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Abbott Laboratories today announced that it will split itself into two companies by spinning off its branded prescription drug business and creating a second company responsible for its medical implants, diagnostic tests and baby formula businesses.

The pharmaceutical company will exclusively sell its branded prescription drugs (including its blockbuster biologic Humira) and will be lead by Abbott’s Richard Gonzalez who currently head the company’s pharmaceutical business. Current Abbott CEO Miles White will lead the diversified medical products company. 

The reason for the split is to allow investors to value each of the companies on their distinct characteristic. Abbott’s decision to split the company is consistent with the prevailing notion that companies that sell both prescription drugs and consumer products don’t perform well. This led Bristol Myers Squibb to sell off its medical devices and consumer products divisions several years ago. Interestingly, prescription pharmaceuticals/consumer products/medical devices were de rigueur in the 1990s and early 2000s. Abbott’s decision leaves companies like Pfizer, Novartis and Johnson & Johnson as examples of the few remaining companies that still house pharmaceuticals, devices and consumer goods under one roof. Don’t be surprised if in the future these companies also decide to spin off or divest themselves of their consumer goods/medical devices divisions.

Finally, while the split may be good for investors, it may not be that great for Abbott employees. Usually, spin offs or divestitures

Until next time..

Good Luck and Good Job Hunting!!!!!!!!!!!!!!

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The world’s largest generic pharmaceutical company Teva Pharmaceuticals Industries LTD today announced that it has agreed to purchase Pennsylvania-based Cephalon, Inc for $6.8 billion. Teva will purchase Cephalon for $81.50 per share, a 12 percent premium to the $73-per share unsolicited offer tendered by Valeant Pharmaceuticals International Inc, on March 29, 2011. Cephalon’s board of directors rejected Valeant’s offer on April 5, 2011.

While most of Teva’s revenue comes from the sale of prescription generic medications, the company also sells several branded pharmaceutical products including the multiple sclerosis drug Copaxone and the Parkinson’s disease Azilect. Cephalon’s best selling drugs include Provigil for narcolepsy and the cancer drug Treanda. In addition to its marketed products, the Cephalon development pipeline contains potential cancer treatments, a tamper-resistant opioid painkiller, and an asthma treatment. The Cephalon acquisition is a pivotal part of Teva's strategy of growing branded drug revenue to $9 billion by 2015.

Teva currently has about 40,000 employees worldwide while Cephalon employs 4,000 persons. It is not clear what ever the acquisition will have on job layoffs or organizational structure.

Cephalon’s stock price rose $3.25 or 4.2 percent to $80.26 after the deal was announced.

Until next time...

Good Luck and Good Job Hunting!!!!!!!!!!

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What a difference six months can make in the fast moving world of the social web! At last May’s Advanced Learning Institute’s conference on “Social Media for Pharma” there was a lot of anxiety, hand wringing and concern about the future of social media in the life sciences industry. 

Things were much different at “Social Media for Pharma” (also sponsored by the Advance Learning Institute) held earlier this week in Manhattan. Like last May’s meeting, there was still much speculation about when the US Food and Drug Administration (FDA) may provide the much awaited regulatory guidance on the use of social media for promotional purposes in the pharmaceutical industry. And, despite a presentation by FDA representatives at the meeting—that somewhat paradoxically described how the agency was using social media tools like Twitter, YouTube and Facebook to better educate and inform the American public about its activities and services —there were no hints about when the agency may issuing that guidance. Nevertheless, the number of pharma and biotechnology companies that have decided to “take the plunge into the social media pool” has grown substantially since last May. In fact, I got the sense that many of the conference participants were beginning to believe that implementing social media strategies was possible even if the agency fails to issue the long awaited guidance!

