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Not long ago, pharmaceutical giant Novartis announced that it would spin off its generic drug business unit Sandoz and seek an independent spin-off and listing
.
There must be a reason why
the mixed operation of generic drugs and brand drugs, which has been insisted on for more than 20 years, was finally abandoned.
Looking at the entire generic drug industry, it has been infinitely prosperous: large companies continue to buy, mergers and acquisitions and expand, are sought after by capital and leverage, and have also ushered in a surge in stock price market value; Nowadays, many products and documents are changed or discontinued through subtraction, divestiture and sale
.
Abbott was one of the first to spin off its generic drug business, which it spun off into Hospira Pharmaceuticals and later acquired
by Pfizer.
Through several mergers and acquisitions, Pfizer has always retained its generic drug business and remained under Upjon; Until 2019, it announced its merger with Mylan Pharmaceutical to establish Hui Zhi Company, which is also the largest generic drug company
in the world today.
Sanofi began selling its generic drug business
as early as 2018.
Merck also spun off its generics business last year, including its biosimilar business and women's health-related business, into a new company
listed independently.
This time, Novartis announced to divest Sandoz's generic drug business, which also means that the last pharmaceutical giant bid farewell
to the generic drug business.
Other world's top ten pharmaceutical companies no longer dance with the "wolf" and mix the innovative brand drug business with the generic drug business
.
Why? The author believes that it is nothing more than too many players, overcapacity, fierce competition leading to a decline in profits, and even large losses
in some cases.
Ruhui's recent market capitalization is only $11 billion, and Teva tried to annex Mylan
for $40 billion five years ago.
As a global essential pharmaceutical product, the capital market atmosphere of generic drugs seems to be gradually unfriendly
.
Conjecture >>> Future development trend [Conjecture 1] The market is bigger and the demand is stronger In order to speed up the launch of generic drugs, the FDA enacted the Drug Price Competition and Patent Term Recovery Act (also known as the "Hatch-Waxman Act") in 1984, which standardized the approval process
for generic drugs.
In 2007, the FDA launched the Value and Efficiency Generic Initiative (GIVE) in an effort to modernize and simplify the generic drug approval process and increase the number and variety of generic products available, speeding up approvals and enabling the rapid development
of the generic drug industry.
Because of the simplified approval process, the market demand has skyrocketed
.
Taking the US market as an example, from 1984, the number of prescriptions for generic drugs accounted for only 18% and continued to rise, and now it occupies 80%~90% of the share
.
The proportion of drugs used for common diseases in the elderly is higher, and they are basically generic drugs
.
With the aging of society, there will be many market opportunities
for generic drugs in the treatment areas of chronic diseases such as cardiovascular diseases, diabetes, and oncology.
In addition, the growth of biosimilars, tightening government procurement budgets, and increased health insurance coverage will all drive the increase in
generic drug consumption.
Generic drugs are 4 times that of brand patented drugs in terms of prescription volume and sales, but due to low prices, the sales amount is only one-fourth of the original drug brand drugs, and the competitiveness is strong
.
Studies show that the generic drug market will continue to grow steadily in
the next 5~10 years.
In 2012, the global sales of generic drugs were only $260 billion, the global sales of generic drugs reached $392.
4 billion in 2021, the compound growth rate between 2022 and 2028 will be 5.
2%, and the global generic drug market is expected to reach $531.
8 billion
by 2028.
[Conjecture 2] Prescription increase, accounting for nearly the upper limit The provisions of the anti-inflation law recently passed by the US Congress involving drug price limits will have a great impact on brand original drugs, and the impact on the generic drug industry is
relatively small.
Governments, enterprises, and insurance companies will prefer more cost-effective generic drugs in drug consumption and price negotiations, unless they are irreplaceable original drugs
with better clinical effects.
So the number of generic drug prescriptions is likely to increase
further.
However, the pharmaceutical market must have a place for innovative research and development, and give a sufficiently high profit margin, otherwise there will be no motivation and growth space
for innovative research and development.
In the global drug market size of $1.
2 trillion, the sales amount of generic drugs may gradually reach 50%, but the market share may eventually be fixed between
85% ~ 95%.
[Conjecture 3] Emerging markets, still have a role to play Due to limited consumption power, the proportion of sales and consumption of new and expensive brand drugs in emerging markets and underdeveloped countries is not high, and the largest demand and prescription volume must be generic drugs
.
South African and Indian generic drug companies have very good performance and market atmosphere; Chinese pharmaceutical companies are based on the huge market in their own countries, and there are also those who
go overseas to try their knives.
