A number of generics firms have, over the last few years, veered off the path and started to develop innovative drugs in their own right. In a time when generics firms are showing the greatest growth in the pharmaceutical sector, what has driven them to venture into new territory? Michael Spino, the recently appointed president of Apopharma, Apotex's new innovative drug research company, believes it will help sustain the company's growth.

Speaking at the Seventh Annual International Generic Pharmaceutical Alliance (IGPA) meeting in Prague at the end of June, Dr Spino identified the thinking behind the move. Apotex, he said, already had a basic research infrastructure in synthetic and analytical chemistry, and strength in formulation development. Furthermore, he noted, generics are increasingly becoming a commodity market. He identified a number of other key changes over the last decade, which have been influential in fuelling the generics firms' move towards innovation:

• The number of new chemical entities (NCEs) being launched has declined
• Innovative pharmaceutical companies have increased their interest in biotechnology and reduced interest in small molecules
• R&D-based firms require annual sales potential greater than $200 million to develop an NCE, while generic specialists can operate with a lower threshold
• Mergers and acquisitions have increased the experience on the market
• The growth in clinical research organisations (CROs) has reduced the reliance on animal facilities and in-house expertise

Spino pointed out that although many generics companies are still not involved in NCE development, most firms have extended beyond their original generic drug development remit in a number of ways, including working on:

• novel drug delivery systems
• new formulations for existing drugs
• fixed combinations

Apotex already has one NCE on the market, Ferriprox (deferiprone), a second-line treatment of iron overload in thalassaemia patients, which was approved in the EU in 1999 and is now on the market in most EU countries. The company, in collaboration with the Canadian National Research Council, has embarked on another innovative project - Living Skin Replacement (LSR) - which aims to rejuvenate skin extensively damaged by burns or ulcers; this is currently at the Phase II/III stage of development. Apopharma also has three research projects at the preclinical stage.

Apotex plans increased R&D spend
In 2003, Apotex's R&D expenditure represented 20.3% of sales - higher than usual for a generics firm - and over the next 10 years the company plans to spend more than $1 billion on R&D.

Apotex has also an active interest in biotechnology through its majority shareholding in the publicly-traded biotechnology company Cangene. Apotex gained 83% of Cangene's shares in 1995 when Rx Pharmaceuticals, it plasma processes subsidiary, acquired Cangene. According to IMS LifeCycle R&D focus, Cangene has 14 active research projects.This strength in the biotechnology area is instrumental in preparing the company for future biotechnology products - an important strategy once the regulatory systems are geared up to accept biogenerics.

Teva strengthens its foothold in the innovative sector
Teva, which vies with Novartis’ Sandoz unit as the world’s largest generics manufacturer, has also furthered its foray into innovative drug development. In February 2004 it acquired US-based Sicor, a leading injectable generic drugs business, which complemented Teva's successful oral dose generics franchise. This is an important strategic move for Teva, which had no experience in this area before, and will allow it to position itself as a serious contender in the generics biologics business.

Unlike Apotex, Teva has chosen to team up with biotech companies, and in June 2004 signed an agreement with Active Biotech to develop and commercialise the oral immunomodulator laquinimod. The drug is currently in Phase II trials for relapsing multiple sclerosis; Teva gained worldwide rights for the drug except in the Nordic and Baltic countries. Teva has entered into several other licensing and development agreements with small and medium sized biotech companies, and in 2003 increased its R&D spend by 26% to $243.4 million.

R&D spends for 10 leading generic manufacturers, 2003*

*Note: Mylan = year to March 2004, Barr = year to June 2004. Figure for Hexal is an approximate, and both Hexal and Schwarz's figures converted from Euros Source: IMS Company Profiles.

Teva already has one successful innovative drug on the market, Copaxone (glatiramer acetate), a self-administered parenteral daily product for relapsing-remitting MS. It was first launched in Israel in 1996 and reached the US market in 1997, where it has orphan drug status. According to R&D focus, Teva has nine R&D projects in the Phase I to pre-registration/filed stages of development, including a number of projects involving drug delivery system technologies. Therapeutic indications include MS, Parkinson's and Alzheimer's diseases, systemic lupus erythematosus, iron overload following blood transfusions in sickle cell anaemia and thalassaemia, prostate cancer and epilepsy. Most of these projects have involved licensing or collaborative deals.

IVAX forges further ties with the R&D sector
IVAX increased spending on R&D by 42% in 2003 to $108.3 million, representing 7.6% of net revenue. The company's R&D is based on a balanced strategy of developing proprietary pharmaceutical products with an emphasis on the oncology and respiratory fields, as well as generic products with an emphasis on specialty or harder to develop, higher margin generics. Much of IVAX's innovative research has stemmed from its acquisition of the Hungarian Pharmaceutical Research Institute in 1999. IVAX is known for its aggressive acquisition trail: the 1999 purchase of US-based Soft Drugs provided IVAX with several NCEs and soft steroid technology. In September 2003, IVAX added a new inhalation technology to its portfolio with the acquisition of Advanced Tobacco Products (ATP) of the US; ATP has an exclusive licence to new dry inhaler technology applications from Duke University.

Mylan also forges forward on branded front
In May 2004, Mylan, through its Bertek subsidiary, made further headway in the sale of branded products by submitting beta-blocker Nebilet (nebivolol) for FDA approval for hypertension. Bertek acquired US and Canadian rights to nebivolol from Johnson & Johnson in 2001. It has been launched in many world markets by J&J since 1996 but was not developed for the North Amercian market.

Mylan has developed expertise in the drug delivery system area through its Bertek subsidiary and a US joint venture with Watson, Somerset. Somerset received an ‘approvable’ letter from the FDA in February 2004 for EMSAM, its transdermal selegiline product for depression. Although selegiline is a Parkinson's treatment, which has been on the market since the 1980s in tablet form, the development of the transdermal formulation may have potential for depression and other neurological conditions such as attention-deficit hyperactivity disorder. Bertek received approval from the FDA for use of an injection pen cartridge formulation of apomorphine as Apokyn for the treatment of acute, intermittent treatment of hypomobility ('off' episodes associated with advanced Parkinson's disease), for which it gained orphan drug status in the US.

Number of NCEs in active development

Source: R&D focus

There are many Indian generics companies that are also developing their own R&D pipelines, helped by lower costs than in the US or Europe. Both Ranbaxy and Dr Reddy's have a number of research drugs in early development, and in September 2004 Glenmark licensed an asthma and COPD compound to Forest in what was described as the largest licensing deal to date for an Indian pharmaceutical company: Glenmark could receive up to $190 million.

Risk vs. return
Dr Spino said that many generics companies still avoid true discovery of NCEs and many, as in the case of Mylan, generally chose to capitalise on their strength areas of formulation development. He points out that despite more companies dipping their toes in the R&D water they are still gaining the vast majority of their revenue from generics. He recommended caution to the companies moving into R&D, stating that although the profit potential is great with the development of successful NCEs, the failure rate is high, as are the costs and risks, and that progress will be slow.

This article was written by Irene Buggle, Managing Editor of Drug Information for IMS Health. Much of the information was sourced from IMS LifeCycle R&D focus, which provides coverage of technologies, drug delivery systems and therapeutic agents from discovery through to market. It is available as part of IMS Knowledge Link, or independently via the web, CD, or online hosts. A weekly newsletter, Drug News, is also produced, containing the latest updates. For more information contact Rupesh Chudasama via email or call +44 207 393 5000.

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Relevant reports on this topic:
Global and regional sales information:

• Apotex
• IVAX
• Mylan
• Teva
• Watson

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