Complex therapies in US lure pharma firms

The US market for pharmaceuticals is not just about patent expiries and billion-dollar drugs.

It’s also about complex therapeutic segments such as controlled substances, injectibles, oral contraceptives and dermatology.
And the Indian drug makers, which have made a mark in generics, are now looking at strengthening their presence in this niche category.

Unlike areas such as diabetes or cardiovascular diseases, these complex categories need special manufacturing expertise due to their intricate nature but offer limited competition as a benefit.

Among complex drugs, oral contraceptives and dermatology are pegged to be worth $3.5 billion and $4 billion, respectively in the US.

“Going by the complex nature and tough manufacturing mechanisms of such segments, the number of competitors is limited. This increases the scope for garnering a larger market share,” said an analyst from a research firm.

Experts say instead of jumping into manufacturing a product worth a billion dollars, flooded by 15-20 other players, it seems a better idea to manufacture a niche product having much less value, but where competition is restricted to two to three players.

Satish Reddy, managing director and chief operating officer, Dr Reddy’s Laboratories, said limited competition segment is an attractive bet in the US and the company has a presence in areas such as injectibles.

Other firms such as Sun Pharmaceuticals, Lupin and Glenmark also have a presence in categories like controlled substances, oral contraceptives and dermatology in the US.

Bhavin Shah, analyst from Dolat Capital Market, said in a niche or complex product category, a firm with a good manufacturing and distribution base can even capture a good share as the margins are higher, as compared to regular products.

Against the average 15-20% margins that any common generic product fetches in the US, complex products can get margins upwards of 22-25%, said the analyst.

Industry experts say that if a player concentrates on any of the complex categories such as ophthalmology or oral contraceptives, it could get annual sales of $100-125 million.

However, of late these segments have started getting crowded and this might impact returns, said a spokesperson from Sun Pharma.

Ramesh Swaminathan, president, finance and planning, Lupin, said there is competition from the likes of US-based Watson and Sandoz.

“Firms will need dedicated manufacturing facilities and good supply chain metrics,” he said.

According to Shah of Dolat Capital Market, while it may be limited when compared to regular categories, the competition offered by generic leaders such as Teva, Watson, Mylan, Impax and Sandoz will be huge. “Moreover, getting US Food and Drug Administration approvals for such products is also getting tougher.”