The sales growth rate of generic drugs is naturally higher than that of developed countries
in Europe and the United States.
The global generic drug market will grow at a compound annual growth rate of 5.
5%, but the growth rate will be several percentage points
higher in emerging markets.
Large generic drug companies will also penetrate and strategically deploy
in emerging markets through mergers and acquisitions, cooperation and agency.
In addition to the traditional demand for small molecule chemical generics, the demand for biosimilars in emerging markets will also increase
.
The market share and proportion will also gradually increase
.
Demand for pharmaceuticals will grow
steadily in line with GDP growth in emerging markets.
Even if large international pharmaceutical companies abandon or divest their generic drug business, they will still have an important position and sales share
of expired patent products in emerging markets and the four BRICS countries.
Inspired >>> Regrouping the direction of mergers and acquisitions or more than addition Around 2010, the generic drug industry continued to set off a wave of mergers and acquisitions, and the transaction price of $1 billion was not news, and mergers and acquisitions of billions or even tens of billions of dollars also occurred from time to time, although some transactions were not finally concluded
.
The biggest deal was Israel's Teva Pharmaceuticals' acquisition of Allergan's generic drug business for more than $40 billion, and it was this super acquisition in the generic drug industry and previous mergers and acquisitions that cost billions of dollars left Teva with a heavy financial and debt burden
.
Teeva's institutions are bloated, products and overcapacity, performance and profits are declining, and market capitalization and stock prices have fallen from more than $40 billion and $29 in the spotlight to more than $7 billion and more than $6
.
In order to reduce the burden, Teva had to sell assets and some products, reducing costs and liabilities
.
Teva was frustrated by greed, mainly in the one-sided pursuit of scale effects, while ignoring the particularity of the generic drug industry, that is, the threshold is not high and the competition is fierce.
Therefore, it is not that the more products and the larger the enterprise, the more stable and profitable it is, but the ship is easy to turn around and make generic drugs with characteristics and difficulties, but can get better returns
.
Business differentiation development opportunities The threshold of the generic drug industry is not high, especially the generic drug business of small molecule chemical drugs is the most competitive, but if the generic drug company can seize the market opportunity, especially by challenging the patent to win, it can enjoy 180 days of administrative exclusivity protection and enter the market earlier, so as to squeeze the market space of the original brand drug, until the original drug actively withdraws from the river and lake
due to price reasons 。 In addition to challenging patents to be the first generic drug, the market is not so crowded in the field of injectable generic drugs, combination and controlled release preparations, and generic drugs that are difficult to develop at low doses, which is an opportunity for
generic drug companies, especially in drug delivery (DDS) and formulation development, to have technical strength and innovative R&D enterprises.
Preparations that are in short supply in the market, especially those on the FDA list of shortage varieties, are of great development value
.
The shortage of these products is usually either difficult to buy or make raw materials, or the market capacity is not large, the document number is too competitive with manufacturers, and it is not profitable after cutting the price, and it is caused
by giving up together.
In fact, many of the products in the global market between tens of millions of dollars and 100 million dollars are of great clinical value
.
Pharmaceutical companies should pay attention to the varieties and business opportunities in this regard, especially the generic drug business of hospital drugs, injection preparations, and small-variety drugs has great prospects and can be jointly developed
with foreign enterprises.
The author noted that Medivant Health in the United States recently invested in the construction of a factory to develop small varieties
of injection that other generic drug companies are unwilling to develop.
There will definitely be good returns
in the future.
Optimistic about biosimilars business opportunities At present, more than half of the world's hottest TOP10 drugs are biomacromolecular or antibody drugs, and according to the "Global Biosimilars Market Outlook 2022-2027 Report", the biosimilars market will be worth $13 billion
in 2021.
The market is currently being driven by factors such as the expiration of blockbuster biologics patents, falling prices, rising prevalence of chronic diseases, and cost-saving initiatives by governments
.
Driven by these factors, the market size is expected to reach $60.
8 billion by 2027, with a CAGR of 26.
1% from 2022 to 2027, which is much higher than the sales growth rate
of small molecule chemical generics.
And the development of biosimilarsThe investment threshold is high, the competition is small, the price is not low, if the development is successful, there will be a good return
.
When Novartis CEO recommended Sandoz for spin-off, he emphasized that its selling point and future growth space lie in the development and marketing of
biosimilars.
In the long run, the world's top ten biosimilar manufacturers, as well as India, South Africa and South Korea, have made large long-term investments
in recent years.
Chinese pharmaceutical companies participate in the competition in the global generic drug market, and biosimilars are a must-do homework
.
