Abbott and Zydus Cadila enter alliance for emerging markets
This article was originally published in Scrip
Abbott Laboratories and Zydus Cadila have joined the expanding list of innovator-generic combines that are forming symbiotic relationships to tap into emerging markets, seen as the engine of future growth for the pharmaceutical industry.
Abbott has licensed 24 products from Zydus targeted at 15 high-growth emerging markets, with an option to add another 40 to this list. It includes medicines for pain and cancer, and cardiovascular, neurological and respiratory diseases.
Abbott, which formed a separate established products unit within its international pharmaceutical division in 2007, has also now formally set up a stand-alone established products division with a portfolio of branded generics. The new division will market these products outside the US, with a focus on accelerating growth in emerging markets.
The new division, with $5 billion in current sales, will be headed by Michael Warmuth, who previously led Abbott's diagnostics unit.
The alliance expects to commercialise Zydus's products starting in 2012. Manufacturing will be done by Zydus at its facilities in India.
deal benefits
Zydus said that the deal would allow it to leverage its regulatory pipeline, developmental capabilities and manufacturing strengths, while enabling Abbott to further accelerate its growth in emerging markets. It is unclear if the partners will share revenues from the marketed products or even co-market these in certain markets, a model used by GlaxoSmithKline and Dr Reddy's in a similar deal agreed last year.
"We see tremendous opportunity to participate in multiple ways in a market that is growing and expanding rapidly. Building on our mutual strengths we are creating a considerable competitive advantage for value creation for both partners over the long term," Zydus's chairman and managing director, Pankaj Patel, said.
Abbott and Zydus appear to be following in the footsteps of several others who have sewn up similar deals over the recent past. Last year, Pfizer entered into similar alliances with the Indian companies Aurobindo Pharma and Claris Lifesciences. The deal with Aurobindo covered product rights in more than 70 emerging market countries.
GlaxoSmithKline's deal with Dr Reddy’s Laboratories gave it exclusive access to Dr Reddy’s portfolio and future pipeline of more than 100 branded pharmaceuticals in several emerging markets.
There have been mixed reactions in India to such alliances, with some analysts claiming that cost worries and patent expiries were pushing large companies to strike deals and control production capacities in the generics space. They claimed that Indian companies could lose out in terms of "value gains" in some lucrative emerging markets in the medium term.
Others, however, argued that such deals gave Indian firms market access without the need to build/invest in their own sales and marketing infrastructure.
established products
Abbott has been developing its portfolio of branded generics, both through its own products as well as those that came with the acquisition of Knoll's pharmaceutical business in 2001.
Its recent buy of Solvay Pharmaceuticals has brought with it a diverse branded generics portfolio providing "significant critical mass" in key emerging markets, Abbott said. Besides this, a new geographic region focused on Russia, India and China was created, which saw the company's growth rate double in those countries. Emerging markets account for about 20% of Abbott's pharmaceutical sales at present.
Annual pharmaceutical sales in emerging markets are expected to exceed $400 billion by 2020, equivalent to current sales in the US plus five major European markets, according to IMS.
Branded generics account for 25% of the global pharmaceutical market, have the majority of market share in the largest emerging markets, and are expected to outpace growth of patented and generic products, Abbott said.