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Why Actavis has its eye on Japan

Claudio Albrecht, CEO of Actavis, outlines his company’s new “think smart medicine” strategy, its plans for expansion into new geographies and the goal of achieving a stronger position in the Japanese pharmaceutical market.

Q. Focusing on the fiercely competitive generics landscape, what is your opinion on the future of the Actavis business?

If you compare the specific “generic business” divisions of the industry’s leading players, Actavis ranks in fourth place globally, behind Teva, Sandoz and Mylan. In the future we expect to face challenging patent expiries on increasingly complex products. Our investment in R&D is going up significantly to address these shifting market dynamics. We are gearing up not only for new ways of developing these products but also for selling them. We have a certain advantage when it comes to scientific detailing, simply because we are strong in markets where you still need big field forces and where brands are still “the name of the game”.

Q. What changes are you expecting to see in the generic industry?

Within the next decade, the majority of top-selling products that are due to lose patent protection will be biologics, hormones, inhaler products and cytotoxics. All require more complex development programmes or dedicated manufacturing sites. In many cases, success will depend on selling the products in devices which are made for patient convenience and which are not easy to switch to a generic version.

Historically, we have relied on making copies of plain, rather simple chemical compounds and I can say we probably have one of the industry’s best pipelines in this category. But once a wave of blockbuster drugs, including Lipitor (atorvastatin) and Seroquel (quetiapine), have lost patent protection over the next couple of years, many of the world’s new best-selling products will be in areas with much higher barriers to entry. By 2016, out of the top 20 drugs (taking into account patent expiries), I believe about 12 to 13 will be biologics, while another three or four will be hard-to-make generics, such as inhaler devices or hormonal products.

We can already see that the top generic companies are investing more in R&D to make these more complex products. Therefore, Actavis must be realistic and make choices about where it will focus its resources.We cannot do all the “hard-to-make” drugs which are coming off patent in the next 10 years. For this we would need a strong partner.

But we have a clear focus on biosimilars: for example, we want to have biosimilars in oncology, diabetes and women’s health. These three disease groups also give us the greatest leverage for our chemical portfolio and obviously we can offer an interesting value proposition for key opinion leaders. Our field forces are well-trained in these areas, simply because of the chemical portfolio which fits into these disease groups, and where we already have a very broad presence in several countries.

Q. At the official opening of the new Actavis headquarters in Zug, Switzerland you presented a new strategy under the heading ‘think smart medicine’. What does this mean?

I believe we must listen much more to our key business partners and try to understand what challenges they face. In reality it is not always about getting the cheapest price of a drug. Significant cost factors in the field of pharmaceuticals include “non-compliance”, safety, educational issues for medical staff or simply the holistic management of a particular disease, with all the conditions associated with it; in these settings “concept” suppliers are of great help.

Therefore the new Actavis strategy going forward will still aim at the “traditional” key success factors, such as time-to-market, cost leadership, and differentiated products in more profitable niches, but key initiatives will also include very creative new value propositions, clearly aimed at providing a more conceptual solution to address our customers’ issues. We can be open about the ideas behind this strategy; there are no secrets, simply because we already started moving in this direction a while ago. We know you need creative people and quite significant additional financial resources to make this happen. I would say we are some way down the road and it will be difficult for competitors to catch up with us.

‘Think smart medicine’ in business will give us a more competitive edge in our space – and our partners will benefit, not only from affordable prices but from the many underlying activities. There are numerous examples I could give you, but just to mention some: we believe we can be a good partner in managed care in the diabetesspace. We are working on the first biosimilar insulin in regulated markets and its analogues. We have all the key chemical substances and combinations for type 2 diabetes, either on the market or in development. Moreover, we have, or will have, a very broad offering for all the collateral diseases, be they in neuropathy, cardiovascular or ophthalmology. But our thinking goes beyond this. We also want to offer prevention, education programmes and diagnostic devices, and special focus will be given to diabetes in children. We offer a similar programme for oncological indications.

