Market Report Source

Overview

Introduction
The generics industry has undergone significant change over the last five years, with a wave of consolidation altering the competitive landscape. Indeed, the intense merger and acquisition activity has lead to more diverse companies, both on a product level and geographically, with pure generics companies becoming increasingly rare.

Scope
Detailed profiles of the leading fifteen companies involved in the generics industry
Benchmarking analysis of the leading companies’ financial performance in 2005
Assessment of and comment on the business models in the generics market
Overviews of company strategy and alliance networks

Highlights
Within the generics segment, there is increasing diversity in companies’ offerings, with a variety of commodity, specialty, branded and super generics being offered. In addition, some generics companies are now involved in proprietary product research and development or in-licensing.

Several generics companies have demonstrated strong growth between 2004 and 2005. This has primarily been driven by acquisitions, although organic growth has also boosted sales. In contrast, many of the companies that have not participated in the wave of consolidation within the generics market have posted stagnant or declining sales and profits.

Teva and Sandoz are currently the leading companies by sales, and these positions will be bolstered by the consolidation of their recent acquisitions. Watson and Actavis will see their market share increase if their planned acquisitions of Andrx and Pliva, respectively, are successfully completed.

Reasons to Purchase
Identify the leading companies within the generics market in 2005 and their strategies for the future
Understand the changing competitive dynamics within the generics industry
Assess the different business models being applied in the generics industry and the success of each one

Table of Contents

CHAPTER 1 EXECUTIVE SUMMARY

Scope of the report

Key findings

CHAPTER 2 STRATEGIC COMPANY ANALYSIS

Key findings:

Business models

A diverse generics portfolio is becoming the standard business model

Branded and super generics provide a significant competitive advantage

Proprietary products can be lucrative but require significant up-front investment

Biosimilars are being touted as the next wave of innovation for the generics industry, but the future is not clear

Few companies in the generic market concentrate on one particular type of product

Most generics companies are globally focused, either through sales or manufacturing operations

Benchmarking the leading companies

Teva and Sandoz dominated the market in 2005

M&A activity has driven growth in operating profits

The generics market is defined by low-margins, although companies with a diversified portfolio have demonstrated greater returns

Operating costs must be kept to a minimum to ensure profitability for generics companies

R&D investment varies between companies but has remained stable

Overall most companies spent similar percentages of sales on each of their key costs

CHAPTER 3 PROFILES OF LEADING COMPANIES

Teva Pharmaceutical Industries

Portfolio

Geographic presence

Growth strategy

Alliance networks

Sandoz

Portfolio

Geographic presence

Growth strategy

Alliance networks

Merck KGaA

Portfolio

Geographic presence

Growth strategy

Alliance networks

Watson

Portfolio

Geographic presence

Growth strategy

Alliance networks

Mylan

Portfolio

Geographic presence

Growth strategy

Alliance networks

Stada

Portfolio

Geographic presence

Growth strategy

Alliance networks

Pliva

Portfolio

Geographic presence

Growth strategy

Alliance networks

Ranbaxy

Portfolio

Geographic presence

Growth strategy

Alliance networks

Barr

Portfolio

Geographic presence

Growth strategy

Alliance networks

Andrx

Portfolio

Geographic presence

Growth strategy

Alliance networks

Perrigo

Portfolio

Geographic presence

Growth strategy

Alliance networks

Gedeon Richter

Portfolio

Geographic presence

Growth strategy

Alliance networks

Actavis

Portfolio

Geographic presence

Growth strategy

Alliance networks

KRKA

Portfolio

Geographic presence

Growth strategy

Alliance networks

Cipla

Portfolio

Geographic presence

Growth strategy

Alliance networks

Other company profiles

Zentiva

Par Pharmaceuticals

Dr Reddy’s

ratiopharm

Aurobindo

APPENDIX A: ADDITIONAL INFORMATION

Exchange rates

APPENDIX B: BIBLIOGRAPHY

Press releases

Newspaper articles

Miscellaneous sources

Presentations

Annual Reports

Websites

Datamonitor reports

TABLE OF FIGURES
Figure 1: Generic production and supply value chain

Figure 2: Commodity generics tend to be lower value but high volume while branded and super generics can command a premium price

Figure 3: Teva has the strongest proprietary product pipeline and currently markets the most proprietary products, although Ranbaxy has several products in discovery

Figure 4: The leading generics companies all operate with a diversified business model

Figure 5: Teva and Sandoz were the clear generics market leaders in terms of sales value in 2005

Figure 6: If the proposed acquisitions are successfully completed, Actavis will become the fifth largest generics company, while Watson will ensure that its top five position is maintained