Generally speaking, there was a growing consensus at the meeting that the use of social media for promotional purposes—specifically to bolster sales of approved and marketed drugs and devices—may not be its best use. Several presentations, most notably those offered by Justin Gardener and Lindsey Hart from Advanced BioHealing, Inc and Jenny Keeney from Astellas Pharma US, Inc showed how social media can be used by life sciences companies to improve healthcare outcomes for patients and promote science education to improve the public understanding of science. Nancy Buono Cartwright from Kaiser Permanente gave a great talk on how to use social media to enhance corporate communication and employee participation and retention. 

A panel discussion featuring Dennis Urbaniak, Sanofi Aventis, Cynthia Phillips, Millennium Pharmaceuticals, Inc and Justin Gardner, Advanced BioHealing, Inc and lead by John Mack aka the Pharma Guy was insightful and extremely illuminating regarding pharma’s changing attitudes toward social media. All of the panelists agreed that the drug industry is in transition and that now may be the time to try new things to get back to addressing unmet medical and patient needs. More importantly, Dennis Urbaniak stressed that pharma must begin to listen to what patients and stakeholders want rather than dictating or imposing “its” ideas and products on them. And, that it is apparent that social media provides an ideal vehicle to accomplish that goal.

Finally, Doug Levy, a compliance lawyer and Executive Director of Communications and Public Affairs Columbia Medical Center, gave an inspiring talk on how social media is no different than traditional modes of communication and that best practices already exist whether or not FDA ever issues any additional guidance on the topic! It appears that it is no longer a question of “if” but “when” as pharma continues to warm to inevitability of social media.

Until next time...

Good Luck and Good Tweeting or Whatever Your SM Tool of Choice May Be

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It is no secret that growth of the pharmaceutical industry has slowed to single digits in the past five years or more. In fact, many experts don’t expect there to be double digit growth in this sector for a long time. Instead, future robust growth of the pharmaceutical industry is expected to take place in emerging markets including India, China, Brazil, South Africa and others. This is because the economies of these countries are booming and the middle class in these nations continues to rapidly grow. 

While branded prescriptions drugs once dominated Western markets, it is likely that generics or branded generic products will be the major players in emerging markets. Because of this, big pharma companies such as GlaxoSmithKline, Daiichi Sankyo and most recently Abbott Laboratories have either purchased or crafted large marketing deals with smaller regional drug manufacturers.

Daiichi Sankyo paid $4.0 billion in 2008 for a major share of India’s Ranbaxy Laboratories and GlaxoSmithKline earlier this year acquired exclusive rights to over 100 products produced by Dr. Reddy’s Laboratories, another Indian drug maker with a broad reach in emerging markets.

Today, Abbott Laboratories announced that it would purchase the healthcare business of Piramal Healthcare Ltd, one of India’s largest purveyors of branded generics for $3.72 billion. When the deal closes, Abbott will inherit the rights to about 350 brands and trademarks and a manufacturing plant in northern India. Also, Piramal agreed to a six year non-compete agreement for branded generics. The remaining parts of Piramal include a custom manufacturing business, over-the-counter products, vitamins, diagnostic devices and Piramal Life Sciences a drug discovery company.

The company, which has India’s largest sales force, would become a subsidiary of Abbott Laboratories and employ about 7,500 workers. Last week, Abbott said it would license at least 24 products from Zydus Cadila to sell in emerging markets. Analysts estimate that emerging markets account for 20 percent of Abbott’s business. The Piramal and Zydus Cadila deals suggest that Abbott maybe the company to reckon with in emerging markets in India and elsewhere.

 Until next time...

Good Luck and Good Job Hunting!!!!!!!!

