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Infographic: Understanding the Cost Dynamics of 3D Printed Drugs

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Medical industry needs no introduction to 3D printing technology, which has found usage in applications varying from custom prosthetics to surgical procedures. And with the US Food and Drug Administration (FDA) approving the sale of Spritam (in 2016 across USA), a drug used in preventing seizures, produced by Aprecia Pharmaceuticals using 3D printing, this commercial use of 3D printing technology embodies a momentous development in the field of printing drugs. The deployment of this technology offers certain benefits, but also comes at a cost, and affects the cost dynamics of producing a drug.

Cost savings offered by 3D printing technology are massive. Making drugs using printers will gradually reduce the processing equipment required, allowing the final product to be printed on one versatile machine, saving thousands of dollars. Going a step ahead, pharma companies will provide the base products for printing of the medicines at clinics and pharmacies, which means that the investment in production and storage facilities at the pharma company’s end will decline as the physical making of the drug will be shifted closer to the end-user. The technology will also help save on packaging and labelling costs along with bringing down logistics expenses.

However, as 3D printing capabilities develop further and as the cost of printing drugs falls, increasing easy accessibility to these drugs, it will become imperative to address safety and regulatory concerns associated with this technology.

While making drugs with 3D printing technology could be a game changer for the medical industry, it also comes with a potential threat of counterfeit and illegal drugs. As drugs production will be shifted from centralized location of pharma companies, which are able to ensure more controlled and supervised production processes, drugs will be printed at numerous clinics and pharmacies, and hence strict regulations need to be adopted and methods of production need to be appropriately controlled. Unified safety procedures and quality control measures need to be developed so that patients can be assured of the quality of the products.

The immense potential offered by this technology is increasingly materializing through commercialization in developed markets. However, as massive financial inputs from pharma companies paired with research grants and support by governments are still required, it is fair to believe that this technology is still far out from the reach of the less developed parts of the world, at least in the foreseeable future.

3D printed drugs

by EOS Intelligence EOS Intelligence No Comments

Indian Nutraceuticals – Potentially Rich Market Momentarily Disrupted by Frail Policies

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Over the past few years, consumption of diet supplements and functional foods and beverages has seen a rise in India, fueled by an increasing health awareness and a slow shift towards preventative health care. India’s nutraceutical sector offers tremendous opportunities, a fact that has led to the emergence of various players offering wide range of nutritional products. Other than nutraceutical companies, a mass of pharmaceutical and FMCG companies has entered the market leading the dietary supplement and the functional food and beverage category. India’s future in nutraceuticals industry looks promising, however, there is an immediate need for regulatory clarity and cost efficiency to streamline the otherwise progressing sector.

Currently, the USA, Japan, and Europe account for more than 90% of the total global nutraceutical market. But with these markets attaining maturity, the focus of nutraceutical players is shifting towards developing economies, especially those across Asia Pacific, including India. Indian market holds only a 2% market share of the global nutraceutical market and its estimated valuation stands at around US$4 billion as of 2017. It is expected to reach US$10 billion by 2022, increasing at a CAGR of 21% over the period of five years. The high potential of the Indian nutraceutical sector is propelled by the growing awareness of healthy lifestyle and the benefits of a balanced and nutritious diet in Indian population (especially in its urban section). India’s promise to remain a growing market, at least in the near time, also lies in the increasing income of the country’s vast middle class.

It’s not all nice and easy

While India may seem to be a favorable location for nutraceutical players to enter because of the rising urban income and increasing health consciousness, setting up new business here is not easy. Nutraceutical companies have the opportunity to develop and offer wide range of nutritive products for the populace but face challenges in broadening their reach in the local market.