Figure 7: The generics industry is traditionally associated with low operating profit margins but companies with more diverse portfolios have generated stronger returns

Figure 8: COGS as a percentage of sales are relatively high for the generics market as product prices are kept low compared to the branded segment

Figure 9: Companies with third-party sales tend to have a larger SG&A spend

Figure 10: On average, around 7.4% of sales is spent on R&D by generics companies

Figure 11: Most generics companies have increased their R&D expenditure as a proportion of sales since 2003

Figure 12: Overall most companies spent similar percentages of sales on each of their key costs

Figure 13: Teva thumbnail: key performance metrics

Figure 14: Teva’s generics portfolio is largely focused on CNS and CV therapeutics

Figure 15: Teva’s sales are predominantly derived from North America but the company’s presence in Europe is increasing

Figure 16: Teva’s growth since 1996 has been driven by several large scale acquisitions

Figure 17: Sandoz thumbnail: key performance metrics

Figure 18: Sandoz manufactures a number of different types of generics

Figure 19: Cardiovascular and anti-infective products contribute the largest proportion of Sandoz’s generic sales

Figure 20: Europe now accounts for 56% of Sandoz’s sales, an increase of 8% from 2004

Figure 21: Merck KGaA thumbnail: key performance metrics

Figure 22: 70% of Merck’s generics sales are derived from Europe and North America

Figure 23: Watson thumbnail: key performance metrics

Figure 24: Watson’s generics portfolio has demonstrated the strongest growth between 2003 and 2005

Figure 25: Mylan thumbnail: key performance metrics

Figure 26: Cardiovascular sales as a proportion of total sales have declined since 2003 while GI and CNS sales have increased

Figure 27: Generics account for the majority of Mylan’s annual sales

Figure 28: Stada thumbnail: key performance metrics

Figure 29: Generics are key to Stada’s overall sales

Figure 30: Omeprazole is one of Stada’s best selling generics, generating 9% of total generics sales

Figure 31: Stada’s sales structure as of 2005

Figure 32: Stada’s sales by segment vary by region

Figure 33: Stada has successfully launched over 350 new products per year for the past three years

Figure 34: Pliva thumbnail: key performance metrics

Figure 35: The majority of Pliva sales come from pharmaceuticals, particularly generics

Figure 36: Pliva’s geographical presence has been expanding in areas such as Western Europe and North America

Figure 37: Ranbaxy thumbnail: key performance metrics

Figure 38: Eight of Ranbaxy’s top 10 selling molecules are infectious disease products, accounting for around $380m in sales

Figure 39: Ranbaxy’s sales are predominantly derived from the US, with the BRIC region also contributing a significant percentage

Figure 40: Ranbaxy has a relatively active proprietary product pipeline, focused on infectious, metabolic and respiratory disease and urological disorders

Figure 41: Barr thumbnail: key performance metrics

Figure 42: Proprietary products are now generating over a quarter of Barr’s total sales

Figure 43: Barr’s principal facilities and capabilities

Figure 44: Barr’s investment in R&D has increased significantly over the last two years

Figure 45: Andrx thumbnail: key performance metrics

Figure 46: Andrx’s core business is the distribution of generics, but licensing is becoming increasingly important

Figure 47: Perrigo thumbnail: key performance metrics

Figure 48: The geographic distribution of Perrigo’s employees and facilities has been widened with the acquisition of Agis

Figure 49: Gedeon Richter thumbnail: key performance metrics

Figure 50: Generics account for 72% of Richter’s total sales, compared to 60% in 1994

Figure 51: Exports have accounted for just over 71% of total Richter sales in 2004 and 2005

Figure 52: New products account for almost half of Richter’s total sales

Figure 53: Actavis thumbnail: key performance metrics

Figure 54: Own brand sales account for two-thirds of Actavis’s total sales

Figure 55: The acquisition of Amide and Alpharma’s generics business has provided Actavis with significant US sales

Figure 56: The revenue by segment is distinctly different in each of Acatavis’s geographic regions

Figure 57: Actavis has experienced significant sales growth in the past five years

Figure 58: Actavis has been highly acquisitive since 1999

Figure 59: KRKA thumbnail: key performance metrics

Figure 60: 87% of KRKA’s prescription pharmaceutical sales are derived from four key therapeutic areas

Figure 61: Central and Eastern European markets account for the largest percentage of sales and have also demonstrated the strongest growth over the last year

Figure 62: Cipla thumbnail: key performance metrics

Figure 63: Over half of Cipla’s sales are accounted for by tablet and capsule products

Figure 64: Cipla’s export sales are generated across the globe, with the America’s accounting for the highest proportion