Report: Generic drug makers may look to diversify portfolios

PHILADELPHIA — An increase in consolidation among generic drug companies could be in the works, according to a new report from Thomson Reuters.

According to the report, “Gaining Market Share in the Generic Drug Industry Through Acquisitions and Partnerships,” generic drug makers face competition, as well as government-mandated price cuts in Europe and such policies as lowest-price tendering. As a result, many could seek deals that would cause them to diversify their portfolios.

“Pricing pressures in established generics markets have forced the industry to look for economies of scale in manufacturing and opportunities in emerging markets,” Thomson Reuters Generics and API intelligence director Kate Kuhrt said. “Companies also are cutting out the middleman and diversifying their product portfolios by moving into niche areas, including follow-on biologics.”

The number of companies that have the follow-on biologics option is limited to those that can afford the high development costs, which can range from $100 million to $200 million, compared with $1 million to $5 million for generic pharmaceuticals. Teva Pharmaceutical Industries, Sandoz and Hospira already make follow-on biologics for the European market, and Teva has sought to make inroads into the impending U.S. market as well.

Meanwhile, such companies as Mylan and Watson Pharmaceuticals have expressed interest — Watson set itself up to enter the market with its 2009 acquisition of Arrow Group — as have such branded drug makers as Merck.

Despite the projected increase in consolidation, mergers and acquisitions lately have decreased, from $24 billion in 2008 to $6.8 billion in 2009, according to the report.