Plunging off the patent cliff
The situation currently facing the pharmaceutical industry is a rather unusual one – the ‘patent cliff.’ Within the next few years, multiple companies are set to lose their exclusive production rights to some of the world’s most popular drugs and medications.
The patent for the biggest selling drug in the world; Pfizer’s cholesterol reducing Lipitor, was initially due to expire in June 2011. However, Pfizer managed to obtain an extension for Lipitor and it is now finally expected to bite the dust in the US in November 2011 and May 2012 in European Union (EU).
Aside from Pfizer’s Lipitor, Eli Lily’s bipolar treatment Zyprexa, Merck’s asthma drug Singulair and the antipsychotic Serequoel by AstraZeneca are just a handful of the drugs set to lose their patents in 2011-2012 alone. Meanwhile, Johnson & Johnson has already had to relinquish control of some of its products, including the antibiotic Levaquin and its ADHD/ADD medication Concerta – they expired in May and June earlier this year.
Once the patent of a drug has expired, generic drug companies such as Teva Pharmaceuticals (TEVA) and Dr Reddy’s will be legally allowed to produce cheaper, generic, unbranded versions of the products. The loss of a drug patent often results in a huge loss of revenue for its original manufacturer and estimations suggest generic drugs drain up to 90 percent of its sales. In addition, the IMS Institute for Healthcare Informatics reported: “Over 80 percent of a brand's prescription volume is replaced by generics within six months of patent loss.”
Looking specifically at the fate of Pfizer, in 2010 sales of Lipitor alone reportedly accounted for over $10 billion of Pfizer’s annual income, a significant portion of its total revenue. When Pfizer was granted a 10 month extension on Lipitor’s patent in the EU, the Financial Times reported it had the potential to earn the company an extra $770 million.
Elsewhere, Zyprexa is responsible for roughly 22 percent of Eli Lily’s worldwide annual revenue, consistently earning the company yearly sales of $4 billion and peaking in 2010 to reach $5 billion. In 2010, Merck’s Singulair was responsible for 11 percent of the company’s revenue, reaching another $5 billion in global sales. Similarly, AstraZeneca’s Sereoquel’s 2010 sales were $5.3 billion – 16 percent of the company’s revenue.
The analysis company EvaluatePharma has looked at the situation from a wider perspective and estimated that overall, the pharmaceutical industry is at risk of losing $250 billion in sales of drugs between now and 2015.
Merck is one company already struggling with the loss of patents. In 2010 its rights to two of its blood pressure drugs, Cozaar and Hyzaar, ended which has had a massive effect on the company; in 2010 sales dropped by 41 percent to $2.1 billion.
Since 2008 Johnson & Johnson has lost four patents and although the company has a more diverse product offering than its competitors with consumer goods, its 2011 losses of Levoquin and Concerta could be damaging to its pharmaceutical arm of the business. In 2010 the collective sales of the two medications represented 12 percent of the revenues of the pharmaceutical side of the business, but this equates to just four percent of J&J’s annual $61 billion revenue.
So what are company’s doing to combat this huge loss of revenue? Well, in an attempt to cope when Lipitor loses its patent, Pfizer has apparently cut the amount of money it is investing in research and new drug development; there are rumours its R&D budget will be reduced by 30 percent within the next two years. It has also been reported that Pfizer will dedicate more of a focus to producing drugs with a slightly lower earning potential, things such as anti-inflammatory treatments and anti-cancer drugs. In 2009 the company also announced the loss of 8,000 jobs in the run up to the end of Lipitor’s licence.
In another attempt to survive the tough economic climate currently disrupting the pharmaceutical industry, companies are merging together. In a transaction totalling $68 million, Pfizer purchased one of its competitors, Wyeth, in the hope the merger will boost earnings by half and help it to remain as the world’s leading drug company. Elsewhere in the merger’s market, Schering-Plough was bought by Merck for $41.1 billion.
Although blockbuster drugs of the 1990s are continuing to plunge off of the patent cliff with potentially devastating circumstances for pharmaceutical companies, consumers are likely to reap the benefits of soon-to-be-seen generic counterparts. The high price of Lipitor can apparently add up to $40 per month to health insurance premiums in the US so there is no doubt cheaper drug versions will be welcomed across the world. Despite people voicing concerns over the effectiveness of generic equivalents, the US Food and Drug Administration (FDA) requires copycat drugs to be as safe and effective as the originals. Although pharmaceutical companies are losing out, consumers are most certainly not.
Bachem turns 50 - a timeline
Bachem, a supplier to pharmaceutical and biotechnology companies worldwide, is celebrating its 50th anniversary this month. We take a look at the Swiss company's history.
1971 - beginnings
Bachem is founded by entrepreneur Peter Grogg in Liestal, a small town near Basel in Switzerland. Grogg started the firm with just two employees, and with a focus on peptide synthesis - peptides are composed of amino acids that have a variety of functions treating health conditions such as cancer and diabetes.
1977 - 1981 - early growth
Bachem moves its headquarters to the Swiss town of Bubendorf, with eight employees. In 1978 the company produces peptides for use in medicines for the first time. In 1981 production capacity triples and the workforce grows to 150.
1987 - 1996 - worldwide expansion
The company expands into the US with Bachem Bioscience, Inc. in Philadelphia. To strengthen its presence in Europe, Bachem opens sales and marketing centres in Germany in 1988.
Further sales centres open in France in 1993. By 1995 the company employs 190 people. In 1996 it acquires the second largest manufacturer of peptides in the world and forms Bachem California with a site in Torrance.
1998 - 2003 - Bachem goes public
Bachem company goes public and lists shares on the Swiss Stock Exchange. Further acquisitions include Peninsula Laboratories, Inc, based in California, and Sochinaz SA, a Swiss-based manufacturer of active pharmaceutical ingredients. By 2001, the company has 500 employees and sales reach 141 million CHF.
In 2003 the organisation is given a new legal holding structure to support its continued growth, which remains in place to this day.
2007 - 2013 - acquisitions
Bachem acquires a brand by Merck Biosciences for ready-to-use clinical trial materials and related services.
In 2013, together with GlyTech, Inc. Bachem announces the development of a new amino acid that can help to treat multiple sclerosis, with a world market of more than $4 billion.
In 2015 it acquires the American Peptide Company (APC), which becomes integrated into Bachem Americas.
2016 - 2019 - a global leader
In 2016 the group opens a new building dedicated to R&D projects and small series production in Bubendorf. With a total of 1,022 employees, the workforce exceeds the 1,000 mark for the first time in the company’s history. Sales are over the 200 million mark for the first time at 236.5 million CHF.
Bachem expands into Asia with the establishment of a new company in Tokyo called Bachem Japan K.K.
By 2019 Bachem has a growing oligonucleotide portfolio - these are DNA molecules used in genetic testing, research, and forensics. It is hoped this will become a significant product range in the future.
2020 - COVID-19
Despite the COVID-19 pandemic, Bachem secures its supply of active ingredients, and even increases it in critical areas. Sales exceed the 400 million Swiss franc mark for the first time, and 272 new employees are hired.
2021 - a milestone anniversary
Bachem celebrates its 50th anniversary and position as a global leader in the manufacture of peptides. While it remains headquartered in Bubendorf, the company employs 1,500 people at six locations worldwide. In the next five years there are plans to continue expanding.
Commemorating the company's anniversary, Kuno Sommer, Chairman of the Board of Directors, said: "Bachem's exceptional success story from a small laboratory to a global market leader is closely linked to Peter Grogg's values, and has been shaped by innovation, consistent quality and cost awareness, as well as by entrepreneurial vision."