A totally different example is our “dose dispensing” product range. We are already very successful in many countries, especially in Scandinavia, where we are the leading supplier of products in bottles which can be filled in compliance-enhancing strips. We believe we offer the broadest portfolio of these drug packs, which are mainly used in nursing homes. With easy-to-handle offerings, clearly aimed at supporting compliance, we are helping patients who may have to take up to 15 drugs per day. We do all this with one aim: helping our partners to save money so they can see that we are focused on solving their problems.

Q. Diabetes is one of Actavis’ key targets. What makes you confident that you can be successful in such a difficult segment as insulin?

Actavis and Bioton are in the process of forming a joint venture to develop the Polish company’s insulin and follow-on analogues for Europe, the US and Japan. Actavis will have exclusive sales rights in these and additional territories.

Insulin and its analogues are the lead substance for a full range of disease-management offerings and in this respect we believe we are a first mover. When I look at the three originator companies in this space, I can say that we offer a much broader portfolio. We will be a ‘one-stop-shop’ for treatments for diabetes and its associated complaints.

In addition, we can rely on nine years’ worth of safety and efficacy data to support our detailing strategy. By the time of approval we will have a very impressive data package, which should also convince key opinion leaders who are sometimes sceptical about biological products coming from new entrants in this space.

We believe we will have a very competitive pen system and we are also well on our way in the development of analogue insulin. Here we adapt a very opportunistic approach: we take note of whatever solutions a country’s medical schools favour, then we try to provide those solutions as first-choice offerings for very economic prices and in the different forms which different countries require.

For us, the diabetes idea goes way beyond natural insulin and the two analogue insulin lead substances. In the near future, we will see patent expiries for pioglitazone, including fixed combinations with metformin, and for repaglinide. Actavis’ pipeline also includes high-value ‘gliptin’ products. We are the only company that can offer such a broad diabetes portfolio. Even if innovators came to market with cheaper Indian insulin, the brand firm would lack Actavis’ breadth of oral generics. We can tell insurers and payers that we cover the whole diabetes segment for a cost that is probably considerably less than they have been paying historically.

Q. Which countries come to mind as significant growth opportunities for Actavis?

We are investing in high-growth geographies, including southern Europe, Poland, Russia, the Middle East, North Africa, Latin America and, of course, Japan. Actavis may start developing and selling biosimilars with partners in emerging markets. Thanks to the relatively generic-friendly intellectual property rules in emerging markets, early sales in those regions could finance the clinical tests necessary to bring them to patients in Europe and the US. This clearly requires a crystal-clear quality concept on which we cannot compromise and there is nothing wrong with generating early cash flows. Actavis had €1.7 billion ($2.4 billion) in annual sales last year, 17% of which came from markets outside the EU and the US.

We already have strong positions in Russia, Serbia, Turkey and Indonesia, with manufacturing and R&D sites in Jakarta, Russia and Serbia. At present, our biggest investment programme is in India, where we are expanding our site to become the biggest across the Actavis Group.

Q. And what about Japan specifically?

In Japan the situation from our side has changed. We have defined the country as a strategic territory and we will make funds available to grow there.

A strong Japanese originator industry and Japanese legislation have for many years been high hurdles for the generics industry. But now the Japanese government appears to be committed to raising generic usage considerably as part of efforts to curb its spending on healthcare. We will invest in a broad development pipeline and will aggressively enter the market with cytotoxics, a women’s health range, cardiovascular drugs, and of course our diabetes range, including the insulins. We have a local joint venture in Japan which we will leverage to full effect. We also believe that the local originator industry does not have to be a ‘natural’ enemy. On the contrary, the nature of the Japanese market today speaks much more for partnerships and synergies between innovators and generic companies. We are ready to invest in Japan because we believe it is one of the big growth potentials of the future.