines. With regard to intellectual property, the EU should not misuse free trade agreements in order to implement TRIPS-plus rules which place conditions beyond the scope of the TRIPS agreement and its application to medicines in order to extend monopoly protection and limit access to medicines. The EC should stop exerting pressure on governments that attempt to introduce safeguards to protect and promote public health; and should amend its counterfeiting regulation to ensure that it does not have a detrimental impact on developing countries. The EU should also ensure that the Anti-Counterfeiting Trade Agreement (ACTA) does not set a new global standard for intellectual property rules that will impede access to medicines for developing countries; and should identify and support measures to improve access to generic medicines in developing countries, including the UNITAID patent pool for HIV / AIDS drugs.

The report also urges the EU that with respect to research and development, European donors should scale up financial contributions to R&D to address diseases that disproportionately affect people living in developing countries. The EU should also support Product Development Partnerships designed to deliver affordable and effective new products, and should continue building R&D capacity in developing countries. It should also support the implementation of the WHO's Global Strategy and Plan of Action on Public Health, Innovation and Intellectual Property, and support the Expert Working Group in its efforts to find new models of innovation. Finally, the EC should take measures to ensure that specific initiatives meet real health needs, and that the EU's regulations on children's medicines can also be to the benefit of developing countries.

As can be seen, the report has a long list of recommendations, and many of them are not new for Oxfam. In the past, however, many of these allegations, such as those regarding TRIPS-plus free trade agreements, have been labelled at the US, and it is interesting that this has now changed. Whether the EU will be any more willing to adopt these recommendations than the US is unlikely. However, there is no doubt that groups such as Oxfam will not stop pushing for change.

Ian Platts, Editor, World Generic Markets

Of patent pools and regime change

The growing impetus to amend Canada's Access to Medicines Regime (CAMR) has gathered pace, with Canadian Senate committee hearings into Bill S-232, which aims to streamline the regime, now underway. The hearings' opening statements have thrown up an interesting question over whether or not the existing act has actually failed. Critics – of which there are many – of CAMR in its current guise argue that the regime has clearly failed, pointing to the fact that in the five years in which the act has been in law, only one company has been able to use it. That company was Apotex, which used the act to provide a very limited run of antiretrovirals to Rwanda, in two shipments in September 2008 and September 2009. In total, around 14 million doses of a fixed-dose combination product were shipped. However, Apotex has been very vocal about the difficulties the regime produced, and has added that it would not use the process again in its current form, throwing its weight behind efforts to amend CAMR, with the added carrot that it would use an amended regime to produce paediatric antiretrovirals. However, on the other side of the fence, supporters of the current regime point out that it has been used successfully, even if only once. Furthermore, in doing so, this is the only such access to medicines legislation in the world that has worked. The Senate committee asked the question what reasons are behind the regime being so little used. The difficulties in using the regime are certainly one possible answer, and another possibility is that Canadian manufacturers simply cannot compete on price with, for example, Indian or Chinese manufacturers. A further possibility raised in the hearings' opening was that other factors have played a part, particularly the Global Fund to Fight HIV/AIDS, which has provided funds of some US$16 billion. The issue that Canada will need to decide is should CAMR be amended, and if it is, will this make a difference globally?

Another possible route for increasing access to essential medicines is that of developing a patent pool, an idea which also saw a boost recently, with the UK's government indicating support for this measure. The basic aim of a patent pool is that all the patents for essential medicines are made available collectively, enabling generic firms to use them to produce drugs for developing countries, paying the patent owners royalty rates in return. UNITAID has decided in principle to establish a voluntary patent pool for medicines in a decision made in July 2008, but it is a scheme that appears to have gained little traction since. However, in a speech on 12th October 2009, the UK Minister for International Development, Mike Foster, said that the UK government supported UNITAID's efforts, according to Knowledge Ecology International. Mr Foster's comments came a few weeks after Médecins Sans Frontières launched an email campaign targeting nine brand name companies, which between them hold patents for 21 antiretrovirals.

Both of these initiatives are efforts to crack the same problem. However, it is worth bearing in mind that these are not the only options. The branded companies themselves have also made efforts to provide essential medicines to developing countries, providing drugs at cost, or even donating them. Cynics may argue that this is little more than window-dressing, maintaining good public relations, and indeed may well be right, but it does surely reflect an expectation, seen in all these efforts, that developing countries need to be given every option to access essential medicines in order to save the lives of millions.

