GSK/Dr. Reddy’s Deal To Co-Promote Branded Generics In Emerging Markets
This article was originally published in PharmAsia News
Executive Summary
GlaxoSmithKline and India-based generics giant Dr. Reddy's now must iron out how best to sell branded generics in diverse emerging markets after reaching a strategic alliance, announced June 15 (PharmAsia News, June 15, 2009)
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GlaxoSmithKline and India-based generics giant Dr. Reddy's now must iron out how best to sell branded generics in diverse emerging markets after reaching a strategic alliance, announced June 15 (Also see "GSK In Pact With India’s Dr Reddy’s; Digs Deeper Into Emerging Generic Drugs Market" - Scrip, 15 Jun, 2009.). Under terms of the agreement, GSK gains access to more than 100 branded generics in Dr. Reddy's portfolio and pipeline for cardiovascular, diabetes, oncology, gastroenterology and pain management indications. Dr. Reddy's and GSK will co-promote the drugs in some markets and under one of the company's brand names in others. Not all the products will be sold in all countries, and GSK is still sorting out "which products will be sold under what brand, in which countries," a spokesman for the larger pharma said. "We picked out therapeutic areas of interest, but not necessarily specific products on which we'll build," the GSK spokesman offered, adding that the products, typically, won't compete with patented products that GSK sells in those markets. Generally, though, Dr. Reddy's will manufacture generic drugs, which GSK will then market in certain African, Middle Eastern, Asia Pacific and Latin American countries, focusing on key markets such as Brazil, Mexico, India, China and Turkey and aided by its emerging markets sales force, 11,000 reps strong. Major Western pharmaceutical companies, including GSK, are looking to emerging markets to make up for revenues and profits lost to generic competition in the West. The partners expect the deal to start contributing to sales in the fourth quarter of this year, but they did not disclose the terms or quantify their expectations for the deal's contribution to their fiscal performance down the road. Because GSK CEO Andrew Witty wants analysts to take a longer-term focus, he is not providing quarterly forecasts for various businesses, the spokesperson explained. Nevertheless, this alliance is another notch on GSK's emerging markets belt for 2009; since the beginning of the year, the pharma has entered into at least four other deals that expand its presence in emerging markets. The Dr. Reddy's alliance came weeks after GSK announced it is acquiring a stake in the South Africa-based generics company Aspen Pharmacare, with which it had inked earlier partnerships to gain rights to sell certain branded generics in Africa. On June 9, GSK also announced it had entered into a vaccine joint venture with the Chinese biologics firm Shenzhen Neptunus Interlong Bio-Technique Co., which has been fighting to stay afloat amid earnings losses, staff layoffs and a partial halt in production (Also see "New Vaccine Partnership With GSK Could Act As Lifeline For Chinese Biotech Firm Neptunus, Which Has Been Trapped In Troubled Financial Seas" - Scrip, 11 Jun, 2009.). While GSK's biologics group led the deal, its emerging markets business also is involved, the spokesman said. Aspen And Dr. Reddy's: Similar But Different Deals CEO Witty has said GSK is interested in growing its emerging markets base through organic growth, strategic alliances and what he referred to as "bolt-on" acquisitions, which are small and focused, rather than through large M&A. The Dr. Reddy's agreement complements the Aspen deal, therefore, GSK said, noting that plans laid out with the smaller South African generics company will work as a strategic model for GSK going forward. Each deal is structured differently, however; GSK took a 16 percent equity stake in Aspen in the mid-May deal, but did not invest in Dr. Reddy's, which is strictly a sales and profit sharing arrangement. Prior to the Aspen deal, GSK also acquired Bristol-Myers Squibb's Egypt/Pakistan business. On May 6, in one of his first presentations to investors outlining GSK's approach to emerging markets, Abbas Hussain, the company's relatively new president of Emerging Markets, said GSK's goal is to continue building a diverse product portfolio. Hussain could not be reached for comment on GSK's new deal on June 15. "In emerging markets, it's absolutely critical that you have scale; that you have a breadth of portfolio at different price points that can innovate down the wealth pyramid," Hussain said, at the May 6 meeting, which was organized by Sanford F. Bernstein equity research. Many drugs available in the U.S. and Europe remain out of reach for patients in emerging markets, despite mounting affluence in these areas, and GSK sees branded generics as one way to reach more people there, Bernstein's Tim Anderson said in a May 1 research note. Country-specific Marketing Important, Hussain Says The alliance with Dr. Reddy's is in line with GSK's overall business strategy of working to understand the marketing climate of individual countries to most effectively promote products. At the May 6 meeting, Hussain stressed the importance of localizing commercial strategies in emerging markets, which he said are "clearly, very, very diverse," rather than grouping together countries, such as Brazil, Russia, India and China and others. "Anyone who's actually flown to Bombay, and then from Bombay gone on to Beijing, would recognize that just as you land in those two markets, that they're actually fundamentally very, very different," he said. Dr. Reddy's brings GSK contacts and familiarity with the largely genericized markets it already reaches, which GSK then plans to supplement with its own resources. Dr. Reddy's has built brand loyalty in those countries, a GSK spokesman said. The generics company has "excellent manufacturing facilities, at a cost base lower than ours," GSK said, adding that in choosing strategic players to expand into emerging markets the large pharma looks for those with "a good pedigree and track-record." - Carlene Olsen ([email protected]) and - Wendy Diller ([email protected]) [Editor's note: This story first appeared in "The Pink Sheet" DAILY, June 19, 2009.] |