“I think generics were buried too quickly. This area is still alive, brings nice profits, and it has room to grow. It’s just that, today, Copaxone draws all the attention,” says Teva SVP Global Generic R&D Elisabeth Kogan in an interview with “Globes.”
Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA), the largest generic drug manufacturer in the world, has been fighting in recent years to defend its most profitable product - the MS drug Copaxone, which is actually a branded drug - from generic competition. The commotion surrounding the US patent expiry diverts attention from reports of new generic drug launches, which do not succeed in making a significant impression on investors. “Once, reports like these were big news,” says Kogan, “Today, it almost doesn’t move the stock, despite the fact that it is very significant for business.”
So what, in Kogan’s opinion, are investors missing? A whole world of change: new markets, regulatory changes, possibilities to improve generic drugs using new delivery methods, and a regulatory revolution in the field of generics, which actually sets Teva apart from the competition.
Meanwhile, the renewed blossoming of the branded drug market is good for generics as well. “There are many products whose patents are going to expire - maybe they are not blockbusters (popular drugs with more than $1 billion in annual sales), but they are very valuable. This is my perspective after 17 years at Teva,” says Kogan.
These statements come on the heels of broad changes in in the US generics market, which is Teva’s primary market. These changes caused analysts and investors to worry about the company’s future profitability in this area. In the past, Teva enjoyed high margins from a legal process called Paragraph 4, which allows generics companies to challenge patents protecting branded drugs, by claiming they are invalid for one reason or another. In such a case, the first generic company to submit a request to the US Food and Drug Administration (FDA) would be entitled to launch the generic version of the drug exclusively for 180 days, before other generic competitors could enter. In some cases, it is also possible to launch “at risk,” in other words, before the legal proceedings regarding the patent are concluded. This was part of the business model that took Teva to where it is today. In recent years, however, other companies have learned the trick, and the number of Teva’s “exclusive” launches has decreased dramatically.
“Paragraph 4 still has significance, even if it is different from ten years ago,” admits Kogan, “In Paragraph 4, it is not possible to develop a drug that is exactly like the one in the patent. You have to change something in development, but the drug still needs to be identical to the original, and that is our advantage. If generics were just copy-paste, it would be very boring; there’s nothing generic about generics development at Teva. For the very simple products, there are Indian companies that know how to do it cheaply. We bring the brains where it’s difficult: Paragraph 4 or complex generics, for example, with technologies that require a lot of scientific knowledge in new fields, like drug-delivery methods, such as specialized syringes.”
Anyone who listened closely to incoming Teva CEO Erez Vigodman’s public statements, would have noticed the emphasis he places on developing delivery methods - this basically means Teva is entering the field of medical devices. Teva, unlike its competitors, has some knowledge in this area, because Teva Israel also markets medical devices, and because Teva International has already built inhalers with specialized delivery capabilities for its drugs.
“We are currently building a team of experts for delivery methods, and we are seeking partnerships in the field,” says Kogan, “We established a team of experts who are not expected to develop medical devices themselves, but who know how to lead partnerships in the field.” Another change in the US generics market that Kogan points to is the FDA’s stricter requirements for generic drug approval, which has led to the fact that, today, the cost of developing a generic drug is much higher than it was in the past.
Are the new requirements pushing any competitors out of the market?
“We are not counting on that. We respect the competition, but there is no doubt that the threshold requirements are rising. In two generic launches this year, Lovaza and Xeloda, Teva was the only company to receive approval, despite the fact that, from a legal perspective, there were other companies that could have obtained it. In other words, the fact that Paragraph 4 no longer always gives us exclusivity doesn’t necessarily mean that we will never have exclusivity for a period of time, thanks to the quality of the product. This is our aim - to invest more in development, and to create a situation in which there will not be ten competitors for a product.”
Improving the patient experience
The combination of a generics company that holds a significant innovative (original) product is transforming Teva into a hybrid creature. Despite the fact that in recent years the line between the two areas has been blurred, the big companies that compete with Teva run their generic and branded drug operations as two separate companies. This is how Sandoz and Novartis, for example, operate.
The connection between the two fields is one of the points that differentiates Teva from its competitors, and, therefore, it has decided to invest in global development of New Therapeutic Entities (NTE), an innovative combination between existing drugs, aiming to address existing medical needs. In order to maximize the creative dialogue, Teva decided not to include the new field under the umbrella of the innovative or the generics division, but under both. Kogan is one of the executives responsible for NTE at Teva, alongside the head of specialty medicines R&D.
“The generics division brings experience with 1,000 molecules that we have already developed, and the innovation division brings the thinking about the patient, building the clinical trial, and the complex submissions to the regulator. This is team work, with joint leadership, and it works very well,” she says.
Today, less than two years after Teva entered the field, it has eighteen products in development. The company estimates that this field could yield $3 billion by 2020, and it will initiate development of ten new products per year (though we should recall where long-term projections about innovative products have led Teva in the past).
Kogan explains how NTE work begins: “It is not a product, but rather a concept: we look for an area in which a drug with a known safety profile exists, but is not good enough for the patient, because there are side effects, or because he needs to take pills eight times a day, and he forgets. We take an existing product, and improve the patient experience, and the chemical effects of the drug.
“In July, 2012, we presented the concept, and it was named NTE in that same meeting - Rob Koremans (CEO of Teva Global Specialty Medicines) suggested the name, and everyone loved it,” she adds, “After that, young companies would come to us and say ‘We are an NTE company,’ and suggest partnerships - the name had not even existed before that.”
The company is looking for ideas for new NTE products, even among its workers. “If someone works with a product and has an idea how to improve it, or if his mother takes such a drug and he knows what is unpleasant for the patient, we have an obligation to take every idea that comes to us seriously,” says Kogan, “And we get good ideas from the employees, even if most of them are from partnerships.”
Levin’s baby
The concept of NTE as a growth engine with potential in the billions of dollars was first presented by Teva’s previous CEO, Jeremy Levin, in 2012. Less than a year later, he was fired.
NTE was Levin’s “baby.” Has something changed in the field since Vigodman took over as CEO?
NTE is still high priority, and it is not CEO dependent. The field is an example of the strength of Teva’s integration, and it is a natural result of the unique connection we have between generics and innovation.”
Published by Globes [online], Israel business news - www.globes-online.com - on June 9, 2014
© Copyright of Globes Publisher Itonut (1983) Ltd. 2014