The lack of consistent regulation and standardization of nutraceutical products is one of the key challenges faced by nutraceuticals producers in India. Product cycle in the nutraceutical industry is regulated by strict guidelines through each phase of product development, from the selection of raw materials to the packaging stage. FSSAI (Food Safety and Standards Authority of India) issues regulations on licensing and registration of business, packing and labelling, food products standard, additives, etc. However, irregularities in laid guidelines for registration of nutraceuticals, permitted additives, and packaging often create problems for companies to get product approval quickly leading to costly delays. The most common concern that nutraceutical manufacturers face is the lack of clear differentiation between raw materials, additives, or colors categorized as permitted to use in a pharma drug or a nutraceutical product. What is more, some colors and additives commonly used in food do not find place in the list of permitted additives for nutraceuticals under the regulations. Similarly, any product packaged and marketed in the form of a gelatin capsule is considered as a drug and not necessarily a nutraceutical or dietary product, regardless of its function and indication. Thus, it is necessary to have regulations for permitted additives, product registration, product approval, and pricing specifically for nutraceuticals. In the light of the rapid growth of this segment in India, it is imperative to treat this segment as a separate entity and have clear product definitions and production guidelines.

Another challenge for producers is to arrive at the right pricing for their products in the local market. Though the demand for nutraceuticals is expected to rise considerably, the high prices of nutraceuticals limit their adoption in the Indian market. Nutraceutical producers try to recover their R&D costs in a short span of time by putting a high price tag on their products, but in a price-sensitive market such as India, high costs associated with producing nutraceuticals (or putting high margins on products) is a major restraining factor. Also, affording health products, which cost much more than some of the basic food items, is a key concern for majority of Indian population.

Moreover, with the introduction of GST (Goods & Services Tax) in July 2016 (we talked about it in our article GST Likely to Become India’s Biggest Tax Reform in August 2016), nutraceuticals and other health supplements are subject to 18% tax (with few categories even taxed at 28%), making these products considerably more expensive than before (when they were taxed at 12%). High taxes associated with nutraceutical products could also affect the entry of new players in the market as these new players would be pressed to launch their products at lower prices in order to get a slice of the market. This could only be achieved by either lowering the cost of production or accepting a lower margin, and both of these options might make the new players apprehensive about entering the market now.

Nutraceuticals in India

Evolving competitive landscape

Pharmaceutical and FMCG companies dominate the nutraceutical market with very few pure play nutraceutical companies. Key players in the Indian market consist of both domestic and multinational players. While MNCs such as Amway, GSK, Abbott, and Danone are focusing more on regional penetration, domestic players such as ITC, Dabur, Himalaya, and Patanjali are launching new products to reach out to newer segments. The range of dietary supplements that accounts for about a third of the nutraceuticals market in India is captured by pharmaceutical companies. Meanwhile, there has also been a compelling change in consumer preferences towards functional foods and beverages. These consumables have nutritional and disease preventing qualities and are mainly catered to by the companies in the FMCG domain. The market for functional products is most likely to see a higher growth than the dietary supplements owing to the increasing number of people being affected by lifestyle diseases.

EOS Perspective

FSSAI is keen to introduce amendments to the existing regulations pertaining to nutraceuticals and dietary supplements, so much so that a set of new and (allegedly) consistent regulations and standardization procedures for nutraceutical products are to be implemented in January 2018. This raises hopes that the nutraceutical companies will be able to produce, distribute, and sell products within a clearer framework pertaining to permissible ingredients, labeling, etc., in nutraceutical products. The regulations also include an exhaustive list of ingredients, which are permissible in nutraceutical products, enabling players to introduce new products in the Indian market.

Apart from restructuring the regulations, there is also an urgent need to reduce the price of these products to make them accessible to consumers across many income levels, across the country. Currently, the penetration of nutraceuticals in urban India is 22.5% but this rate stands only at 6.3% in rural parts of the country. Urban consumers, though are aware of the benefits of nutraceuticals and often have higher disposable income, are somewhat reluctant to add these products in their monthly budgets on a regular basis, unless required, due to exorbitant prices. Making these products available at more competitive prices could enable players to capture a good share of urban Indian market over a short span of time.

