Lessons Learned From 4500 Launches

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Lessons Learned From 4500 Launches
Generics
Entering The Generics
Business In Mature Markets:
Lessons Learned From
4,500 Launches
Big Pharmas are responding to major market challenges by considering
diversification options, notably entering the small-molecule generics
business. An IMS Consulting Group analysis of more than 4,500 generics
launches between 2005 and 2010 tracks what branded companies
interested in generics need to know about key attributes for success.
■ Many innovative pharmaceutical companies looking
to diversify consider entering
the small-molecule generics
business, which they view
as a logical adjacent space
with comparatively low barriers to entry, and one that is
synergetic with their existing
business.
■ An IMS data-driven study
of 4,500 generics launches
confirms the importance
of a strong local presence,
large global scale, and a
rapid launch following the
originator’s loss of exclusivity
as key determinants of a new
generic’s uptake and eventual
capture of volume share.
■ IMS warns that synergies
between branded and generics businesses are less
than assumed, the required
investment can be considerable, and the risks can be
high, especially for newcomers embarked on exploiting potentially lucrative, but
unpredictable, Paragraph IV
legal challenges in the US.
1
BY Waseem Noor and Stefan Lunglmayr
F
aced with patent cliffs, constrained pipelines, and intensifying budget pressures,
many R&D-driven large pharmaceutical
companies are turning to non-proprietary
products as a strategy for growth. They aim
to expand into generics or over-the-counter
products to retain the value of their own drugs
after loss of exclusivity (LOE) and/or to capture additional cash flow from unprotected
products that they either develop internally
or in-license.
In many cases, these efforts center on exploring the opportunities inherent in marketing small-molecule generics. Companies view
small-molecule generics as a logical adjacent
space, because it seems to be a business
that is relatively easy to enter, has synergies
with current operations, and uses learnings
already ingrained in their existing businesses.
(See ”Pharma: Serious About Change?“ — IN
VIVO, October 2010 and ”North American
Buyers Turn to European Branded Generics For
Growth” — “The Pink Sheet,” June 6, 2011.)
But any entrant will face a highly mature,
crowded, and fragmented market, dominated
by pure-play generics companies with years
of experience in the field, as well as by local
legacy players that know how to survive in
a tough environment. Research-based companies new to the game may not have the
right skills, resources, and commitment; their
capabilities and culture, designed to support
innovation, are less suited to a commodity
| March 2013 | IN VIVO: The Business & Medicine Report | www.ElsevierBI.com
business based on volume.
While many Big Pharmas have already
entered the field, they’ve done so with different levels of commitment and experience,
mixed operating models, and varying degrees
of success. (See ”Sale Of Pfizer’s Established
Products Not Off The Table, Exec Says” — “The
Pink Sheet” DAILY, September 11, 2012.) The
challenges for new entrants raise a number of
questions. What lessons can be learned from
past market dynamics on how best to enter
the generics business? How should companies
structure their portfolio of products? What
capabilities will they need? And how and
when should they launch their products? (See
”Abbott Established Products Senior VP Michael
Warmuth Stresses Diversified Portfolio In Emerging Markets: An Interview With PharmAsia News
(Part 1 of 2)” — PharmAsia News, August 19,
2011 and ”Abbott Established Products Senior
VP Michael Warmuth Stresses Diversified Portfolio In Emerging Markets: An Interview With
PharmAsia News (Part 2 of 2)” — PharmAsia
News, August 22, 2011.) To answer these
questions, IMS Consulting Group studied
the results of thousands of generic launches
of “simple” oral solids in three mature generics markets (France, Germany, and the US),
testing hypotheses about the circumstances
under which launches were most successful.
As a result, we have identified the likely drivers of success and failure in entering mature
generics markets.
Generics
Introducing three lessons we have identified as the likely drivers of success and failure
in entering mature generics markets.
LESSON 1:
S
Build Local Strength
trong local operations are particularly crucial for success in the generics market, which is typically highly fragmented with
local, regional, and multinational players of various sizes competing within countries. Our study demonstrates that companies with a large generics presence in a given country command higher average volume shares per product. (See Exhibit 1.)