Ian Platts – Editor, World Generic Markets

PEPFAR reaches 100th approval

The US Department of Health and Human Services has marked the recent approval of the 100th antiretroviral drug to be approved through the PEPFAR programme. Ironically, by the time the FDA marked the event, the 101st product had already received approval. PEPFAR, the President's Emergency Plan for AIDS Relief, was introduced by President Bush in 2003 and has a remit to work in partnership with host nations through to fiscal year 2013 to support treatment for at least three million people, prevention of 12 million new infections and care for 12 million people, including five million orphans and vulnerable children. The programme allows the FDA to review antiretroviral drug applications on an expedited basis, with the aim of fast-tracking the approval of drugs in order for them to be used in developing countries, rather than the US. Most applications are generic, and most approvals are tentative, as they are for drugs which are still protected by patents in the US, and thus the generics cannot be marketed in the US.

A look at the drugs approved produces an interesting picture. The first to be approved was Barr Laboratories' didanosine capsules, which gained tentative approval on 3rd December 2004. This proved not only to be Barr's first and last drug approved under the PEPFAR programme, but also stands out as the only drug to enter the programme from an American company. In total, 13 companies have provided the 101 drugs, and of those 13, ten are Indian firms. Asides from Barr, the other two firms which are not based in India are Aspen Pharmacare, based in South Africa, and Huahai US, based in China. One of the Indian firms listed, Matrix Laboratories, is now majority-owned by the US' Mylan, but was an entirely Indian firm at the time many of its products were submitted and approved. Matrix also took the honours for both the 100th and 101st drugs to be approved under the programme. The dominance of Indian firms in the lists underscores the role India has carved out in producing generic antiretrovirals, and included in the list are some of the country's largest generic pharmaceutical manufacturers, including Ranbaxy Laboratories and Cipla, as well as smaller companies, such as Aurobindo Pharma, Emcure Pharmaceuticals and Hetero Drugs. Aurobindo has emerged as the company with the most drugs approved under PEPFAR, with 31 of the 101.

Quite why so few US generic firms have had antiretrovirals approved under the PEPFAR programme is curious. A quick look at the FDA's information for approved or tentatively approved antiretrovirals shows that, as with the PEPFAR programme, generic versions of these drugs are dominated by Indian firms, with only Barr and Roxane Laboratories standing out. The most likely reason is undoubtedly money. US firms will need to spend money to develop generic antiretrovirals, especially as many companies do not have any experience with antiretrovirals, and as most of these are still protected by patents in the US and thus cannot be marketed there, there will be no immediate prospect of returns. Of course, the patents will eventually expire, but at that point, home grown firms will have already lost the chance of marketing exclusivity to the multitude of Indian firms which have tentative approvals already; financial returns will therefore be minimal. However, neither the domestic nor international markets for antiretrovirals are getting any smaller, and whilst such drugs may not see the stellar returns promised by blockbusters such as fluoxetine has in the past, they may well provide a small but steady income, particularly in the US and other developed nations.

Ian Platts - Editor, World Generic Markets

Goldshield bidding war

A bidding war broke out in September 2009 over Goldshield Group, the UK-based pharmaceutical and consumer health company. The battle is being fought out by two investment vehicles, AIT Investments and Midas Bidco.

Goldshield began life in 1991, gained its first marketing authorisation for a product it had developed itself in 1996, and floated on the London Stock Exchange in 1998. The Group was founded by two brothers, Ajit and Kirti Patel, along with a third partner, Shane Gogerly. In recent years, Goldshield was one of a number of companies to face investigations over alleged price fixing by both the Serious Fraud Office and the NHS. Although the cases ultimately collapsed, the investigations did see both Ajit Patel and Kirti Patel step down from the firm's Board in order to fight allegations levelled at them; Kirti Patel now occupies the position of Group Executive Director in the company. Perhaps ironically, given the legal battles the firm has faced, Goldshield's current Non Executive Chairman is Dr Keith Hellawell, who in previous years was a Chief Constable for two British police forces and in the late 90s was responsible for the UK's anti-drugs policy. For its most recent fiscal year, ended March 2009, Goldshield reported revenues worth £98.4 million (US$156.9 million), with profit after tax of £13.9 million (US$22.1 million). This was a significant improvement on the revenues of £84.9 million and profit after tax of £6.3 million reported for the previous fiscal year.

Ajit Patel is now involved in one of the parties bidding to acquire Goldshield, AIT Investments, which was the first to announce an offer. AIT describes itself as a newly-incorporated company formed by the Fuhrer family for the purpose of implementing the acquisition of Goldshield. The Fuhrers are an Israeli family which own and control the Neopharm group of companies, which market ethical pharmaceuticals and branded consumer healthcare products.

The other bidder for Goldshield is Midas Bidco, an investment vehicle set up by Goldshield's management team; involved in this bid is Goldshield co-founder, Kirti Patel; the two brothers are thus facing off over control of the company they set up and then had to withdraw from in order to fight the price fixing allegations.