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The rising cost of healthcare, increasing drug prices and the restrictive nature of the formularies of many insurers and third party payers is forcing a growing number of Americans to rely almost exclusively on generic prescription drugs. The trouble is that most Americans know very little about generic drugs; mainly because big pharma has done its best to minimize the discussion about generics and continues to portray generic manufacturers as less than reputable purveyors of prescription drugs. Because of this, I think that American ought to begin to understand an industry that increasingly will play a major role in the US healthcare system. So here goes:

1. According to IMS Health, generic drugs accounted for 70 percent of the 2.9 billion prescriptions filled in the US in 2009
2. Generic drugs accounted for only 15 percent of almost $300 billion spent on prescription drugs last year in the US
3. Since 2003, the US Food and Drug Administration (FDA) received 800 new generic drugs applications; up from an average of 330 applications per year in the last decade
4. Five years ago, it took FDA regulators an average of 16.3 months to review and approve generic new drug applications; by 2009 the average time to approval had ballooned to 27.7 months
5. There is a backlog of nearly 2,000 pending generic new drug applications, almost double the backlog at the agency in 2005
6. FDA’s division of generics had a budget of only $41 million in 2009; its budget for 2010 is $511 million
7. Unlike branded pharmaceuticals, companies seeking regulatory approval for new generic drugs don’t pay user fees
8. According to FDA Commissioner Dr. Margaret Hamburg generics saved American consumers almost $750 billion over the last decade.

Based on these facts, it is evident that FDA is seriously under funded, under staffed and overwhelmed by the spike of new generic drug applications in recent years. Interestingly, President Obama’s proposed 2010 budget included $38 million in user fees from generic manufacturers to process new drug applications. Not surprisingly, generic manufacturers are not willing to pay these fees unless the approval time for their products is drastically shortened. To that end, FDA is hiring 50 more reviewers and hopes that personnel increases will eliminate the generic drug application backlog by 2012. 

Dr. Hamburg is also looking to streamline some aspects of the generic drug application review process. For example, she proposed giving higher priority to generic drugs applications for branded drugs whose patent expiry is imminent as compared with applications for drugs that have several more years of patent protection remaining.

Nevertheless, the bottom line is that the agency needs a much larger budget and staff to keep up with the ongoing torrent of new generic drug application. With this in mind, the agency ought to consider reallocating existing resources—rather than wait for budget increases in these financially uncertain times—to process new generic drug applications in a timely fashion. This may be possible because of the annual number of drug applications for new, branded prescription drugs has steadily been decreasing for the past five years.

Hat tip to the New York Times!

Until next time...

Good Luck and Good Job Hunting!!!!!!

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Earlier this week, an article appeared in the NY Times Business section heralding the entry of several large pharmaceutical companies into the branded generics industry. For those of you who may not know, generic drugs are lower cost versions of brand name prescription drugs that have lost patent protection. Generic prescription drugs are usually much cheaper than their brand name counterparts but generally deliver the same therapeutic effects as the branded product. In most cases, so-called “commodity generic drugs” are not branded and sold to consumers by their chemical names. A good example of a commodity generic drug is the anti-depressant sertraline HCl; which Pfizer sells under the brand name Zoloft. Pfizer still manufactures and sells Zoloft but Zoloft lost patent protection several years ago and a generic version of the active ingredient, sertraline HCl, is now available to consumers. Because sertraline HCl is much cheaper than Zoloft, pharmacists almost always substitute prescriptions for Zoloft with sertraline HCl. This is perfectly acceptable because sertraline HCl was approved by the US Food and Drug administration with an AB rating which means that sertraline HCl is biologically equivalent to Zoloft.

Unlike commoditized (no-name) generics, branded generics are off-patent prescription drugs that are sold to consumers—as the name implies—under a brand name. Typically, because these products are “branded” and actively marketed by manufacturers they are sold at higher prices than equivalent no-name generics. This is because consumers are generally willing to pay more for drugs that are manufactured by well known and trusted companies as compared with no-name generics which are usually produced by lesser known or unidentified manufacturers.

Branded generics are not a new or novel concept. They were previously championed by a number of generics manufacturers, most notably Barr Laboratories, which was recently purchased by the Israeli generics giant TEVA. In the past, when pharma embraced the blockbuster drug business model, drug manufacturers built in revenues— that eventually would be lost through patent expiry—into the price of their top selling drugs. This allows drug companies to maximize ROI early in a drug’s life cycle years before patent expiry Studies have shown that branded prescription drugs can lose as much as 90% of their original value two years after the introduction of generic equivalents. Consequently, because of drastically diminishing financial returns after patent expiry, it didn’t make economic sense to continue to promote and support a brand that was facing generic competition. Put simply, the company made its money on the drug and it is time to move on. 