Why Is This The Case?
Companies need large, local operations to achieve economies of scale in product marketing and distribution. A strong local
presence also supports a detailed understanding of the local regulatory environment, solid relationships in the supply chain, and
greater customer confidence in areas where generics have sometimes struggled, such as good manufacturing practice, supply
continuity, and package quality. Such strengths are often cultivated over many years by dedicated teams with deep knowledge
of the dynamics of the sector and the broader domestic environment.
Exhibit 1
Product Share One-Year Post-Launch Correlates To Size Of Local Company’s Generics Business*
15
14
13
12
Average Product 11
Volume Share 10
9
One Year
Post-Launch (%) 8
7 6
6
5
4
3
2 2
1 1
0
Small
14
GERMANY
13
10
FRANCE
5
3
Medium
USA
Large
Size of Company’s Local Generics Business
*“Simple” oral solids only.
SOURCE: IMS Consulting Group
Companies making up 50% of all generics sales in a country are defined as “large” for this study, the remaining companies
generating between 50% and up to 80% of all generics sales are defined as “medium,” and all remaining companies are
defined as “small.” According to this definition, in the US, France, and Germany, the top nine, eight, and 12 companies,
respectively, are considered to be “large,” and the following 26, 22, and 41 companies, respectively, are “medium.”
©2013 Windh o v e r I n f o r m a t i o n I n c . , an Elsevier company | IN VIVO: The Business & Medicine Report | March 2013 |
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Generics
LESSON 2:
BE MULTINATIONAL
G
eographic reach matters for generic companies, particularly in France and Germany, where all large players are multinational. Geographic reach is also increasingly important in the US, which traditionally has been large enough on its own
to support economies of scale. Multinational companies with small local generics businesses did not benefit from their
geographic reach independent of the size of their local branded business. (See Exhibit 2.)
Why Is This The Case?
Beyond being large enough to successfully market products in one country, generic companies also need to reach sufficient scale
to justify investment in product development and registration, and to drive down costs in sourcing and manufacturing. Although
the US market is big enough on its own, European players have to expand beyond borders to achieve synergies among several
countries. However, being multinational only provides the scale needed to develop and price products competitively; local business size is the crucial factor in garnering a solid volume share.
What Are The Implications For New Players?
Companies committed to entering the space outside the US should expand their geographic footprint quickly to achieve the
product volume required to justify the cost of development, registration, and manufacturing; however, companies must still build
strength locally in important markets to achieve the synergies described in Lesson 1.
Exhibit 2
Average Volume Share Of Generic Products One-Year Post-Launch*
USA
13.6%
FRANCE
GERMANY
14.2%
10.4%
7.0%
0.6%
3.0%
1.5%
4.9%
2.5%
12.1%
7.2%
1.3%
0.9%
13.6%
13.9%
5.4%
Small
2.5%
Medium
3.8%
Large
Small
3.2%
Medium
1.3%
Large
Small
3.4%
Medium
Large
Size of Local Generics Business
Height of bars represent average
volume share one year after launch
Extent of geographic coverage
Multinational
Regional
Local
*By size of company’s local generics business and extent of geographic coverage (“simple” oral solids only).
Local companies were defined as those with more than 80% of their sales in one country; regional companies as more than 80% of sales in three or fewer
countries, and the remaining companies as multinational corporations.
SOURCE: IMS Consulting Group
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| March 2013 | IN VIVO: The Business & Medicine Report | www.ElsevierBI.com
Generics
LESSON 3:
Be First With New Products
C
ompanies with larger portfolios achieved a higher market share for their product launches in the US and France, with
slightly lower share in Germany. (See Exhibit 3.)
So, is a large portfolio of molecules the key to success? Not necessarily, with the exception of France, where, unlike in
Germany or the US, independent pharmacies make the buying decisions for the bulk of generic prescription drugs. As a result,
in France large portfolios are essential to justify large pharmacy sales forces.
