The top 20 multinational pharmaceutical companies in Asia will see an average of $950 million in sales become at risk in the next 5 years due to the loss of exclusivity of their top brands. How can MNCs survive and thrive in this increasingly genericized era?

1. 5
It’s a pressing issue—and a demanding
one.
Already, says Anthony Morton-Small,
Senior Principal, IMS Consulting
Group, Asia-Pacific, off-patent and
unprotected products constitute the
lion’s share of leading MNC sales,with
continued sales erosion from protected
product sales inevitable in the coming
years.
“The landscape has shifted so
significantly in the last several years
that today five of the top twenty
pharma companies in this region
derive just 10% to 30% of their total
portfolio sales from protected products,”
says Morton-Small. “Another six reap
less than half of their sales from their
brand portfolio. Innovator multinationals
have never faced a challenge of such
proportions. The risks are different,
the stakes much higher.”
“We’ve tracked the products at risk
from generic competition in key Asia
Pacific countries since 2005,” says
Amkidit Afable, an IMS Consulting
Group engagement manager in Asia-
Pacific. “The numbers really do tell
the story. Between 2006 and 2011
alone, the value of products at risk has
grown from $2.6 billion to $5.1 bil-
lion.” (see figure 1)
One door closes, another opens
But where one door closes, another
often opens, and such is the case for
companies operating in this increas-
ingly genericized era. There is, of
course, no single strategy that will
ease the path for MNCs. But those
that take the time to analyze the
various markets and respond to
particular pressures and trends will,
says Afable, rise above.
“The pace of generic penetration
varies greatly from geographic area
to geographic area,” he says. “Leading
companies are already recognizing the
value in post-patent strategies that are
highly market-savvy and -specific.”
Consider China and India, two of
the largest emerging pharmaceutical
markets in the APAC region.
“In both China and India, more
than two-thirds of pharma sales are
derived from generics,”says Small,“and
generic products gain rapid popularity
among both patients and physicians in
these countries.”
The situation is different in both South
Korea, an advanced economy with a
Pursuing Growth in the Age of LoE
The facts are startling and incontrovertible: Over the next five years, pharma-
ceutical products collectively expected to generate an estimated $21.3 billion
in revenue are destined to go off patent,devastating branded sales in keyAPAC
markets. Among the top innovator multinational companies (MNCs) in the
region,four will see 30% of their overall portfolio value diminished by Loss of
Exclusivity (LoE). Ten more face related losses of between 10% and 30%. On
average, each of the top twenty MNCs in the APAC region look toward the
next five years as a time when some $950 million in sales will be at risk,thanks
to the LoE of their top brands.
Constantus$BN
%ofprioryear’ssales
2005
5.5
5.0
4.5
4.0
3.5
3.0
2.5
2.0
0
2
4
6
8
10
12
14
1.5
1.0
0.5
0.0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Source: IMS Health MIDAS MAT JUNE 2011, RX-only; Markets included: Japan, India, Australia, New Zealand, Korea, Singapore, Hong Kong, China, Taiwan, Philippines
LoE Planning & Life Cycle Management
Value of products at risk 2005-2016
Over the next 5 years $21.3 billion in sales are at risk
from generic competition in the key Asia Pacific countries
* 2015 APAC Sales ~ $195bn-$225bn
0.2
0.5 0.4 0.6
0.9
1.4
1.8
2.6
0.4
1.6
1.8
0.5
3.1
1.3
3.7
2.13.03.7
2.5
2.1
1.2
2.1
1.5
% of prior year’s sales Specialist driven Primary care driven
0.4
Figure 1CDF

2. 6
relatively large reimbursed market, and
the Philippines, an emerging economy
with a significant dependence on out-
of-pocket sales. In Taiwan, Singapore,
Australia, and New Zealand, mean-
while, generic sales account for just
a third of the pharma market, and in
Japan, that number is even smaller.
Every country—and, often, territories
within countries—must be separately
analyzed, assessed, and approached.
“Numerous emerging APAC mar-
kets with relatively higher generic
penetration lag behind their peers in
pharmaceutical spend per capita, im-
plying significant growth opportuni-
ties given their large population base,”
says Morton-Small. “India, China,
Indonesia, and the Philippines all
represent important opportunities for
post-LoE volume plays.”
In Korea, a fascinating dynamic is
playing out as traditional big phar-
ma companies battle against well-
entrenched local branded generic
players for considerable potential
pharma dollars. Australia and Japan,
finally, offer significant absolute sales
values (both at an overall and generic
level) as well as a high pharmaceutical
per capita spend.
Gaining ground in the post-LoE era
Success in the post-LoE era will, says
Afable, hinge on the ability of the
companies to ask and answer the right
questions. “Companies need to be
asking themselves what the likely
performance of their key assets will be
in the market,” he says. “They should
also be asking themselves what strate-
gies and tactics should be pursued to
maximize the value of threatened assets.”
