patent cliff

CLIFF

PATENT CLIFF(2012-2015)

Presentation byPeruka Venkata Ramana Prasad

1st Semester, MBA(Pharm)Department Of Pharmaceutical Management

NIPER

What is patent cliff

Global blockbusters by revenue& patent expiration

Global drug sales at risk from patent expiration

Fall down of companys annual revenue

Key drugs in pipeline

Frequency of NME approvals may come down

Big pharma job cuts announced since 2009

FLOW OF PRESENTATION

Increasing merges &acquisitions

Hatch-waxman act-1984

Patent exclusivity & generic entry regulations

Generics will dominate the market

ENTERING “pharmering markets”

Patent wars

Contd..

It is most often described as an industry-wide expiration of the patents of a number of

blockbuster drugs with a combined of $250 billion in annual sales will go off-patent by 2015, creating

a life-threatening situation for many of the top companies in pharma sector

WHAT IS PATENT CLIFF

Source : Evaluate Pharma,2012

Other sectors, such as software and consumer goods, have patents. But they rely on rapid innovation to maintain sales.In pharmaceuticals, stringent regulations on

authorization and marketing impose tighter controls, higher costs and longer lead times, making drug developers more reliant on patent monopolies to recoup their costs

Why only pharma field is more worried?

KEY GLOBAL PLAYERS

Source : Individual company financials online 2012

GLOBAL BLOCKBUSTERS BY REVENUE&PATENT EXPIRATION

Source : Bioassociate Consulting & Management Ltd

Source : Evaluate Pharma,2012

2012 2013

2014 2015

Patent Expiration Of Drugs By Year

Source : IMS Global Insight, 2011

Source : IMS Global Insight, 2011

2013

Source : IMS Global Insight, 2011

2014

Source : IMS Global Insight, 2011

2015

Global drug sales at risk from Patent Expiration

Source : Evaluate Pharma Vantage 2010

Forecasted revenues of few blockbuster Post-generification

Source : The Economist,2011

PFIZER – US$30 Lipitor , viagra

Eli lilly- US$13(50%rvnu) Evista , zyprexa &Cymbalta

Takeda- 52%revenue loss Actos

Forest labs- 52%revenue loss Lexapro

Gsk,Novartis,bms,A&Z- 14-40%revenue loss

Fall Down Of Companies Annual Revenue

Source : Price watercoopers,2011

2009-2013 annual patent losses by company

Source : Bio associate Consulting & Management Ltd

0%

5%

10%

15%

20%

25%

30%

R&

D a

s %

of

sale

s

Source: Company data, Goldman Sachs Research estimates

Over $280 billion spent on R&D over last decade

Source : Bioassociate Consulting & Management Ltd

Key drugs in Pipeline

Source : Analyst and company reports,2012

Frequency of NME approvals may come down

Source : US FDA , 2012

2012 : 28NME’s

Big Pharma job cuts announced since 2010

Source : FiercePharma.com,2012, Price watercoopers 2010

Increasing Merges &Acquisitions

2011 –Sanofi-Aventis- Genzyme- -US$20Bn. -Biotech

2011 – Novartis - Aires pharm – US$250Mn -Cystic fibrosis pnemonia2011 – Amgen - Biovex -- US$1Bn -Cancer vaccine Oncovex2009 –Pfizer - Wyeth - US$68 -Fill pipeline, Biologics2009 –Merck -Schering-plough-US$41.1 -18NME’s in pipeline

2009, 563 deals worth US$161.2Bn took place

Source : Pfizer,2012

Contd..

Merges in 2012

Source: business-beacon.com, 2012

Acquisitions in 2012

Source: business-beacon.com, 2012

Contd..

29

For Innovator companies

Patent term extension Provides New drug product exclusivity 30 months stay for ANDA approval

For Generic manufacturers Created “Abbreviated New drug Application” approval

process for generic versions of innovator drugsFile ANDAs with bioequivalence data using innovator

product 180 day exclusivity for first-to-fileCertification regarding each patent listed in the Orange

Book for the product: four certification options

Hatch-Waxman Act-1984

30

Paragraph I

Paragraph II

Paragraph IV

Paragraph III

Patent information has not been filed

Patent has Expired

Patent is invalid or non-infringed by Generic applicant

Patent has NOT expiredbut will expire on a

particular date

FDA may approve ANDA immediately

FDA may approve ANDA on the date that the patent expires

Generic applicant provides notice to patent holder & NDA filer;

entry of the first filermay or may not occur

ANDA Patent certification Options

Source : Orange book

Patent exclusivity & Generic entry regulations

Contd..