More significant is the timing of market entry. Successful companies in the generics space generally launched products near
to the originator’s loss of exclusivity (LOE) and harvested returns generated by high-volume shares and prices, and moderately
discounted pricing compared with the original innovator price. They then either kept these products or divested them, as the
products faced more competition and became less profitable. (See Exhibit 4.)
Exhibit 3
Average Generic Product Volume Share By Size Of Company Portfolio One-Year Post-Launch
Average Product
Volume Share
One Year
Post-Launch (%)
26
24
22
20
18
16
14
12
10
8
6
4
2
0
100 or less
GERMANY
FRANCE
USA
101 to 250
251 to 500
502 or more
Size of Company Portfolio
Exhibit 4
Average Volume Share Of Generic Products One-Year Post-Launch Is Dependent On The Launch Timing*
24
23
22
Average Product
Volume Share
One Year
Post-Launch (%)
10
9
8
7
6
5
4
3
2
1
0
GERMANY
FRANCE
USA
0
*“Simple” oral solids only.
SOURCE: IMS Consulting Group
+ 1Q
+ 1Y
+ 2Y
Time From First Generic Launch
> 2Y
©2013 Windh o v e r I n f o r m a t i o n I n c . , an Elsevier company | IN VIVO: The Business & Medicine Report | March 2013 |
4
Generics
(continued)
LESSON 3:
Be First With New Products
This advantage is similar or even higher than the average to be gained from focusing on more complex formulations. (See Exhibit 5.)
In all three countries, first-to-market generics and first-wave entrants (those launched within three months of the first entrant)
maintained their first-mover advantage three years post-launch. (See Exhibit 6.)
What Are The Implications For New Players?
Although new products are the “cash cows” of the generics business, only an estimated total of 22 branded small molecules in the
US and 15 in Germany are going off patent between 2013 and 2016. Launching old products in mature markets will provide small
revenue streams due to lower shares and price levels. New players willing to face the odds should be prepared to commit resources
to develop, in-license, or acquire new molecules, and bring them to market as a first generic.
Exhibit 5
Average Product Volume Share One-Year Post-Launch By Product Form*
22
GERMANY
20
18
15.7
16
Average Product
14
Volume Share
One Year 12
Post-Launch (%) 10
13.0
8.6
9.1
8
6
6.4
4.8
0
5.1
3.6
4
2
FRANCE
USA
3.1
Pill/Tablet
Modified Release
Pill/Tablet
Parenteral
Injectable
Formulation
Exhibit 6
Average Product Volume Share Over Time Of Generics Launching First*
GERMANY
30
25
20
Average Product
Volume Share (%) 15
FRANCE
10
5
0
USA
1 Year
2 Years
Time From Launch
*“Simple” oral solids only. SOURCE: IMS Consulting Group
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| March 2013 | IN VIVO: The Business & Medicine Report | www.ElsevierBI.com
3 Years
Generics
Advice To Would-Be
New Entrants
Incremental/Organic Growth Requires A
Long-Term View
Building a generics business incrementally
requires a mindset that is not inherent in
research-based pharmaceutical companies.
It is, therefore, often advisable to keep
generics product development, sales, and
marketing at arm’s length from core R&D
business operations, and to invest in a separate structure bearing expertise in the field.
With the incremental growth option,
companies must identify their portfolio early
and invest in product development/licensing and regulatory activities years ahead
of launch to bring first-mover generics to
market. This requires a long-term view and
many years of preparation and investment
in the future organization and portfolio.
Synergies that can be achieved through
partnerships and joint ventures will be
relatively small, and players committed to
being in this field should strongly consider
acquiring generic companies with their
portfolios, operations, and client base.
It May Not Be For You
Companies interested in the generics market primarily because parts of their portfolios are reaching the end of their lifecycle
may want to consider alternative options.
Proactive, product-lifecycle management
may allow them to extract some value from
off-patent brands, be it through novel formulations or launches in selected emerging
markets where a brand adds incremental
value to customers. Other alternatives
include switching to over-the-counter
status, head-on competition with generics
on commercial terms in selective channels
such as large tenders or through sick fund
contracts, or making authorized generic
deals with other players. Out-licensing and
divestment of assets may also be attractive alternatives. In addition, for emerging
markets where physicians remain key decision makers for branded generics usage,
promoting selected in-licensed branded
generics can be an option to complement
local portfolios – however, such strategies
are often driven by affiliates locally.