However, the emergence in recent years of an affluent middle class in developing markets like China, India, Brazil, Eastern Europe and elsewhere is causing branded pharmaceutical companies to reconsider their generics strategy. In these markets, many people frequently pay out of pocket for their medicines but cannot afford to pay for the expensive brand name drugs. Also, in some emerging markets, where the threat of low quality or counterfeit prescription drugs may be high, consumers who can afford to purchase medicines are willing to pay more for drugs manufactured by well known and respected companies. Finally, IMS Health estimates that close to $89 billion in US drug sales alone will be lost to generic competition over the next five years or so.

In the absence of any new blockbuster drugs on the horizon, many big pharma companies have been scrambling to acquire or enter into relationship with established regional generic manufacturers. For example, GlaxoSmithKline recently bought a stake in Aspen a South African generics manufacturer and entered into an agreement with India-based Dr. Reddy’s laboratory to sell generic products in Asia and other emerging markets. Likewise, in the last year, Pfizer created an off-patent generics division (products are sold under Greenstone label which is a wholly owned subsidiary of Pfizer) and signed agreements with three Indian companies to sell their products in the US and other markets. These deals added about 200 products to Pfizer’s new generics portfolio. Further, Pfizer recently announced that the Greenstone brand has become the world’s seventh largest generics seller. In addition, Pfizer is expected to make a formal bid to purchase the financially-troubled German generics manufacturer Ratiopharm; one of Germany’s largest purveyor of generic drugs.

Not to be outdone by the competition, the French drug maker Sanofi-Aventis recently purchased Brazil-based Medley, a dominant player in the South American branded generics industry and Laboratorios Kendrik, a Mexican generics producer. Last year, the company also purchased Zentiva, a leading Czech generic manufacturer signally the company’s intention to move into financially-lucrative Eastern European markets.

Watson, one of the largest American generics manufacturers (which primarily operates in the US) recently purchased Arrow, a generic producer that operates in 20 different countries. Finally, Novartis, recognizing a business opportunity before most of its competitors, entered the generic market in 2003 following creation of Sandoz, a division of Novartis that manufactures and sells small molecule generic drugs and branded biosimilar products. Recently, Novartis purchased the German branded generics manufacturer Hexal, making it the world’s second largest generic drug manufacturer after Teva.

The entry of pharmaceutical companies into the generics business is allowing these companies to pursue a two-tiered business strategy in certain markets which is designed to preserve the long term value of their branded franchises. For example, companies can continue to sell their expensive name-brand drugs to the wealthy (or those that can afford them) and concurrently sell the more moderately priced branded generics which includes and over the counter products to the broader market. 

While some may lament the end of the blockbuster drug era, rising healthcare costs and generic competition is forcing big pharma to continue to explore novel and innovative strategies to reinvent itself.

Until next time...

Good Luck and Good Job Hunting (try the generic industry; business is booming)

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A post today on the Pharmalot blog suggests that Israeli generic manufacturer Teva is in talks to acquire US-based Barr Pharmaceuticals for  $7.0 -7.5$ billion. Barr’s present market cap is approximately $5.0 billion.

The acquisition would make sense for Teva to broaden its reach into the generic and branded generic markets in the US. Also, Barr recently acquired PLIVA which has active research programs on biosimilars and is currently selling its version of EPO in Croatia and other parts of Eastern Europe.

Teva has been trying to get into the biosimilar/follow-on biologics market for the past eight years or so. The company previously bought several early stage biogenerics manufacturers but have yet to advance their plans to formally enter the biosimilar/follow-on biologics market. This may be the opportunity that Teva has been looking for!

Check back for updates.

Until next time…

Good Luck and Good Job Hunting!!!!!!

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