Generics companies expand scope, capabilities to fight headwinds
At a time when people expect negative news in the generics industry — whether it is unabating competition, price deflation, product quality and recall issues, or product supply shortages — many generics firms are managing to thrive.
Amidst this disruption, many players in the generics sector are counterpunching with innovative strategies, accelerating their efforts to pursue a diversified business model and focusing on significantly increasing their pipeline of products to include new therapeutic areas and new dosage forms. They also are developing and commercializing complex medicines and delivery systems that position their business for continued long-term growth.
The experience of Bridgewater, N.J.-based Alembic is a case in point.
Prior to 2019, most of Alembic’s products were solid oral dose tablets and capsules. In 2019, the company launched its first dermatological and ophthalmic products, including generic Bromday and generic Lumigan. This year, the company is expanding into injectables, oncology and oncology injectables.
Armando Kellum, Alembic’s vice president of sales and marketing, said the company’s foray into new therapeutic categories was driven by the fact of decreased competition in these areas.
“We felt they were good spaces for us to get into, and that we could provide additional value in terms of bringing consistent supply at a reasonable price to patients and our customers,” Kellum said.
East Windsor, N.J.-based Aurobindo is another prominent player in oral solid products that has expanded its pipeline to include ophthalmics, dermatology and oncology.
“Oncology is the new frontier for us. We’ve already started launching the first products into the oncology market. We also have hormones, peptides, metered-dose inhalers, ophthalmics, and other alternate delivery form products. We are covering a lot of different bases in terms of diversifying the product line and have really branched out,” said Aurobindo’s vice president of commercial operations Paul McMahon. “That’s important because it’s a very competitive market and we’ve seen competition accelerate in the last couple of years. The more diversification we can have, and the more hedging of our portfolio and broadening the ways we create value for our customers, the better positioned we are for growth and long-term stability.”
Many of the areas in which companies are branching out into new territory are happening organically as they seek out therapeutic areas and delivery methods that offer the most sizable opportunity. At Ascend Labs, for instance, the company — which executive vice president John Dillaway described as category agnostic — has instead focused on delivering products for underserved markets. This has led the company to search for molecules that are coming off patent, which also might be a little more difficult to develop, and thus attract fewer players. This strategy has ushered the Piscataway, N.J.-based company into nasal sprays and transdermal patches.
Unlike branded product counterparts, which typically have little or no branded competition on exact molecules, it’s not unusual for a generic molecule to have 10 to 15 competitors, Dillaway said.
“Given the consolidation among chains and group purchasing organizations, it’s possible to have more competitors than customers on some molecules, which is not the best strategy for success,” he said. “Any way that we can gain distinction is good. Ascend has spent the last year enhancing its production capability in an effort to stand out as a strong supplier.”
Another generics company that has expanded into new therapeutic categories and formulations as a competitive strategy is Bridgewater, N.J.- based Amneal.
Chirag Patel, Amneal’s co-CEO and president, said that increased competition on easier to formulate generic products like oral solids has led Amneal to focus on more complex products, such as inhalation products, transdermal systems, oncology injectables and ophthalmics.
“We will make larger investments into these areas where we can leverage our deep scientific and manufacturing capabilities to bring these products to market,” Patel said. “They are still commercially attractive compared to the highly competitive products in oral solids, so we’ve been focusing on these products for the last few years.”
Maple Grove, Minn.-based Upsher-Smith also has significantly increased its pipeline of products to include new dosage forms, as well as more traditional and specialty products.
Rusty Field, Upsher-Smith’s president and CEO, said that after several years of intense downward pricing pressure, generic price deflation has begun to stabilize in low single-
digit annual declines. Yet, while the outlook is more positive relative to previous years, competition remains intense.
To that end, Upsher-Smith’s pipeline, which includes complex generics, liquids and ophthalmics, is more diversified than ever before. In the last two years, Upsher-Smith launched generic versions of Cardura, Lomotil, Targretin, Prozac, and Onfi tablets and oral suspension.
No Easy Answers
While expanding into new therapeutic areas and formulations may seem like a panacea, it is no easy feat. It does not come cheaply. It involves major investments in operations and scientific capabilities, and it is a time-
consuming endeavor. In fact, some of the products currently being launched have been years in the making and have much to do with the complexity of the products.
“It takes years to build the infrastructure, such as the manufacturing facilities, and to complete the R&D of these complex dosage forms, and to file with the FDA, especially for the inhalation products, the long-
acting injectable products, and some of the more sophisticated ophthalmic products,” Amneal’s Patel said.
Amneal’s recently launched first-to-market generic version of the branded birth control NuvaRing was the culmination of about 10 years of work, and injectables provide several formulation and manufacturing challenges.
“Certain injectables are long-acting technologies, which eliminate the need for daily injections and can be effective for 30 days or more. They are difficult to formulate and involve complex manufacturing,” Patel said. “In many cases, they require specific manufacturing capabilities per product and higher capital expenses than easier to formulate generic products. This is why the barriers to entry are higher in these products.”