Source : DataMonitor,2011:US FDA,2012;

According to IMS Health, generics drugs accounted for 57.7% of prescriptions dispensed five years ago, and close to 75% today

Price of the drugs will be reduced

However, while the generic drug industry will certainly benefit in the short term from the patent cliff

Generics will dominate the market

GENERICS ; US$ 100 Bn/paETHICAL MANUFACTURES ; US$ 720 Bn/paIt is estimated that by 2014 generic market will reach

US$124Bn.

Source : IMS Health, 2012

LEADING GLOBAL GENERIC PLAYERS

Source : Individual company financials 2012

Generics offer Drugs at low cost

Contd..

Source : Blue cross blue shield of michigan

ENTERING “Pharmering Markets”

Source : IMS Health,2011

Contd..

Source : IMS Health,2011

INDIA has large domestic market.

Highest number of US FDA Approved manufacturing Units (74) outside the US.

Clinical trial hub

Less manufacturing cost

High CAGR

Contd..

PATENT WARS

Law suits & legal loopholes are the last resort before a patent cliff for innovators

30 Month marketing stay for brand name drugs as part of patent Infringement litigation, which provides immunity against generics.

Patent ever greening

In the end, the financial future of many pharmaceutical companies will depend on how they manage the transition of many of their brand drugs

to the generic market, as well as on their own efforts to develop novel

therapeutics and diagnostics with significant profit potential, and to adapt to the changing global

business climate.However, while the generic drug industry will

certainly benefit in the short term(upto 2015) from the patent cliff.

CONCLUSION

T H A N K Y O U

Let’s get going ….43

India, China, Russia and Brazil are some of the more obvious novel destinations for

large PHARMA to nest in.

BACK UP SLIDES

During 180 day exclusivity

AG competition typically reduces a first-filer generic’s revenues during the 180 days of marketing exclusivity by approximately 50 percent.

To prevent this loss of revenue, a generic may be willing to delay its entry in return for a brand’s agreement not to launch an authorized generic – that is, a brand’s agreement not to compete with the generic through an AG – during the generic’s 180 days of marketing exclusivity.

7. STRATERGIES TO MINIMIZE THE IMPACT OF PATENT CLIFF

Most obviously, there has been continued investment in new drug discovery and development of a “pipeline” of promising agents that address unmet medical needs and are profitable.

Enhanced advertising over the past decade in an attempt to optimize earnings prior to patent expiration

A number of drug companies have suggested that they will outsource at least some of their manufacturing to places such as Eastern Europe, India, and China, where drug products can be made at significantly less. But Quality issues will become severe.

Some pharmaceutical companies already are entering into agreements with generic manufacturers, licensing them the right to sell “authorized generics” identical to

branded drugs that have gone or will go off patent.

 In an Economist article, it is revealed that Pfizer worked with an American firm in order

to help break apart a 180 day generic exclusivity period, helping the company compete with often

times cheaper generics. These practices have helped to boost sales by over half a billion in the

first half of 2012, taking at least some of the pain of the patent expiration out of the equation

Companies with the biggest cash reserves

Novartis $15 billionRoche $13.5 billion

Johnson & Johnson $13 billionMerck & Co. $10 billion

GlaxoSmithKline $9.5 billion

HYDERABAD: Dr Reddy's Laboratories has agreed to buy the entire equity holding of the Dutch injectable specialty generics manufacturer OctoPlus NV  for 27.39 million euro ( 192 crore) in an all-cash deal.

The Hyderabad-based company said on Monday that OctoPlus' expertise in making improved injectable pharmaceuticals based on proprietary drug delivery technologies and focus on medicine ingredients that are difficult to formulate complement it capabilities.

Source: business-beacon.com, 2012