AIT commenced bidding for Goldshield with an offer of 440 pence per share, valuing the company at some £162.1 million (US$257.1 million). In response, Midas announced it had put financial backing in place to allow it to make an offer above 440 pence per share. AIT hit back, raising its offer to 450 pence per share, valuing the company at £165.7 million (US$262.8 million). Bidco then upped its offer to 460 pence per share, making the firm worth £169 million (US$268.0 million). In the latest turn, AIT then increased its bid on 2nd October to 480 pence per share, which would value Goldshield at £176.8 million (US$280.4 million). At the time of writing, this is where the bidding rests. However, there is no doubt that the deal, which has pitched two brothers against each other, is not yet done.

Ian Platts - Editor, World Generic Markets

Grindeks looks to expand

The Latvian firm, Grindeks has made a few announcements recently which reveal the firm is aiming to expand its business. On 19th August, the firm reported that it was considering establishing injections manufacturing in Latvia, and was looking at the territory of Riga Free Port as a possible site to construct a new plant, because of economic incentives and tax allowances offered there. However, the firm added that purchasing an existing plant would also be an option. This was followed on 7th September with an announcement that the firm was considering options to develop its ointment business. Here, Grindeks is looking at two possibilities: either move its existing operations in Tallinn, Estonia, to Latvia, or remain in Tallinn, and presumably develop the plant there. As yet, no decision has been made.

Grindeks has, in recent years, been undertaking an investment programme, and these recent announcements are in line with that. In January 2009, the firm opened a new final dosage forms plant; the firm commented that this had been the largest investment project in the company's history, with LVL9.1 million (US$16.8 million) invested over two years. It is anticipated that the new plant will increase manufacturing productivity and capacity substantially, to 1.5 billion tablets and 500 million capsules per year.

Additionally, in August this year, Grindeks also announced that it had introduced a new active pharmaceutical ingredient, ursodeoxycholic acid, used in the treatment of hepatic and gallstone diseases. The new API represents a new medical therapeutic group for the firm, and has been developed as part of a co-operation agreement with the German firm, Marenis Pharma; once again evidence of Grindeks' plans to expand. The firm also announced it had started construction on a new manufacturing unit with an investment of nearly LVL6 million (US$12.5 million), connected with the development of this API. This again is an important move for the company; Germany is a relatively unexplored territory for Grindeks, whose traditional markets have been those of Central and Eastern Europe, the Baltic States and the CIS. Although Grindeks has co-operated with Merck in Germany, its presence there has been limited. The development of new APIs is of course also significant. Despite the economic turmoil of recent months, Grindeks appears to still be on course to expand its horizons.

Ian Platts – Editor, World Generic Markets

Canadian manufacturers squabble over statistics

Canada’s Patented Medicine Prices Review Board (PMPRB) has issued its Annual Report for 2008, leading to claims and counter-claims by the country’s generic and branded industry organisations. The Canadian Generic Pharmaceutical Association (CGPA) used the report to criticise the branded industry, noting that for the eighth year in a row, the branded industry had failed to reach its threshold of 10% of their Canadian revenues being ploughed into Domestic R&D spending; this having been a commitment made by the branded industry in 1987, with the adoption of amendments to the Patent Act. In response, Canada’s Research-Based Pharmaceutical Companies (Rx&D) has sought to play down the last eight years of failing to reach the target, arguing instead that its member companies’ total investments in R&D in Canada over the last 20 years has averaged more than 10% of sales. Of course, both sides are correct in their assertions, depending on how the data is analysed. It is worth noting also that the PMPRB’s report states that Rx&D members accounted for 89.4% of all reported R&D expenditures in 2008, with patentees reporting a total of C$1.3 billion (US$1.2 billion) of R&D expenditures.

However, whilst the overall average for the last 20 years is for over 10% of sales put into domestic R&D, the figures presented by the PMPRB’s report show that the branded industry only met and / or exceeded the 10% figure in eight years, between 1993 and 2000, whilst Rx&D member companies managed to meet and / or exceed the figure in ten years, between 1993 and 2002. Despite the occasional blip, the ratio figure has been falling since those years, having reached 8.1% for all patentees in 2008, and 8.9% for Rx&D members.

Rx&D brought attention to wider issues, noting that the PMPRB’s report also showed that whilst the Consumer Price Index climbed by 2.3% in Canada in 2008, prices for patented medicines rose by only 0.1% during the same period. The organisation added that over the past decade, prices for innovative medicines were around 7% below the international median. However, against that, the report also shows that Canadian prices were the third highest of seven comparator countries, behind only the US and Germany. However, the US was highest by some margin, skewing the figures somewhat.

The PMPRB’s report gives a detailed look at the state of the Canadian branded industry’s finances, but as always, its findings are open to interpretation of the statistics. The claims and counterclaims of both the branded and generic industries hold up when viewed in the right context, despite apparently being at odds with each other. Perhaps then, the value of the report is that it shows that both sides could do better.

Ian Platts - Editor, World Generic Markets