There are also considerable opportunities beyond the urban segment, as population in rural parts of the country represents a huge untapped potential for nutraceuticals sales. Financial capabilities of rural consumers are surely much lower than of their urban counterparts, but this does not mean that the rural market should be ignored altogether, as this segment can offer considerable sales volume, especially that the incidence of undernutrition in rural population is higher than in urban areas. This market, however, should be approached with a different tactic. Players should consider expanding their reach in this segment with simpler, lower-priced, generic products and with products on which they can afford cutting their margins the most. It is important that they also broaden their distribution reach to make their products available in local dispensaries in rural areas, and work with local healthcare providers to drive awareness and demand for nutraceutical supplementation. But in order to really get a firm grip on the rural segment, the pricing should be much more attractive, and this could be potentially achieved by working with the government, local authorities, and healthcare organizations to launch initiatives in the form of subsidies, tax rebates, or other co-payment forms to allow to bring the product price significantly down. Obviously, this might be difficult to achieve in the near term, as public entities are unlikely to see this as a priority in assigning funds. So till this changes, it appears that a refurbishment of the regulatory framework is going to be the only turning point in the growth route that the nutraceutical players can hope for.

by EOS Intelligence EOS Intelligence No Comments

Blockchain Technology – Next Frontier in Healthcare?

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Blockchain, an innovation underlying the Bitcoin cryptocurrency, is a distributed ledger technology enabling transparent and secure data sharing in real time. The buzz around blockchain technology has spread far beyond finance sector, the technology’s original application area. In fact, think tanks globally are exploring and testing the potential use of blockchain technology to ease current pain points in healthcare and pharmaceutical industries.

Blockchain Technology – Next Frontier in Healthcare? by EOS Intelligence

EOS Perspective

Blockchain-managed information exchange ensures data security, transparency, integrity, and reliability. These attributes have the potential to address several healthcare industry challenges associated with interoperability, data security and privacy, insurance claims processing, clinical trials credibility, and drugs counterfeiting, among others. As a result, blockchain technology is quickly gaining ground among industry stakeholders.

An IBM study (released in 2016) based on survey of 200 healthcare executives – both providers and payers in 16 countries – indicated that 72% of the respondents were planning to deploy blockchain technology-based solutions by 2020. The survey emphasized that the industry pioneers have great confidence in application of blockchain technology with about 16% of the respondents planning to have commercial blockchain solution operational in 2017. Another survey commissioned by Deloitte in 2016 involving 308 executives at the US companies (from various industry segments) with US$500 million or more in annual revenue indicated that 35% of the respondents from healthcare and life sciences industry plan to deploy blockchain solutions in 2017. These surveys suggest that healthcare industry have set high expectations from and is ready to embrace blockchain technology.

 

Blockchain Technology – Next Frontier in Healthcare? by EOS Intelligence

Though blockchain promises to offer several unique solutions, industry players need to be cautious about some obstacles associated with adoption of this technology.

Blockchain technology is a relatively new concept for healthcare domain. There are high risks of dealing with immature and untested technology. A report released by Tierion (a US-based blockchain start-up) in 2016 indicated that healthcare data is prime target of cybercriminals as patient health records sell at US$20 compared with US$1 per credit card number.

Moreover, healthcare organizations need to comply with stringent rules and regulations pertaining to patient data privacy and security to avoid steep penalties. Even though the blockchain technology is expected to provide better security against data breach, the adopters need to be cautious until the capabilities of blockchain technology are proven in real-time environment.

Even though the blockchain technology is expected to provide better security against data breach, the adopters need to be cautious until the capabilities of blockchain technology are proven in real-time environment.

Since blockchain technology is still in the stage of development, the costs and risks associated with its implementation in practicality are largely unknown. Moreover, in absence of real-world business cases, it is difficult to forecast the operating costs as well as potential technology post-implementation roadblocks. This might create some hesitation among the industry players to adopt this new technology as there is little clarity on return on investments.

Full digitization of healthcare data is imperative for successful deployment of blockchain technology. However, it is observed that even some of the developed nations have not been able to achieve 100% digitization till date. For instance, 2015 Commonwealth Fund’s International Survey of Primary Care Physicians indicated that about 84% of physicians in the USA use some form of electronic health record system, while in other countries, such as Germany, France, Canada, and Switzerland, these figures are even lower – 84%, 75%, 73%, and 54%, respectively. These shares can surely be expected to be incomparably lower in less developed and developing countries.


