Pharma drools as US patent expiries

After a brief lull caused by the slowdown, the US has once again emerged as El Dorado for Indian drug makers.

With multiple patent expiries staring innovator companies in the face, the opportunity for Indian generic players is just immense.
Over the past year or so, Indian pharmaceuticals companies have turned to emerging economies in Asia and Latin America, such as Brazil, Turkey and Mexico, which have been growing at a healthy 14-15% annually. In comparison, the US market, although the world’s largest, grew a meagre 1-2% in 2009, and was seen stagnating.

But the impending patent expiries are set to turn the tide in favour of the US again.

Between 2010 and 2015, drugs worth a whopping $157 billion are set to go off patent. Indian companies are expected to
corner a large chunk of this pie, going by HDFC Securities Institutional Research.

The 2010-12 period holds the maximum significance for Indian players as 26 major drugs with total sales of $69 billion are set to lose patent protection.

The 2013-15 period will mainly see patent expiries on drugs, which are niche products catering to specific segments, are often difficult to produce, and have smaller sales potential. The next 2-3 years will see blockbusters opening up for generics play, but thereafter the opportunities would be limited, says Sujay Shetty, associate director, PricewaterhouseCoopers.

“After 2-3 years, the drugs going off-patent would mostly be biological entities, as well as those requiring complex technical knowledge and catering to limited niche segments. Not the mass-market kind of drugs,” says Shetty.

Though patents on drugs such as Cymbalta (for depression, $2.6 billion sales in 2008) and Nexium (gastric disorder, $5.2 billion sales in 2008) would provide opportunities for Indian generic players in 2013 and 2014, respectively, on the whole, the lucrative prospects of 2010-12 would decline.

Though it is common knowledge that the price of a drug drops by as much as 80-90% once the patent on it expires, what with countless generics players entering the fray, estimates by HDFC Securities suggest that Indian companies could be looking at an average potential of Rs 12,000 crore per year.

 Kamal K Sharma, managing director of Lupin, says patent expiries would mean a great story for any player, provided the company is great in compliance and has a commitment to quality.
At present, about 33% of Lupin’s turnover comes from the US, and by 2012, US contribution is expected to account for nearly half of the company’s turnover.

Sun Pharma, which gets 30% of its sales from the US today, is also looking at a huge opportunity. “We have 108 pending ANDAs (abbreviated new drug applications), in addition to 83 currently approved,” says a spokesperson of the company.

For all that, Indian companies aren’t the only ones in fray. There is bound to be stiff competition from global generic players such as Teva (Israel), Apotex (Canada), Cobalt Pharma (Canada), Sandoz (Germany) and Actavis (Iceland).

However, experts feel the scale would be tipped in favour of Indian companies to some extent on account of the fact that production costs in India are 35-40% lower, due mainly to cheaper manpower.