Challenges and Opportunities for Generic Medicines Development Outlook for European Industry in current

Economic Recession

Gudbjorg Edda Eggertsdottir December 6, 2012

Watson acquires Actavis

• Acquisition value EUR 4.25 billion (USD 5.5 billion)

• Acquisition closed 31 Oct 2012

• Creates 3rd largest global generics company

• ~$8.0 billion projected 2012 pro forma combined revenue

• 17,000 employees

• Strengthened commercial position with footprint in 60+ countries

• 30+ manufacturing facilities; ~44 billion unit capacity

• 12 global R&D centers

Two powerful, profitable and rapidly growing companies into one exceptional global business

Global Powerhouse

Our global marketplace

60/+ countries

5 billion potential customers

Top 3 in 12 markets

Top 5 in 16 markets

Watson Will Continue to Grow

• Well-Defined, Balanced Growth Strategy • Global Generics

• Global Brands and Biosimilars

• Anda Distribution

• Supported by Leading Global Supply Chain

• Substantial Investment in Internal Growth • Significant investment in internal R&D

• Investments in people/resources to support marketing and sales growth

• Financial Strength to Drive External Growth • Expanding market/geographic access through Actavis

acquisition

Key role of generic and

biosimilar medicines

Affordability Accessibility Availability

Generic

Medicines

• Approximately $30bn can be saved globally by improving

suboptimal use of generics*

• Japan has the biggest opportunity, followed by Cyprus

*IIHI Ministers Report 17.09.12 from IMS Institute for Healthcare Informatics

Opportunities

• Global generic spending is growing by over 10% a

year to reach around $415 billion by 2016*

• Fastest growth in pharmerging markets

• Europe‘s share in growth drastically reduced

• New emerging markets with high purchasing

power (Russia, China, Middle East, Africa)

• Demographic changes (ageing and growing

populations) both in Europe and globally

• Patent expiries in developed countries

*IMS Market Prognosis 2012

Challenges

• Increasing regulatory requirements to manage more

complex operations • New pharmacovigilance requirements

• Anti-counterfeit measures – implementation of FM directive

• Unique identifier

• API controls

• Management of continuity of supply

• Increasing competition from countries outside Europe • Lack of level playing field

• Market access barriers and delays as identified in the EC

Sector Inquiry

• Strong price pressure in the EU

Influence of recession on pharma market

Pharmaceutical growth trend in Europe is a major concern Cost-containment and austerity measures a key driver

Europe

2001-2005

CAGR

8%

2006-2010

CAGR

6%

2011-2015

CAGR

1-4%

Regions

Source: IMS Market Prognosis 2011

Top 5: 7% 5% 0-3%

Other West: 8% 4% (-1)-2%

East: 13% 11% 6-9%

Payers in Europe have implemented cost

containment measures targeting

pharmaceutical supply and/or demand

Supply side Demand side

All reducing growth

• Reference pricing

• Volume controls

• Mandatory price cuts

• Rebates and clawbacks

• Faster to implement

• Widely seen in crisis struck (IMF) countries

• Promotion of generics

• Prescribing budgets

• Patient co-payment

• Risk sharing agreements

• Slower to implement

• Long-term sustainability

• Technology often required

69%

21%

10%

Brand Generic Other

Generic penetration will continue to grow

based on patent expiries and economic

pressures

Source: IMS Market Prognosis, Sep 2011

Sales by Segment

52% 40%

8%

63%

28%

9%

$610Bn $876Bn

$1,120Bn

2010 2005 2015

Biosimilar Products in the 7MM Despite impressive growth biosimilars still account for very small

portion of biologics sales (~3% of the relevant drug classes in terms of US$ in 2011)

0

50

100

150

200

250

300

350

400

2007 2008 2009 2010 2011

US$m

m epoetin theta

epoetin zeta

epoetin alfa

filgrastim

somatropin

~107% CAGR %, 2007-11

$20mm

$76mm

$144mm

$256mm

$365mm

Source: IMS Health, MIDAS, MAT Q4 2011; Actavis research

7MM – US, Japan, France, Germany, Italy, Spain and UK

Regulatory hurdles

Key hurdle: lack of right for EU

companies to manufacture during

SPC

• Global competition from

key emerging markets (India,

South Korea, Russia, China,

Brazil)

• Lack of provision for

advanced manufacturing

during SPC in Europe

Emerging

Markets

SPC

EU generics

industry

Key hurdle: Major increase in costs

due to the Falsified Medicines

Directive

• The implementation

costs of possible new

anti-falsification

technologies for the

EU generic industry

could reach € 1

billion.

WARNING

€ 1 billion

Key hurdle: Possible shortages

due to API supply problems

API sourced from outside

the EU 75%

API sourced from the EU

25%

API Supply

• EU is implementing a new requirement for API imported into the EU – written

confirmation of GMP status

• Key supplying countries must get prepared (India, China, etc.)

How can we strengthen

the industry?

Europe 2020 Barroso commission II

• Three mutually reinforcing

priorities:

I. Smart growth: developing an

economy based on knowledge and

innovation.

II. Sustainable growth: promoting a

more resource efficient, greener

and more competitive economy.

III. Inclusive growth: fostering a

high-employment economy

delivering social and territorial

cohesion.

Export Loss of EU Generic and

Biosimilar Medicines Industry

Period of market loss

to EU companies

Date of international

competition

20 year patent + Up to 5 year SPC

Leading countries in number of

Canidates for biosimilars

European Generic Medicines Industry:

Major Contributor to Employment and

Development

European countries with

generic medicines R&D and

manufacturing

European countries with

generic medicines

manufacturing

Source: EGA

Internal survey

2010

Updated 2010.10

EU2020 Industrial Policy – priorities

for generic and biosimilar medicines

industry

• Creating a sustainable internal market for generic and biosimilar

medicines

• Creating sustainable pricing and reimbursement

• Tax exemptions and funds for generic R&D

• Tax initiatives for manufacturing jobs

• Fostering market access in third countries

• Advanced manufacturing for export

• Eradication of non-tariff barriers in 3rd countries

• Improved mutual recognition of API inspections

• Better regulation

• Harmonisation of quality standards to ICH Standards

• Establishing global development for biosimiliar medicines

EU-US Task force

• EGA and GPhA jointly support setting up a High Level Working

Group on Growth and Jobs to create opportunities for the

European and American industries in the globalised economy.

• EGA and GPhA have put forward practical priority measures for our

industry:

• global development and international harmonisation of data

requirements for approval of biosimilar medicinal products

• single development programme and international harmonisation of

data requirements for approval of generic medicinal products

• mutual recognition of compliance inspections

• not mismatching the EU and the US IP rights systems

• advanced manufacturing provision

Global development of

biosimilars

• We are very close to a breakthrough! • Europe is now willing to embrace the concept of

a global reference product for biosimilars

• Also US FDA, and Canadian authorities have

indicated willingness to support global

development.

• Generics remain key in containing costs post

patent expiry • Generic penetration continues to vary based on

specific country drivers

• Massive savings can still be made globally by

optimizing use of generics

• Price reductions continue to exert pressure on

generics • Sustainable price & reimbursement systems

need to be implemented

• Reference pricing systems need to be improved

• Regulatory requirements need to fit the

purpose • If it isn’t a problem, don’t fix it!

• International harmonization is key

Final comments

Thank you!