Explore our other Perspectives on blockchain


Furthermore, the implementation of blockchain solutions would require significant changes to, or complete transformation of, existing systems. In order to integrate blockchain software in legacy systems, all forms of data would need to be standardized to ensure compatibility. Considering large volumes of healthcare data, which is now being produced in the range of petabytes, the transition would be a major challenge.

Implementation of blockchain solutions would require significant changes to, or complete transformation of, existing systems. In order to integrate blockchain software in legacy systems, all forms of data would need to be standardized to ensure compatibility

In view of these risks and challenges, we believe that the time is not ripe for the healthcare industry to readily adopt blockchain solutions at a large scale. Rather than rushing to adopt blockchain solutions, the technology should be thoroughly tested before deployment. There is no doubt that the application of blockchain technology has the potential to impact healthcare industry in several positive ways, however, in absence of real-world business cases, it seems too early to estimate the scale of impact and risk.

by EOS Intelligence EOS Intelligence No Comments

A Doctor under Your Skin: Wearable Medical Devices in India, Brazil, and China

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From smart glasses that allow a surgeon to operate having his patient’s medical records at sight to an intelligent contact lens that measures glucose levels of its wearer, technological innovations are changing the world as we know it. Wearable medical device market growth has been promising and the industry is expected to reach a value of US$7.8 billion by 2020, growing at a CAGR of 19% from 2015 to 2020. Since 2015, the USA and Europe have been two key markets hosting majority of users of these new technologies. However China, India, and Brazil are expected to increase its demand for wearable devices driven mainly by rapid expansion of smartphone users and an increasingly aging population. Is these emerging economies’ current set-up favorable for medical wearable to maintain a steep growth?

 

The use of wearable medical devices is skyrocketing due to aging populations, fast adoption of new trends, and greater incidence of chronic conditions around the world. An increase in health awareness across the globe and a simultaneous increase in worldwide wearable medical device shipments estimated to reach 97.6 million units by 2021, growing at a staggering CARG 108% between 2016 and 2021, might indicate the industry’s large growth potential.

Wearable Medical Devices in India, Brazil, and China-Global Outlook

Brazil, India, and China (BIC), in particular, have been registering increasing rates of chronic diseases such as heart failure, diabetes, and obesity for the past several years. Therefore, these countries have started to be considered as the next destinations to focus on in search for high growth-potential wearable medical devices markets.

Wearable Medical Devices in India, Brazil, and China - BIC Markets Are Attractive

Regardless of the fact that wearable medical devices are thriving in the USA and Europe, in countries such as Brazil, India, and China, these devices are bound to face challenges that could translate into major roadblocks for the market to grow. For instance, although wearable medical devices have proved to be a significant aid when monitoring and preventing illnesses, these are not yet considered an essential product for healthcare consumers. Consequently, BIC buyers, who tend to also be highly price sensitive, may refrain from purchasing such solutions if the retail price is high in comparison to their purchasing capabilities. As a result, this behavior may lead to a stalling sales volume in these markets and, subsequently, a slowdown in the wearable medical market growth.

Wearable Medical Devices in India, Brazil, and China - Successful in BIC

In addition, the growth of wearable medical technologies in BIC is challenged by deficient regulatory frameworks with regards to categorizing and supervising such devices for their import and commercialization in each market. Currently, regulatory frameworks are mostly outdated and do not include specific category for wearable devices with proper security measures. Moreover, as these wearables are battery-operated, improper testing due to lack of regulation can affect their safety as well as may reduce the trust consumers need to develop in order to accept and use the device. Further, this inadequate regulatory scenario may drive away potential market players (including key providers).

Wearable Medical Devices in India, Brazil, and China - Regulatory Frameworks

 

Wearable Medical Devices in India, Brazil, and China - Challenges

EOS Perspective

Global wearable medical device market is witnessing a steep growth driven mainly by changes in demographic profiles of many populations and a growing incidence of chronic conditions. In developed economies, wearable medical technology is experiencing high adoption rates and its role in the healthcare sectors is strengthening, mainly because physicians already use such solutions during consultations, whether to monitor, diagnose, or treat a patient. In emerging economies such as Brazil, India, and China, wearable medical technology has even more room to continue expanding, however, current scenarios in these countries may partially impede this growth.

