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Actavis prepares for end of generic drugs model

By Ben Hirschler

LONDON (Reuters) - Western generic drugmakers need to adapt to cope with rapid changes in the pharmaceuticals market that are blurring the distinctions between innovator companies and makers of cheaper copycat products.

That is the view of Claudio Albrecht, chief executive of Swiss-based Actavis, which struck a deal on Wednesday with QRxPharma to sell a new patented painkiller called MoxDuo that combines morphine and oxycodone.

Albrecht said he expected to do more such deals for patented and branded medicines in future, including a push into insulins, under deal to be signed shortly with Poland's Bioton, and the development of so-called "biosimilar" drugs.

The pharmaceutical industry is currently going through a record wave of patent expires on mass-market medicines, with blockbusters like Pfizer's Lipitor, for cholesterol, losing U.S. protection last month and AstraZeneca's schizophrenia drug Seroquel facing generic rivals in 2012.

While this is a bonanza for makers of generics, Albrecht told Reuters that the game was about to change, with few conventional chemical products losing patent protection after 2014 as attention turns instead to expiries on biotech drugs.

Unlike chemical medicines, which can be given as pills, biotech products are impossible to copy precisely, forcing generic companies to develop biosimilars, which are close to the original but need to be sold as separate medicines.

"It means generic companies will have to start promoting again and it will become more of a scientific way of selling," Albrecht said in a telephone interview from Zug.

"Looking ahead 5 to 10 years, if you want to be in the front line as a generics player you will have to change your model. The generics business as we know it today will be gone within the next 10 years."

At same time, innovator companies like Pfizer and Merck are starting to build up their own presence in biosimilars, further blurring the distinctions -- and at the other end of the spectrum, Indian and Chinese firms are moving in to scoop up the commodity business.

Increasingly, governments in Europe are using tenders to get the lowest possible price for conventional chemical drugs. It is a trend that Albrecht expects to accelerate, leaving little profit margin for Western players.

"For the classic generics you will see, over time, that the real cost leaders come from countries like China and India," he said. "It's going to be very difficult to have European or American quality standards and processes and still be successful in these very aggressive tenders."

WORLD NO.4 IN GENERICS

Former Iceland-based Actavis, which moved to Zug at the end of 2010, is the world's fourth-largest maker of generic drugs behind Teva Pharmaceutical Industries, Novartis's unit Sandoz and Mylan.

Albrecht said sales were growing steadily and should reach around 2.1 billion euros ($2.75 billion) in 2012, up from 1.85-1.90 billion this year and 1.75 billion in 2010.

After rapid expansion in the early 2000s, Actavis underwent a leveraged buyout in 2007 by Icelandic tycoon Bjorgolfur Thor Bjorgolfsson, which left Deutsche Bank holding billions of euros of its debt.

Albrecht, who took over as the group's first non-Icelandic chief executive in June 2010, reiterated that a merger with another company or an initial public offering was a possibility at some point in the future. ($1 = 0.7628 euros)

(Reporting by Ben Hirschler)

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