Pricing woes force Cipla, Glenmark, Lupin to go slow on US drug pipeline

Companies to focus on complex products as tough competition in generics, customer consolidation impact profits

Faced with pricing pressure, large Indian pharmaceutical companies are focusing on selective product launches in the US market. The move comes amid increasing competition in the generic drug space and customer consolidation, which are impacting the companies' profits.

“I do not think we are going to file more than 20 products in a year, but we will choose them well. Nowadays, in the US, you think you have a very good product but there are eight companies filing the product on day one and then there another five after that. We are running our R&D machinery really hard and the outcome may not be what we want. So we will try and do less filings but focus on the ones that are lot more complex,” said Cipla managing director Umang Vohra.

Cipla is a relatively late entrant in the US market and earns about 20 per cent of its revenue from the market. However, established players such as Lupin and Sun Pharma too are optimising their drug pipelines in the US on the back of customer consolidation.

In a post-result conference call earlier this month, Lupin's chief executive officer Vinita Gupta stated that given the the structural change in the US market, it no longer made sense to invest in products where it is the sixth or seventh entrant. “We have the potential, the opportunity to prune our pipeline further, to focus on products where we can be among the first 2-3 players in the market and can get a return on our investment and ideally sustain revenue margin potential,” she said.

“Now, more than ever, our focus is on products that have strong entry barriers including biosimilars, inhalation and complex injectables. We believe this focus will help us overcome structural changes in key markets like the US,” said Lupin's managing director Nilesh Gupta in a statement.

A thrust in complex and specialty portfolios, it is felt, will give Indian drug makers a competitive edge in the US market. This is even more crucial now, due to consolidation in the distribution channel and entry of about 50 new generic drug makers in the US in a year. Multinational pharma companies like Novartis and Teva too are re-setting their pharma businesses as challenges mount in the US. While Novartis is looking to sell its generic drugs business in the US, while Teva is implementing a $3-billion cost-saving plan.

• Pharma majors are evaluating their generic drug pipeline in the US in view of challenges like price erosion and customer consolidation
• Companies are focussing on developing speciality products 
• Research and development strategy is geared towards limited products and limited competition products 
• Sun Pharma has withdrawn around 15 product applications in view of changed market conditionsCadila Healthcare has said its portfolio will have a mix of both high-volume generic drugs and speciality products

“We are relooking at part of our generic R&D,” Sun Pharma managing director Dilip Shanghvi told analysts in a post-result conference call last week. Sun Pharma, which is building a pipeline of specialty products in ophthalmic, oncology and dermatology in the US, also has also withdrawn over 15 product filings over the past six months in view of changed market conditions.

“Glenmark is focusing on limited launches and limited competition products,” a company spokesperson said. “Our strategy has always been about filing 15-20 products every year, and this will remain unchanged. However the nature of the filings will very different from what we have done in the past.”

Last year Glenmark spent some Rs 12.62 billion on R&D, or 14-15 per cent of its sales (excluding cholesterol drug Zetia). In FY2018, the R&D spend in absolute terms will be significantly lower than last year, the company said.

Ahmedabad-based Cadila Healthcare's US product pipeline will include a mix of both large-volume generics and specialty products, said managing director Sharvil Patel. The company believes there is an opportunity in developing high-volume drugs given periodic supply disruptions in the market.

“I believe in having large-volume products and obviously differentiated niche products. We have a development pipeline of around 150 products, including complex ones. We are putting lot of effort in developing specialty products and we will launch one this year. That will be a key focus. We are also looking for partners for in-licensing technologies,” Patel said.

The exception in the pack is Aurobindo Pharmaceuticals, which is building a large basket of drugs in multiple-dosage formats. Sources familiar with the company's strategy say it isn't reducing its plain vanilla generic drug filings but is parallelly focusing on complex products such as injectables, peptides, and hormones in the US. Aurobindo does not sell finished dosages in India and earns over 70 per cent of its sales in the US and Europe. That is one reason for large number of filings in the markets.