Some of the key issues in these markets include the problem of import regulations unfitted for wearable medical devices, and this seems to be an important issue which needs to be sorted out in the short term to avoid driving potential players and manufacturers away from BIC markets. At the same time, the high retail price makes the wearable devices unaffordable for a large percentage of the population causing low rate of adoption among patients, and hindering medical wearables’ market growth.

Further, the fact that healthcare providers are not planning to include such devices in public health insurance schemes and reimburse the cost of wearable devices as part of their health plans, lowers the chance of this technology reaching higher number of consumers. This limited accessibility to wearable medical devices in BIC markets may result in low consumer’s awareness about their benefits, or even their existence.

Local governments should reform and adapt their import regulations to fit the wearable medical devices characteristics, allowing a better flow of these products to enter the countries without risking human health. At the same time, for wearable medical devices to healthily grow in these promising and widely populated markets, manufacturers and retailers should aim to lower a wearable device retail price. A way to achieve this could be by adding wearable devices to private health care plans (and encouraging public health insurers to do the same) – especially for chro
nic diseases patients and people over 60 years old. This will most likely allow consumers to purchase such a device at a lower retail price or rely on their healthcare reimbursement policies.

by EOS Intelligence EOS Intelligence No Comments

Shire-Baxalta Deal – Post Merger Opportunities

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In January 2016, Shire Plc., an Irish specialty biopharmaceutical company, announced that it will combine with Baxalta Inc., a biopharmaceutical company that was formed as a result of spun off biopharmaceutical division of Baxter International, to become one of the global leaders in the rare diseases segment. The US$32 billion merger deal closed in June the same year and the merged company will be known as Shire. Benefitting from Ireland’s relatively low corporate tax rate, the new company aims at becoming a global leader in rare diseases and expects to deliver robust compound annual growth with over US$20 billion in annual revenues by 2020. While prior to the acquisition, Shire Plc. used to get 45% of its revenue from rare disease treatments, with the Baxalta deal, Shire expects its rare disease portfolio revenue to rise to 65% in the combined entity, clearly indicating the key focus of the newly formed company.

Shire Plc. M&A activity over the past three years helped the company fortify presence in the rare disease specialty, leading way to future synergies achieved through the Baxalta deal. In 2014, Shire Plc. acquired US-based Lumena Pharmaceuticals in a US$260 million plus deal. With this acquisition, Shire Plc. added late stage development compounds for the treatment of rare hepatic diseases and treatment of non-alcoholic steatohepatitis (NASH). In 2015, the company forged another big takeover, a US$5.2 billion deal with NPS Pharmaceuticals, a rare-disease drug specialist. Via this transaction, Shire Plc. gained ownership of lifesaving drugs named Gattex and Natpara expanding its rare disease product portfolio in the gastrointestinal (GI) segment.

While adding new products to its product list, Shire Plc. growth strategy focused on building a portfolio predominantly in rare conditions. Another addition to the list was Cinryze, a medicine for hereditary angioedema (HAE) condition, which came with the buyout of ViroPharma, a US-based biotechnology company, for about US$4.2 billion in 2014. This was followed by acquiring US-based Dyax Corporation in 2015 for nearly US$6.5 billion adding DX-2930, an injectable to lower the rate of HAE attacks, to the list of rare disease drugs. Shire Plc. deals, which consistently focused on inorganic growth in the rare disease market, were complemented by organic development of a robust pipeline also within the rare disease scope.

Rare diseases drugs, often named as orphan drugs, have been among the key focus areas for many pharmaceutical companies over the past two decades, as such products bring in high profit margins and regulatory benefits coming from their development. The new company created through the Shire-Baxalta deal is therefore likely to benefit from the new combined rare disease drugs range. With the acquisition of Baxalta, Shire has a diversified portfolio with a combined rare disease platform in the fields of immunology, oncology, hematology, neuroscience, ophthalmic, GI, as well as LSDs and HAE. Baxalta brings a particularly valuable portfolio of treatments to the table, as even during the talks with Shire Plc. on the planned merger, in January 2016, it inked a deal of US$1.6 billion with Symphogen, a Danish biotechnology company. Through this agreement, for an upfront payment of US$175 million paid to Symphogen, Baxalta acquired exclusive rights to six cancer immunotherapies, focusing on growing area of cancer research called immuno-oncology. The Shire-Baxalta deal gives the newly formed Shire the opportunity to take these therapies through later-stage trials to the market.