Play Big Or Stay Out
Major revenue streams justifying product
development and registration come from
products launched first – or at least early.
In the US, companies must be prepared to
make high-risk investments into Paragraph
IV legal proceedings well before LOE if they
aim to launch generics with an exclusivity period. Alternatively, more difficult-tomake products can offer an advantage to
companies able to handle the complexities.
Yet, there are only a few, highly competitive opportunities on the horizon. Products
with Paragraph IV filings will be difficult to
acquire, and launching new generic versions of older, already registered molecules
provides small returns.
If research-based companies want to build
a substantial presence in generics in mature
markets, they need to think big and make
significant investments. They must be able
to achieve scale in their generics distribution
and promotion channels. This requires large,
local generics revenue streams, country sales
organizations tailored to generics channels
and stakeholders, and years of experience. In
Europe, multi-country presence is desirable
to reach sufficient scale for manufacturing and dossier preparation (see “Generic
About The Study
IMS Consulting Group studied 4,564 generic launches dating between
July 1, 2005 and July 31, 2010. (See Exhibit 7.) A product was defined
by its combination of molecule, form, and manufacturer. The product
strength with the greatest volume share in the second quarter of 2011,
one year after the latest launch, was used for the analysis. Drugs with
more than two active ingredients were excluded, as were vitamins and
supplements. Forms were defined based on New Form Code classifications, but were grouped into three larger categories: “simple” oral solids,
modified-release oral solids, and injectables/parenterals. Data were accessed from the IMS MIDAS database, including retail and hospital sales.
For each generic product launch, one-year volume share after launch
was calculated by dividing standard units sold in the fourth quarter
after launch by the total standard units of all products of the same
molecule/form/strength combination (originals and all generics) in the
same time frame.
To derive the impact of criteria analyzed in this study (e.g., formulation, geographic reach of company, or launch timing), we took the
simple average of the one-year volume share after launch of all generic
launches meeting the criteria, irrespective of the product’s molecule.
Industry Specialization, Consolidation Driven
By Rising Product Complexity” — “The Pink
Sheet,” March 4, 2013.)
In summary, success in the generics market
is not a foregone conclusion, and R&D companies should invest heavily – or not at all.
IV
[A#2013800039]
Authors’ Note: We would like to thank John
Cline and Alan Sheppard for their support
with examples and hypotheses to test for
this article. Waseem Noor is a Vice-President
at IMS Consulting Group in the New York
Office. Stefan Lunglmayr is an Engagement
Manager in the London Office. They are part
of the Strategy & Portfolio Analysis practice
and can be reached at [email protected]
and [email protected]
©2013 by Windhover Information Inc., an
Elsevier company. No reproduction without
the written consent of the copyright owner.
RELATED READING
“Pharma: Serious About Change? “ — IN VIVO, October
2010 [A#2010800157]
“North American Buyers Turn to European Branded
Generics For Growth” — “The Pink Sheet,” Jun. 6, 2011
[A#00110606019]
“Sale Of Pfizer’s Established Products Not Off The Table,
Exec Says” — “The Pink Sheet” DAILY, Sep. 11, 2012
[A#14120911003]
“Abbott Established Products Senior VP Michael Warmuth
Stresses Diversified Portfolio In Emerging Markets: An
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Access these articles at our online store
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Exhibit 7
Number Of Generic Product Launches Analyzed
Oral Solids (excluding modified release)
All Formulations
All
(oral solids,
modified-release oral Launches,
2005–
solids, injectables/
parenterals)
2010
Launches in Which First
Generic Entered Market
between Mid-2005
and 2010
France
1,062
827
599
Germany
1,614
1,156
615
US
1,888
1,447
667
Total
4,564
3,430
1,881
SOURCE: IMS Consulting Group
©2013 Windh o v e r I n f o r m a t i o n I n c . , an Elsevier company | IN VIVO: The Business & Medicine Report | March 2013 |
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