06 February 2007
Generics to slash Big Pharma's Revenue by over $100bn in U.S and Europe by 2011
Loss of patent protection for key drugs provides generics opportunity of at least $20bn in 2007, 2008, 2010 and 2011
There are at least 70 major drugs, apart from recombinant products that will suffer from generic competition in the US and Europe from 2007 to 2011, finds new research.
The loss of patent protection for key products is a significant factor in assessing the future performance of major pharmaceutical companies because losses to cheaper generics often means a huge dent in finances. Patent expiration for a major product can see revenues for the supplier fall ten-fold within two years. A case in point is what happened to Eli Lilly when generic fluoxetine supplanted the company's Prozac. Similarly, Bristol-Myers Squibb saw a 90% drop within a quarter when generic clopidogrel supplanted Plavix.
On the other hand, the successful identification and exploitation of opportunities afforded by patents expiring provides a major growth driver for pharmaceutical companies which supply generic therapeutics. Indeed, the increase in use of generic therapeutics saw a sales combination of high volumes with low prices and led generics to capture 15% of the global healthcare market in 2005. This translated to combined revenues of $65bn.
The most significant markets for generic pharmaceuticals are the US, with 2005 revenues of $18bn, and Europe, especially Germany and the UK, with 2005 revenues of $18bn.
Lipitor and Plavix Present Largest Generic Opportunity
A study from URCH Publishing identifies Lipitor from Pfizer and Plavix from Sanofi-Aventis and Bristol-Myers Squibb as being the top selling drugs scheduled to lose patent protection. Lipitor, the world’s top-selling medicine, achieved global sales of $12.2bn in 2005, and Plavix saw sales of $6.1bn the same year. Opportunities such as these will sustain the revenue growth for generics suppliers throughout this period and ensure that the revenue growth of the generics segment continues to surpass that of innovative pharmaceuticals companies.
Author of the report, Dr. Peter Norman says; “The most dramatic change in this period will arise in the period 2010–12 as the patents covering Lipitor expire. In 2010, Pfizer is likely to lose the bulk of its revenues from this product in the US ($7.4bn in 2005) and generic equivalents will become available in most other markets in 2012.“
Considerable Variation In Generics Threat to Pharma Companies
There is a considerable difference in how the potential generics onslaught will affect the top 20 pharmaceutical companies in both the number of products and the value of revenues under threat.
Merck and Pfizer both face the serious problem of potential revenue losses of over 50% of their 2005 revenues. Slightly less affected are Bristol-Myers Squibb, Takeda, AstraZeneca and Eli Lilly, all faced with prospective losses of greater than 40% of their revenues. Also, Johnson & Johnson, Novartis, Wyeth and GlaxoSmithKline all face threats to about one-third of their 2005 revenues.
Other companies are likely to be less affected in the period. Neither Amgen, which currently markets only biological products, nor Merck KgaA, whose portfolio is primarily mature products, face any threat from generic competition. Some companies like Roche, Bayer-Schering, Abbott and Schering-Plough face limited threats to their revenues (4–10%).