1-Takeover Performance

Shire also plans to take advantage of Baxalta’s new manufacturing facilities. The new entity announced it would increase its research activity in the Baxalta’s R&D site in Cambridge, Massachusetts research campus, one of the hubs for biotech research that opened in December 2015. It would add another 100 to 200 jobs to the existing research team of 400 people at the center.

2-Ambition “20 X 20”

EOS Perspective

Shire, thanks to the synergies and elements brought in to the deal by both companies, has a promising starting point due to two key factors:

  • Strong financial tax profile: Despite the fact that Shire focuses in its operations on the US market, the company expects to lower its effective tax rate to between 16% and 17% by 2017. This can be achieved as the rare disease business is based in Ireland where tax policies are simpler and more accommodating.

  • Robust rare disease product portfolio: Shire has more than 50 clinical programs in different stages of development focusing on rare diseases. With more innovative products under its umbrella, Shire is likely to have a huge share in the orphan drug product market globally.

3-Catalysts & Road blocks

At present, only assumptions can be made about the future shape of the combined entity. With clear directions laid down of what the company management would like to achieve, it would be interesting to see whether Shire is able to accomplish the set mark of becoming world leader in rare diseases.

by EOS Intelligence EOS Intelligence No Comments

Traditional Chinese Medicine: Ready for the Global Stage?

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In late 2015, Chinese researcher Tu Youyou was awarded the Nobel Prize for creating anti-malaria drug, using Traditional Chinese Medicine (TCM). Artemisinin, an active compound extracted from an aromatic herb sweet wormwood (which has been in use for treating malaria in China for more than 1,500 years now) was the key ingredient in preparing the prize-winning drug.

Based on herbs and other natural ingredients, the traditional medicines in China treat a range of health conditions, including common cold, pain, gastrointestinal ailments, and chronic illnesses, among others. TCM sector, fully supported by the Chinese government, has its own ecosystem in the country comprising dedicated practitioners, educational institutes, and the pharmaceutical companies manufacturing traditional medicine products.

1-TCM

Despite having been in use for more than 2,000 years (as claimed), domestic market for traditional medicines is smaller in comparison to that of conventional prescription and Over-The-Counter (OTC) drugs. The sector requires competitive TCM products for market expansion. However, this looks a distant possibility, as TCM-based clinical trials account for only about 5% of all trials (open studies) in China at present. This can be attributed to dearth of large organized TCM players with enough funds to invest in R&D. It also suggest that majority of Chinese consumers of traditional medicines rely on time-tested legacy preparations.

The State Council (the highest administrative body in China) meeting held in February 2016 asked for strengthening the sector through policy initiatives, such as increasing the number of traditional medicines in national essential medicine list, ensuring higher quality supervision (farm-to-factory), promoting modern production techniques, and consolidating a largely unorganized sector at supply side. The plan is also to support research and development and to look for ways to hasten industrialization and export of TCM.

Amid the urgency shown by the State Council, and in the light of recent Noble Award, it would be interesting to see if traditional medicines have the potential to provide alternative to conventional medicines at global stage, or will they largely remain a domestic (Chinese) phenomenon.

EOS Perspective

Though policy makers in China see enough potential still waiting to be tapped, the traditional medicines sector needs to overcome challenges in overseas as well as domestic market.

It is apparent that the Chinese government’s efforts to promote traditional medicines overseas in foreign markets have not yielded desired results. For instance, to boost TCM trade, the government announced a program in 2012 to establish 10 TCM trading centers worldwide. While there are no updates available on proposed plans to set up these TCM trade centers, in 2015, the first center of traditional Chinese medicine in Central and Eastern Europe was opened in a Czech hospital, as a pilot project.