Such questions,of course,lead to a more
granular analysis—a process that enables
companies to effectively segment—and
respond to—the APAC market.
“Baselines are geography-specific,”
says Morton-Small. “In western phar-
maceutical markets, branded products
typically experience rapid sales erosions
once they go off patent. That’s not the
case in the APAC region, where brand-
ed products have the ability to sustain
growth, even after the patent expires,
and where the life cycle of certain
innovator drugs can be extended.”
“We encourage our clients to take a
close look not just at the reimburse-
ment and macroeconomic conditions,
but at the relevant healthcare infrastruc-
ture,demographics,andchanneldemand,”
says Afable. “We help them address the
key questions: How can innate differ-
ences between reimbursed and self-pay
markets be leveraged? What impact will
the growth of the middle class have on
pharma sales in each country? How will
channel structures influence post-LoE
growth? What influence will the evolving
healthcare structures have on pharma sales?
A variety of external and internal drives
must be factored into the LoE strategy.
Risks must be balanced against potential
rewards.”
Sanofi-Aventis is one example of a com-
pany that proactively addressed the loss of
exclusivity of its platelet-lowering product,
Plavix (Clopidrogel), by launching a
second brand of Clopidrogel in Indonesia.
“Sanofi-Aventis made the decision to
market this second product separately
from Plavix—pricing it in a way that
the company hoped would maximize
uptake without undermining existing
Plavix sales,” says Morton-Small. The
ultimate impact of this defense against
the market-share erosion of Plavix post-
LoE continues to be evaluated.(see figure 2)
Sanofi-Aventisisnotalone.Infact,several
organizations are considering new
approaches to protect the value and
volume of several key molecules across
various therapy classes in theAPAC region.
The probability of second-brand strategy
success increases when the following
components are put into place:
• A clear marketing and sales strategy
that disassociates the innovator brand
(i.e. Plavix) from the second brand to
avoid rapid cannibalization of the
core product;
• Sufficient investment in building
brand equity among consumers;
• A firm understanding of the key
influencers in the market who could
help drive the shift from other platelet-
lowering brands to a company’s
second brand;
Source: IMS Health MIDAS data and analysis
Both volume and value growth significantly expanded post-LoE, which is reflective of a broader trend of several key molecules across
therapy classes in the APAC region ramping up in volume and value sales after LoE. Pharmaceutical companies who have a clear
strategy and strong capabilities to leverage such growth are likely to emerge as winners
Sanofi-Aventis recently launched a second brand of
Clopidrogel to defend its market share against further
generic erosion in Indonesia
Representative
USD Mn
LoE LoELoE
SU Mn
Clopidrogel value sales in
Indonesia (2006-10)
Clopidrogel volume sales in
Indonesia (2006-10)
2006 20062007 20072008 20082009 20092010 2010
0 0
2
4
6
8
10
12
14
16
18
2
4
6
8
10
35% 37%
6.7 3.9
48%
55%
Others (10 cos)
Big Pharma BGx
Top 2 local BGx
Top 1 local BGx
Sanofi-Aventis (2nd Brand)
Sanofi-Aventis (Plavix)
12
14
16
18
20
22
24
26
28
6.7 3.9
8.8 4.8
8.8
4.8
12.2
7.3
18.1
12.4
26.7 17.6
0.6
0.6
0.6 0.5
1.3
1.1
1.1
1.1
1.1
0.92.7
2.3
4.9
3.90.4
0.4
13.6
6.1
4.0 4.0
10.3
5.6
10.1
5.2
4.3
3.7
4.3 1.9
Figure 2

3. 7
• An optimal pricing strategy that
maximixed volume uptake without
negatively affecting the innovator
brand (i.e. Plavix) sales;
• A set of cost-effective resources that
helped push second brand sales; and
• A robust and effective second brand
launch campaign.
The Sanofi-Aventis second brand
campaign is but one option available
to multinational companies in the
post-patent era.
Companies can and should be look-
ing at a variety of value boosters. No
matter what alternatives companies
pursue—product enhancements, de-
fensive list price cuts, second brand
strategies, broad regional emerging
markets play, fortifying the company
with an adjunct generics division,
developing patient assistance pro-
grams, or pursuing new licensing or
merger/acquisition relationships—
several commonalities will define suc-
cess in the APAC region going for-
ward.
“Every company does its own analysis
and makes its own decisions based on its
existing infrastructure and long-term
goals,” says Morton-Small. “Still, we
see greatest success emerging from
those clients with strong marketing
and commercial capabilities, broad
investments in brand equity, a good
understanding of local markets and
stakeholder decision drivers, a firm
knowledge of pricing-volume trade-
offs, steady on-the-ground resource
management, and healthy launch
readiness.”