Alembic’s Kellum concurred, saying that it is costly to expand into new areas. “It’s a new investment versus the prior facilities that were for solid oral dose,” he said, noting that Alembic has built a separate oncology injectable and oncology solid oral dose facility, and it is constructing an ophthalmic facility.
Aside from the expense and time needed to build new facilities, FDA inspections of these sites are required. “Our oncology solid oral dose facility has been inspected and approved by the FDA,” Kellum said. “All of that takes time and that’s a big component of it, and you are spending a fair amount of money to do that.”
Dillaway echoed Kellum’s sentiments. “The biggest challenge is acquiring the manufacturing equipment and receiving FDA site clearance on any new equipment, products and dosage formats,” he said. “These require big investments of both time and money well in advance of any ROI.”
Facilities aren’t the only difficulty — creating these generics also require serious scientific capabilities, Aurobindo’s McMahon said.
“These types of products are specialized for a reason, and since they involve more specialized science, there are additional challenges and higher barriers to entry. Hormones require a dedicated facility, and injectables, ophthalmics and inhalation products require a sterile facility, which not all suppliers may choose to invest in or have the quality and regulatory skill set to operate,” he said. “Beyond that, some of the device-based products, like metered-dose inhalers, have a whole different set of requirements, separate and apart from typical generics. You have the look, the feel and the tactile experience of the product, which is quite different than a simple white pill generic drug.”
Other Ways to Grow
With the abundant challenges involved in delving into new therapeutic areas and formulations, generic companies are shoring up their chances for success by forming partnerships with established companies, making acquisitions or launching new companies.
For instance, Aurobindo is in the process of acquiring the Sandoz U.S. generic oral solids and dermatological business. “This is going to greatly expand our core oral solids business and springboard us forward in the dermatology space. We’ll be the second-largest oral solids and dermatology supplier in the United States once that transaction is complete,” McMahon said.
Alembic also is gaining a stronger foothold in dermatological generics via Aleor Dermaceuticals, which is a 60/40 joint venture between Alembic and Orbicular Pharmaceuticals Technologies. In October 2019, the joint venture received the FDA’s approval for generic Clobex and generic Desonide ointment.
Upsher-Smith entered into an exclusive agreement with an undisclosed pharmaceutical partner to market and distribute some select ophthalmic and otic abbreviated new drug application products. In 2019, Upsher-Smith also added two newly acquired, FDA-approved sumatriptan products to its branded central nervous system.
“The products are an excellent fit with our current [central nervous system] portfolio, and bring new dosage forms with their intranasal and injectable delivery, while also diversifying our portfolio beyond ANDA products,” Field said. “Upsher-Smith plans to strategically pursue acquisitions of generic and targeted brand opportunities that leverage our team’s commercial capabilities in both segments of the prescription drug market.”
As more generics companies diversify their portfolios going forward, several executives said that by doing so they are ensuring that their customers have a steady supply of high-quality products.
“With the organic growth that we’ve experienced, along with this transformational acquisition of the Sandoz business, we’ve become critically relevant to our customers,” McMahon said. “You can say that generics is a commodity business, but there’s many shades of gray along the way in terms of a company’s product offering, regulatory expertise, responsiveness and overall competitiveness. With this groundbreaking acquisition, Aurobindo sets itself apart from its competitors and becomes an even stronger partner for our customers.”a
Helping the System
Generic companies that are focusing on new categories and formulations also are doing their part to avert the supply shortage problems that recently plagued the industry.
Field said that while the FDA has been accelerating ANDA approvals, it also has seen a record spike in ANDA withdrawals, and rapid competitive expansion has decreased price to a point where there are market shortages due to companies pulling unprofitable products off the market. These trends may create some new opportunities for nimble companies to enter new markets, expand market share of existing products and launch new competitive products, he said.
“At a time when only 36% of FDA-approved ANDA products launched, we brought 75% of our approved ANDAs to market,” Field said.
Customers have taken notice of generic companies’ efforts to mitigate supply issues, Alembic’s Kellum said. “Because of the high number of quality issues and strong oversight by the FDA, suppliers and customers have begun to appreciate that aspect of supply much more. It is a very competitive market, but there’s a newfound appreciation for consistency of supply and quality of supply. It’s attractive for customers,” he said.
What bold steps generics companies will take as we go forward is anybody’s guess, but one thing is certain, competition likely will not fade any time soon.
Perhaps Field summed up what generics firms need to do best with this advice: “Companies that plan to thrive will focus on their strengths, seize opportunities that leverage these strengths, and be prepared to respond quickly to shifts in the market,” he said. “Success in the current environment requires discipline, focus and an eye for responsibly commercializing promising new product opportunities. And since no company has all of the answers or expertise in this dynamic market, the ability to form partnerships that capitalize on a company’s own strengths, while leveraging the expertise, capabilities and capacities of other organizations with different strengths is also key to sustaining growth.” dsn