The policy makers in China need to work around the fact that the expansion of traditional medicines beyond China is constrained due to doubts about their efficacy and possible side effects. One of the ways to allay fears of non-Chinese consumers (in order to ensure wider acceptance) is to get recognition through Western regulatory bodies, such as FDA. However, this can be a time consuming process, as evident from the history of TCM registrations outside China.

2-TCM Challenges

At present, the best approach seems to be to strengthen domestic TCM sector while identifying the TCM-friendly overseas markets and the therapeutic segments with potential to be successful abroad.

For competing at global level, TCM sector requires more TCM-focused companies, such as Dihon, Chinese herbal and OTC manufacturer (which was acquired by Bayer in 2014 with Bayer’s intent to strengthen its position in Chinese OTC market that currently consists of about 50% of herbal medicines). Dihon boasts of a strong TCM portfolio, including its star product Dan E Fu Kang, which is marketed as a gynecological medicine for women’s health indications. Dihon-like companies that have a few best-selling TCM drugs under their belt are exactly what the Chinese TCM sector needs in order to develop and expand abroad.

If successful, the envisaged state policies might lead to creation of a number of large TCM companies, with enough financial power to invest in research and development, thereby creating a robust traditional medicine portfolio. At present, only few known large players, such as Traditional Chinese Medicine Co. and Jiangsu Kanion Pharmaceutical, are operating in the Chinese market.

TCM sector’s international expansion should focus on OTC drugs with safety and success record proven in China, and introducing these drugs in markets where regulatory requirements for market approval are less stringent e.g. in Asia and Africa. Manufacturers of TCM can also look for complementing the existing conventional medicines (instead of replacing them) for life threatening diseases e.g. cancer. While not treating the actual disease, traditional medicines can contribute to providing a wholesome treatment. For instance, past studies in China suggest that TCM is effective in treating side effects, such as radiation injury and inflammation, nausea, and gastrointestinal disorders due to radio/chemotherapy.

It may take long for TCM to challenge conventional medicines and make commercial impact at global level. Till it happens, the traditional medicine market will remain China-centric. Only disruptive policy interventions will make the sector dominant at domestic level, thereby setting the stage for a global take-off.

by EOS Intelligence EOS Intelligence No Comments

FDI Regulations in Indian Pharmaceutical Sector: A Game-changer?

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Spoon full of pills and a capsule with the flagdesign of India.(

In June 2016, the Indian government liberalized its FDI policy in the pharmaceuticals sector by allowing 74% FDI under automatic route in brownfield pharmaceutical investments (investment in an existing plant). Earlier, even though 100% FDI was allowed in the brownfield projects, government approval was mandatory for investments beyond 49% stake. In greenfield pharmaceutical investments, the existing FDI policy allows 100% FDI under the automatic route. The recent changes effectively introduce a new regime, under which a foreign company is now allowed to hold a majority stake in an Indian pharmaceutical company without government approval in either brownfield or greenfield projects.

This has been done with a view to boost the development of the Indian pharmaceutical sector. The move is likely to increase the number of investments in the sector along with a decrease in investment timelines leading to a greater inflow of capital in a short span of time. In addition, the policy is likely to result in Indian pharmaceutical companies exporting products to the USA and EU, encouraging the sharing of technologies and overseas investment. An increase in the inflow of funds will also lead to the promotion of R&D activities in the country.

That being said, the liberalization of the FDI regulations has also a potential to threaten competition in the Indian pharmaceutical sector, as seen previously with Ranbaxy. In 2008, Daiichi Sankyo, a Japan-based company acquired a majority stake (including brands, R&D facilities, and production units) in Ranbaxy, a leading Indian generic manufacturer, for US$ 4.6 billion. However, the investment proved unfruitful as post the acquisition, Daiichi faced several regulatory hurdles with the US Food and Drug Administration regarding drug testing authenticity and manufacturing criteria. In addition, four of Ranbaxy’s plants were banned from selling medicines in the USA and Daiichi was made to pay US$ 500 million to the US Justice Department in order to settle the lawsuit. In 2014, Ranbaxy was acquired by India-based Sun Pharma with Daiichi as the controlling shareholder before Daiichi sold its entire stake in Sun Pharma for US$ 3.18 billion in 2015. Once a renowned brand, Ranbaxy has now lost its independent status and exists only as a shadow of Sun Pharma.