Consider the life cycle
To all companies, Morton-Small
and Afable recommend that careful
asset-level evaluation and prioritization
be applied to every strategic option.
“Companies need to remember that
every decision that is made has a
potential impact on the many inter-
locking components of the company,”
says Afable.
To help clients think through the
ramifications of various possibilities,
Segmenting the relevant LoE market appropriately helps a firm determine how to optimally allocate
its assets across multiple geographic markets in the APAC region
Post-LoE perfomance by relevant segment
Effectively segmenting the APAC market based on LoE
performance allows a firm to develop tailor-made/
cluster approaches to strategy development
Illustrative, Non-exhaustive
Reimbursement
status
How do post-LoE
product performance
differ in reimbursed
versus semireimbursed
versus out-of-pocket
markets?
How is post-LoE
product performance
influenced by broader
macroeconomic factors
(i.e. GDP, population,
etc.)?
How does healthcare
infrastructure
development influence
post- LoE
performance,
especially in
developing Asia?
How influential is
middle class growth
on the performance of
post-LoE products?
Do channel structures
play an integral role
in driving post-LoE
growth?
Macroeconomic
status
Healthcare
infrastructure
Middle class
growth
Channel
demand
Figure 3

4. 8
IMS Health has generated an in-depth
roadmap. What, for example, are the
product performance teams supposed
to be thinking about three years ahead
of loss of exclusivity? What should
the manufacturing team be consider-
ing three years after patent loss? What
pricing and contracting considerations
should be assessed all along the way?
As complex as the process is, it can and
must be both determined and deliberate.
(see figure 4)
At the end of the day,loss of exclusivity
should inspire pharmaceutical compa-
nies to think through the overarching
life cycle management of products—
to undertake a transparent yet rigorous
prioritization process that can ensure
a healthy future for the brands and
for the company. The benefits of such
planning are proven and clear,both from
a value perspective and from an organi-
zational one.
“We ask our clients facing loss of
exclusivity to think about four primary
things,” says Morton-Small. “How can
they optimize their portfolio? Should
they establish a competitive branded
generics operation? Should they be
exploring mergers and acquisitions?
How can they balance regional ambitions
with localized market strategies? It’s dy-
namic,it’s interwoven,it’s new. But there
are plenty of opportunities out there,and
we’re helping clients find them.”
Considerations for market participants
Optimize portfolio, pinpoint growth
oppportunities and execute
Establish competitive branded
generics arm
Explore M&A growth but tread
carefully
Balance regional ambitions with
localized market growth strategies
Given key considerations, there are several growth avenues that
market participants may consider for post-LoE growth
Source: IMS Insights and analysis
• Ensure that the portfolio and
core capabilities are aligned
to take advantage of growth -
keeping in mind that optimal
portfolios and core capabilities
needed to succeed may differ
from country to country.
• Establishing generic brands in
therapy areas that are distinct
and do not compete with the core
innovator product portfolio may
increase the likelihood of success.
• There have been no documented
big pan-Asian success for branded
generic companies, although
several players have commanded
high growth and market share in
their home markets, M&A opportu-
nities may exist but risks abound.
• Establishing a balance with a
regional / pan- Asian post-LoE
growth strategy and geographic
market specific strategies will be
key to cornering post-LoE growth.
Years to Loss of Exclusivity
LoE Planning & Life Cycle Management
Product
Performance
Product
Strategy
Options
What generic erosion
should I expect?
What are the parallel
import implications?
How are competitors
eroding my product?
Pricing &
Contracting
Field Force/
Promotion
Manufacturing
IP/Legal
Product Perfomance “What will happen?” LoE Strategies “What can we do?”
-5yrs -3yrs -1yrs +1yrs +3yrsLoE
What LCM options should be
pursued? E.g., forms/
combos, purity, peds
Should we invest in use
trials for OTC switch?
What’s our pricing strategy
pre LoE e.g., increases?
How should we optimize field
force promo near LoE?
How will manufacturing volumes
change post LoE?
How can we continue to close
any patient loopholes?
How can we enforce and monitor
for breach of patents?
What COGS reduction plans should we
implement to optimize profits?
Should we outsource
manufacturing production?
What should we do with
our excess field force?
Should we change
our messaging?
How much promotion should
be continued post LoE?
How and where should we readjust
our promotion strategy?
What contracts should
we pursue?
Can we drive market access
with impending LoE?
How should we drop price to optimize
share? How are generic competitors pricing?
What regional/formulation specific products enhancements
should we launch pre/post LoE?
Should we
monetize our
assets/out-license?
Should we license a
2nd brand/
authorized generic? Are there additional
product enhancements
that should be pursued?
Do we require
a discontinuation
plan?
Critical decisions need to be made impacting many parts of the organization
Figure 4
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