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Reddy’s Labs
CASE
ANALYSIS
COMPANY’S
SNAPSHOT
Patent Expirations - Trends
New drug discovery and development
process
DRL’s strategic goals
DRL’s
Foreign
Target
markets
East European Latin American
Countries Countries
South-East Asian
Countries
Target markets: Russia, China, Brazil & Mexico
Generic Market
► Generic drugs represents $ 40 billion market in
2001
► Growing at 10 to 12% per year.
► Reasons for growth: Pressures on govt.s in US,
European countries & Japan – reduce healthcare
costs.
► Drug price competition & Patent Restoration
Act – 1984 (US) – Waxman-Hatch Act – allow the
access to active ingredient of original patent drug
(getting off-patent) – file registration before patent
expiry – removing the leap period of market entry.
► Market scope: $ 30 billion post 2005.
Generic Market cont…
Waxman-Hatch Act also permits:
► Generic players to file for Abbreviated New Drug
Applications (ANDAs) – generic versions of all post 1962
patented drugs.
► 5 year exclusivity for innovator (New Chemical Entity or NCE
block) – generic player can file for patent challenge –
criteria: bioequivalence same as of patent drug for approval
– 1 year before off-patent (Paragraph IV application).
► Overall cost: Bioequivalence study cost ($ 5,00,000 to $ 2
million) + Market operational costs.
► Factors for investing in ANDAs: predictability of success or
failure is low and timing of entry is slow.
► Risks: Application processing delays, regulatory changes
and R&D failures.
► Drug prices in exclusivity period – 60-70% of original drug &
after exclusivity – entry of competition – 15-20% of peak
price. (Timing of entry is crucial)
► Cost advantage: 57% (foreign mkts) – 76% (india) of patent
company.
Generic Market cont…
► New opportunity domain: Specialty drugs
► Generic drugs sold under company’s own brand
unlike conventional generics being sold under
molecule name.
► Growth prospects & distinct from original patent
drug – offer improved/different version of original
compound (NDDS) – better
dosage/compliance/convenience) – niche market –
need aggressive marketing to prescribers for market
entry.
► Overall costs: Clinical Trial on patients - $ 10 to 30
million + cost on detailing (US).
► Pfizer’s blood pressure drug ‘Norvasc’ (US).
Drug discovery led
► business
Initial focus: Diabetes and similar other therapeutic areas.
► Reasons: less competitive; low entry barriers; nascent
knowledge domain.
► Trials process – expensive and risky
► Concentrated on pre-clinical trial stage; costing $ 10 million
► Strategy adopted: risk sharing –
out-licensing clinical trials like Anti-diabetic molecules – Novo Nordisk &
Novartis.
Collaborative research like NDDS for Chronic obstructive Pulmonary
disease (COPD) – UK based Argenta Discovery.
Balaglitazone – Denmark based Rheoscience.
► Nine NCEs pipelines covering four therapeutic areas:
diabetes, metabolic disorder, anti-infective & cancer (different
competencies, market structures, regulatory framework,
disease patterns, prescribers preferences, diff. promotional
efforts etc.)
DRL’s Global Empire
► 2002 – Operations & Sales offices in 60 countries
► Subsidiaries in US, Brazil, UK, France, Holland & Singapore.
► US share in overall revenues were higher.
† Market size: $245 billion market of $500 billion
global market in 2005-06.
► International vs Domestic revenue sharing: 2:1
► Huge generic growth prospects – post 2008 - $ 82 billion
formulation market getting off-patent globally.
Global Challenges
►Value created in India; realised in US
and other markets.
► Managing across cultures
►Across geographies
► Separate time of entries
► Sustaining the competence in each
four business models; extracting
optimum from all geographies.
Global market entry
1st
strategies
Acquisition – Trigenesis (US Specialty Co.) -2004 –
$ 11 million.
► Purpose: Automatic access to niche dermatology domain.
► Risk sharing across therapeutic domains and across
geographies.
2nd Acquisition – Roche (New Mexico) – 2005 - $ 59 million.
► Purpose: entry into Mexican market.
► Well established markets for manufacture & sale of APIs.
3rd Acquisition – Betapharm (Germany) – 2006 - $ 570 million.
► Purpose: Market & regulatory access and similar synergies and
few new areas. (Table CS 1.6, pg. 809)
European Market
► Scope due to intense competition
by global companies in US.
► Euro 11.8 billion off-patent in 4
generic markets – UK, France, Italy &
Germany (largest market size).
►$14.2 billion market – large,
generics growing faster than
branded formulations
► Rate of growth equal to US
Familiarity/ Indian US Europe Latin
America unfamiliar
► Demographics
► Psychographics
► Cultural
► Legal/Regulatory
► Technological