Out of Industry Case Study: What Business Models
and Strategies are Generic Companies using in the
Global Pharmaceutical Industry
Dr. Brian W Tempest
www.briantempest.com
Crowne Plaza, Brussels, Belgium
23 November 2010
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Dr Brian Tempest advises Companies, Banks, High Net Worth Individuals and Investment Funds on
their Strategy in the Emerging World based on his wide experience in China, Japan, South East Asia
and India where he has lived for the last decade.
Brian has worked for Ranbaxy Laboratories since 1995 holding the position of Managing Director
and Chief Executive Officer until 2005. He was then Chief Mentor and Non Executive Director until
2008. He is one of the few westerners to have led a Sensex Nifty 50 Indian blue Chip MNC and as a
result has a valuable insight into India. Brian has also been Regional Director, Far East for Glaxo
where he was responsible for businesses in Japan, China, Korea, and Taiwan.
Brian has worked in the Pharmaceutical Industry for the last 39 years and led Healthcare businesses in
North America, South America, Europe, Africa, Middle East, Asia and India. He has also led sessions
at Investor Meetings across Asia, Europe and USA. He is now an International Advisor to MAPE –
India, Religare -India and UNCTAD - Switzerland. In addition he is a member of the SCRIP Global
awards panel. Brian speaks at global conferences on the Challenge from India and China and more
information on these presentations can be found on his website www.briantempest.com.
Brian has a PhD in Polymer Chemistry from Lancaster University and is a member of the Royal
Society of Medicine, the Royal Society of Chemistry and is a Chartered Chemist. He is now
Chairman of Hale & Tempest Co Ltd.
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Healthcare Pressures Forever
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Public Health Reform Forever
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Emerging World’s Perceived
Economic Health
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Structural Change by the
large discovery
pharmaceutical companies
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Big Pharma - the R&D model is failing
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Approvals are becoming Difficult
Source: Pharmatimes UK July-August 2010
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Many Drugs withdrawn this Decade
Source: Deutsche bank, FDA
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EC Surprise Anti Trust Raids 2008/9
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1st - GSK, Astra Zeneca, Sanofi Aventis,
Pfizer, Wyeth, Teva in January 2008
2nd – Teva , Servier, Kirka in November 2008
3rd – Sanofi Aventis France, Novartis France,
Teva France in October 2009
4th – Lundbeck Italy, Teva UK in December
2009
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Generic Exposure
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Sales Force Job Cuts in Press since 2009
H1 2010
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82% of the world population accounts for
only 12% of the global pharma sales
Region
North America
Europe
Japan
Pharma Sales
$255 b
$158 b
$59 b
47%
30%
11%
Population
332
725
128
88%
Asia/Africa/Aus
Latam
$41 b
$20 b
8%
4%
18%
4711
558
12%
Worldwide
Sources:
1.
IMS Midas, March 2005
2.
Earth Trend Data Tables 2005
$533 b
100%
5%
11%
2%
73%
9%
82%
6454
100%
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Emerging World Share of Pharma Growth
source IMS
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Emerging World Share of Pharma
Source EIU, OECD, WHO, IMS, Roland Berger
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Big Pharma & the Emerging World
source IMS - BRIC, Mexico, Turkey, South Korea
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India Rankings
Abbott now has 7000 reps & 7% Market Share
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Regional Operating Margins – Sanofi
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Regional Operating Margins - GSK
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A New World Order is Coming
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Business models by the
generic pharmaceutical
companies
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Different Global Generic Market Sizes $b
Region
Sandoz
2006
IMS
2008
USA
23
68
West Europe
14
19
East Europe
13
NA
Japan
3
3
Latam/Canada
10
3 (Canada only)
ROW
37
7
Total
100
100
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Patent Expiries 2003-2013 (in 8 Markets)
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USA Generics Filings
Source: Deutsche bank July 2010
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USA - First to File Lawsuits
Source RBC Capital Markets January 15 2010
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USA - Litigation Success Rates
Source
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RBC Capital Markets January 15 2010
Patent FTF Challenges on rise
Success litigation rate at 48% - or 76%
including deals with patent owner
3 courts hold 69% of cases with a 36%
success rate e.g. NJ
4 courts never ruled against generics e.g. NY
At risk launches on the rise – 6 in 2009
Teva has 12 of the 28 at risk launches – 2002/9
Settlements on the rise – 54 in 2009
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USA Challenge – Size of Product Basket
Source: Deutsche Bank
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Distributors moving into Generics
UK Coop – the world’s largest consumer cooperative
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GBP£10b UK company
running food stores, banks, insurance, funeral
homes, travel agents, farms and pharmacies
3rd rank pharmacy chain in UK with 800 stores
Owns UK pharmaceutical wholesaler Sants
Opus Marketing JV with Day Lewis Pharmacy
Chain offers 113 products under “Prospect”
brand
Tianjin Tasly Sants Manufacturing JV opens
2010/11
With Investment GBP£20m, 200 staff Hale & Tempest
Generic Profit Margin Profile
in descending order source: Deutsche Bank July 2010
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Top 22 Generic Companies over $1b
Source: Company Reports Generics Bulletin 28 May 2010 (excludes Apotex & Actavis Private Companies)
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Next18 Generic Companies < $1b
Source: Company Reports Generics Bulletin 28 May 2010 (excludes Recalcine Private Company)
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The generic Indian
Pharmaceutical industry
– a success story
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Indian Generics have consistently
outperformed USA Generics
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The Education Advantage
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Indian DMFs 62%
April 2010
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Indian Deals Roaring Ahead
July 2010 Grant Thornton Deal Tracker
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FDA Approved Manufacturing Sites
source FDA
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WHO Pre Qualified Products
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An Indian View
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Another Indian View
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To understand India , understand the
promoter families McKinsey Quarterly 16 Jan 2010
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Family ownership -often overlooked
1/3 of S&P500 index, 40% of top 250 Cos Fr/Ge
<30% survive into the 3rd generation
Survivors do better than their corporate peers
Family Councils, Wealth Management Offices
Every generation has a liquidity event
Families renew their portfolios over time
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Will Biosimilars follow HIV Prices?
source www.msfaccess.org
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Cipla - Washington Post Ad
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The Indian Drug Development Model
Early discovery leads from US, Europe, Taiwan, Singapore
Molecular optimisation from India
Toxicology from China, Central Europe, Singapore
Electronic Data Capture from India
API Manufacture from India with Raw Materials from China
Drug Formulation Manufacture from India, USA
Phase 1 Clinical Trials from Europe
Phase 2,3 heavy use of India
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Corporate back office from India
India – Share of CRAMS Market
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Chinese ANDAs are Coming
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The Tempest Crystal Ball
•Asia will become the Centre of Gravity for global business
•Big Pharma will develop Emerging World Strategies, Generics
Strategies, OTC Strategies, Vaccine Strategies, VC Strategies
•Big Pharma will continue to be attracted to India for CT, EDC, MO.
and to China for RM/Biology/Toxicology
•Big Pharma will develop dual IP as well as dual pricing
•Many Indian families are reviewing their family portfolios and will
optimize their holdings. M&A will consequently expand further
•In Commodity Generics risks and competition will rise further.
Branded Generics will continue to be very attractive
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•Monoclonals will be the next generic wave from India
Thank You
brian.tempest@clara.co.uk
www.briantempest.com
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