Follow-up>>> Market map rearrangement At present, the valuation and market value of listed companies of many generic drug companies are not high
.
Teva once had a market value of more than 40 billion US dollars, briefly entered the world's top ten pharmaceutical companies, but now the market value is only about 10 billion US dollars, and several other top generic drug companies have a market value of only 11 billion ~ 15 billion US dollars, and South Africa's pharmaceutical company Aspen has a market value of tens of billions of dollars
because of its vaccine and biological drug business.
The price-to-earnings ratios of these companies are not high, indicating that the performance profit and growth type are not ideal.
Therefore, the generic drug industry needs to go through a period of repositioning, restructuring and internal and external coordination to get out of the current trough
.
In terms of investment value, generic drug companies still have good opportunities
for selective investment.
The bubble has been squeezed out, and if companies can start from their core advantages, develop more new generic drugs and specialty drugs, appropriately adjust their own product lines, and improve production efficiency and market penetration, sales and performance profits should be improved
.
From the current market of generic drugs, the Hui Zhi formed after the merger of Pfizer Puqiang and Mylan (57% vs.
43%) is obviously the boss of the industry, followed by Teva, and Sandoz is third, and such a pattern will not change
for a period of time.
The timing of Sandoz's divestiture also depends on market reaction
.
If it can be reasonably positioned at a valuation of $25 billion ~ $30 billion and the issue price, it may become the industry's highest market value generic drug company
.
However, from the perspective of performance, profit, company market value and future growth momentum, Indian pharmaceutical companies Sun Pharmaceutical and Alabino Pharmaceutical Company, which rank fourth and fifth among generic drug companies, have integrated many resources at home and abroad through mergers and acquisitions, and have developed rapidly
.
Last year, Merck divested and listed companies Organon and GSK's Halson company is also not ordinary, the former business volume of 6 billion ~ 7 billion US dollars, the latter annual sales of up to 13 billion US dollars, their joining, will make the generic drug and OTC industry reshuffle the status of the rivers and lakes
.
Indian companies intend to expand The rise of the generic drug industry stems from the encouragement
of US legislation.
In 1990, about 50 percent of ANDA filings came from U.
S.
companies and 15 percent from India
.
By 2012, U.
S.
corporate filings had fallen to 30 percent, while Indian companies had risen to 40 percent
.
In the past 10 years, the number of ANDA filings by Indian companies has reached more than 200 per year, and the number
of companies involved has also increased fivefold to 25.
In the generic drug industry, the degree of nationalization, capitalization and specialization achieved by Indian companies, as well as the global market share gained by continuous mergers and acquisitions
, are rising.
Today, among the world's top 10 generic drug companies, India has 5; In the ranking of the top 20 generic drug companies, Indian pharmaceutical companies also account for half of the rankings
.
Indian pharmaceutical companies not only export generic raw materials, but also export a large number of generic drug preparations, and set up branches and sales channels around the world, and the annual export of preparation sales has exceeded 20 billion US dollars
.
Indian pharmaceutical companies are not all smooth sailing in the United States, and many Indian pharmaceutical companies have been found to have been severely punished and banned by the FDA in the United States and India
.
However, this has not stopped and slowed down the pace and expansion intention
of Indian companies in the international market.
China's generic drug products have made gratifying progress and growth
in the past 10 years.
China's local pharmaceutical facilities, API and preparation R&D and production capacity and product quality have become competitive in the international market, but their confidence in market expansion, overseas ANDA filing, challenging original drug patents, seizing market opportunities and overseas layout of biosimilars needs to be improved
.
In 2017, Fosun Pharma Holdings acquired Gland Pharmaceutical of India and successfully capitalized it, becoming the largest overseas M&A transaction
value of Chinese pharmaceutical companies to date.
It is hoped that in the next ten years, China's large pharmaceutical companies can rely on the advantages of APIs, further complete some strategic mergers and acquisitions by cultivating and introducing international talents, and with the help of capital ties and leverage, so as to enhance the international status
of Chinese pharmaceutical companies in the generic drug market.
Conclusion<<< Recently, many industry leaders in generic drugs are still sorting out their business and improving the operational efficiency after mergers and acquisitions, and have no time to pay attention to large-scale mergers and acquisitions
in the industry.
However, considering that the market of the entire generic drug industry is fragmented, the market share of the head companies is not large, so after several years of reshuffling the survival of the fittest, there may be major mergers and acquisitions and strong alliances
.
In the rivers and lakes of generic drugs, no one can guarantee that they are "tumblers" and firmly occupy the first position
.
When the crowd competes, there will be a rising star
.
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