Thus, the new FDI regime could easily lead to the sale of several Indian generic pharma companies to pharmaceutical players intending to enter the Indian pharma market, which is considered a generic pharmaceuticals hub with market size estimated at US$ 20 billion as of June 2016. The policy could lead to foreign players grabbing market share and exercising greater control to sway the government to alter the IP regime. This could lead to India losing its independent industry providing low cost essential medicines.

However, things could also take an entirely different turn. Large, well-established Indian pharmaceutical companies might not be looking to receive new investments, which could lead to the acquisition of small and medium-sized Indian pharmaceutical companies by foreign players. This move could lead to the inflow of capital in these small companies, promotion of R&D activities, increased manufacturing of medicines, and higher exports.

While the impact of the FDI regulations change will be seen in the next couple of years, the government has already taken an arduous task of maintaining a balance between foreign investment-friendly regime and guarding the local generic medicines laws while protecting local players from large foreign companies.

by EOS Intelligence EOS Intelligence No Comments

Government Trumps Pfizer Deal

Termination of business contract or partnership

Since its announcement last year, a US$160 billion Pfizer-Allergan merger has been under an ongoing discussion, with great synergies and tax savings expected if the deal was to be finalized, (we wrote about it in our ‘Pfizer-Allergan Deal – What’s in Store for Allergan’ article in February 2016).

However, discussions came to an abrupt end, when the merger was called off on April 6th, 2016 in the wake of changes in tax rules by the US government to check inversions. New rules disregard last three years’ (at the time of deal) acquisitions by a foreign company in the USA in determining its market value. It is a general feeling that the three-year rule was introduced primarily to stop Pfizer-Allergan deal. Since its announcement, the deal was a talking point in political debates with some presidential hopefuls taking an open stance against it.

To secure maximum tax benefits of inversion deal, Pfizer shareholders were required to own 50-60% of the merged entity. Allergan’s market capitalization stood at US$120 billion (against Pfizer’s US$200), owing to three deals, i.e. Allergan-Actavis merger (US$66 billion), Forest Laboratories acquisition (US$25 billion) and Warner Chilcott purchase (US$5 billion), struck in last three years, thereby giving Pfizer shareholders more than 50% of the combined entity. However, this will not be the case now due to drastic reduction in Allergan’s market value as a result of three-year window provision. This also means that both the companies will have to go back to the drawing board.

For Pfizer, this means the need for an increased focus on management of its vast portfolio of drugs (a mix of patent and off-patent products) with an intent to further improve profitability. While Pfizer’s patented drugs command higher prices, the off-patent ones are subject to price decline thereby impacting the company’s profitability. After the announcement of Pfizer-Allergan deal, there were speculations about sale/spin-off of Pfizer’s off-patented portfolio. However, with revenue loss due to the broken deal, the plan (if still any) to sell off-patented business is likely to be put in freezer for some time to come. This could also mean more efforts on research and development front, and being inherently a research driven company, Pfizer has some potentially lucrative drugs in pipeline (including cholesterol lowering and cancer drugs).

For Allergan, the broken deal means looking for alternative ways to strengthen its position outside the USA. The company can take inorganic route to achieve this. No headway was made towards operations restructuring of the merged entity. Therefore, in all likelihood, the research and development assets of Allergan will remain intact, one positive outcome for the company out of the broken deal, as it has some good candidates in the field of ophthalmology, urology, and women’s health. With sale of its generic business to Israeli rival Teva Pharmaceuticals in July 2015, Allergan showed the intent to focus on patented products, therefore the company will have to look for means to raise its R&D budget.

The broken Pfizer-Allergan deal will remain in discussion in coming days from the point of view of missed opportunities for both Pfizer and Allergan, as well as for the political angle involved. Even if the decision was politically motivated, it may have put moratorium on inversion as a strategy for the time being, and it would be interesting to track moves not only in the pharmaceutical space but in other industries as well, following the new regulatory regime.

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