Showing posts with label drug industry. Show all posts
Showing posts with label drug industry. Show all posts

Monday 27 April 2009

Swine flu: the UK shares affected

Swine flu: the UK shares affected

The outbreak of swine flu, which has killed more than 100 people in Mexico and spread to the US, Canada and New Zealand, has hit UK shares linked to travel and agriculture, and give a boost to pharmaceuticals companies. Some of the biggest companies affected are listed below.

By Amy Wilson
Last Updated: 10:26AM BST 27 Apr 2009
GlaxoSmithKline
Shire
British Airways
Easyjet
Thomas Cook Group
TUI Travel
Carnival
InterContinental Hotels Group
Cranswick
Genus


Pharmaceuticals

GlaxoSmithKline: its shares rose as much as 44p, or 4.4pc to 1,050p. Glaxo makes a flu drug called Relenza, which could be bought up by governments seeking to treat and halt the spread of swine flu. Relenza has been shown to work against viral samples of the disease.

Roche: The shares rose in Swiss trading. Roche's Tamiflu drug can reduce the symptoms of swine flu and said it has an ample supply of the drug as the outbreak spread outside Mexico.

Shire: the drugs company’s shares rose in sympathy with Glaxo's.

Airlines:

British Airways: The airline has been hit along with others in the sector, on fear the swine flu outbreak will reduce demand for travel.

easyJet: The low-cost airline fell.

Ryanair: the Irish budget airline was also under pressure.

Travel companies:

Thomas Cook: The holiday company fell on concern the spread of swine fever will curb foreign travel. Mexico has been a popular destination for holidaymakers trying to avoid countries using the euro while it remains so strong against the pound.

TUI Travel: The Thomson holiday group also declined.

Carnival: the cruise operator, whose Caribben cruises take in Mexico, dropped.

Intercontinental: Shares in the hotel operator also fell.

Agriculture:

Cranswick: The food firm, which has just bought a Norfolk-based supplier of pork for Tesco and a number of other major retailers, fell on concern shoppers will avoid pork products as a result of swine flu.

Genus: The pig breeding specialist declined.




Tuesday 23 December 2008

The Coming Bubble in U.S. Generics

The Coming Bubble in U.S. Generics
Despite significant positive catalysts, record patent expirations end in 2012.

By Brian Laegeler, CPA 12-22-08 06:00 AM

No one can deny the significant positive catalysts ahead for the U.S. generic drug industry during Barack Obama's first term. The president-elect favors:

  • significant increases in insurance coverage
  • increased generic drug utilization in the name of cost containment
  • greater Food and Drug Administration resources to speed along generic drug applications
  • a new legislative pathway for generic biologics
  • other pro-generic industry reforms, such as the reduction of authorized generics and state carve-outs.


In addition, a historic $19 billion of branded drug sales per year are slated to lose patent protection between 2009 and 2012.
Despite this positive outlook, it could be game over in 2013, when the average year's pipeline is halved from $20 billion to $10 billion. Halving the pipeline would cut off oxygen to an industry that, because of price erosion in the existing business, requires new product launches for growth. Under this scenario, a major price war could crush margins and growth.

Although the generic drug industry is typically hypercompetitive, price wars can occur in any year that there isn't enough growth to go around. Small players have to cut prices to an irrational level to gain share, and larger players end up having to match the price of their most desperate competitors.
The last price war that we recall at the manufacturer's level occurred in late 2004 to the first half of 2005. Despite record patent expirations, the industry had matured to the point where smaller players became desperate. In our view, pricing only became rational again because of significant catalysts, such as Medicare Part D in 2006, unprecedented industry consolidation in 2007 and 2008, and a 50% increase in annual patent expirations from 2005 to 2006.

Mitigating Factors

Several factors could mitigate the possibility of a major price war in 2013.

Emerging Markets Exposure

Generic drug markets in Eastern Europe, India, and Latin America have significantly higher growth rates than their U.S. counterpart. Several Western European markets, such as Spain, also remain relatively underpenetrated by generics. Major players, including Teva and Mylan, are less exposed to a U.S. slowdown as only a third of their generics business is U.S.-based. Pure domestic players, such as Watson and Par are at the greatest risk of seeing their margins destroyed. Emerging markets have slowed because of the credit crisis, and the patent situation in Western Europe is similar to the U.S. However, we still view international exposure as a positive in this context.

Generic Biologics

Industry executives argue that generic biologics will usher in a new era of growth based upon the billions of dollars of branded biologics that have yet to face generic competition. Even if a U.S. legislative pathway is approved in 2009, the first major round of generic biologics won't launch until 2013 at the earliest because of a characterization process, limited clinical trials, and application review. Upon approval, they will not take 90% market share upon launch like small molecule generics. Large molecules need to be sold directly to physicians. Plus, we believe big pharma and biopharma could capture at least 50% of this new generics market as they already have the manufacturing, salesforce, and clinical trial expertise.

Cartel Behavior

Perhaps generic drug companies hope to consolidate to the point that pricing will remain rational among a handful of top players. We don't believe the industry will ever be concentrated enough for this to happen. Barriers to entry are too low on a drug-by-drug basis. There are some benefits of being a one-stop shop, but for key drugs, the biggest players will always have to match the craziest price.


Branded Drugs

The largest generic drug companies have a branded drug component, which could counterbalance a price war in U.S. generics. The branded pipelines will have to be evaluated on a company-by-company basis closer to 2012.

Branded Sales Growth

The nominal branded sales at risk in 2013 and beyond will continue to increase during the next five years. However, growth will become harder to come by in this economic environment. The differential between 2012 and 2013 will not change much as both figures continue to increase.

Looking Ahead

We're still at least 24 months in front of the peak of this potential bubble. The size of the peak will depend on the significance of Obama's health-care policy, the effectiveness of industry consolidation, and the rate of recovery of global markets. The timing and depth of any decline will depend on how early the market recognizes the Obama catalysts, how soon the market recognizes the upcoming patent expiration problem, and the extent of which market participants are willing to admit that generic biologics are potentially a major disappointment. Even though we're unsure ourselves what exactly will happen, these are the factors and scenarios we'll consider in the years ahead.

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