The financial highlights of 2013 show that while the US is BI’s biggest market (46 per cent), Europe is second (30 per cent) while Asia, Australia and Africa are the remaining 24 per cent. Of the last market, Japan is the largest contributor and contributes 13 per cent of global sales. India does not currently contribute too much to annual sales of BI and the company itself is only around 11 years old in India. What is the strategy for the APAC market, with special focus on the India market. What is the strategy to grow the market share?
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Allan Hillgrove
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Internally, we broadly divide the regions into matured and emerging markets. Among the matured markets we have further divided it into two regions: JUSAC (Japan, the US, Australia, New Zealand and Canada) and the European group.
India is in the emerging markets group, where we have 18 major countries/ groups. We ventured into India relatively recently, only in 2003. So India is still very small from a Boehringer business point of view. But the reason we made it one of the 18 countries/ groups is that it is crucial to us for the future to not only build a presence there but also to make sure that India is being considered when we look at some of the bigger strategic topics.
We’ve got a strong market share and well established business in Japan. From a business and industry point of view Japan is No 2 for us as a country. We’ve had quite a lot of success in Japan and worked a lot with partners. We see Japan continuing to be important, as well as China becoming more important though currently our market share is lower in China compared to many others. But we are growing above the market in China and we are happy with the way we are growing here. We are well established in the Australia market as well as in New Zealand.
So while we came in relatively later into India, compared to most pharma MNCs now we are building our business here as well. We are building the business in terms of the number of products we have on the market, with new products as well. We are also building from a people and growth point of view.
Our other new products are also in India: Linagliptin (Trajenta), from our diabetes portfolio is still in its early days in India but is showing success as well as Pradaxa (dabigatran etexilate) for atrial fibrillation. The products we had earlier were from the thrombolyticsportfolio (Actilyse, Metalyse and Micardis) are quite successful as well.
So, we are very much in the infancy of building the business, as a mixture of the older products and the newer ones. Our philosophy will be to continue to build slowly, to understand and learn about the market. We’ve got some very good people in India and we are building up both the number and the expertise of people in India. Currently, we have around 500 staff in India. The growth that we’ve seen in India has been impressive, though of course from a very low base. It would be nice to have the same percentage growth in some of the bigger markets! So we are happy with the way the business is shaping.
As of now, BI does not have a manufacturing facility in India. Are you looking at the possibility of setting one up as this will allow you to offer products at more cost effective prices which is also a concern as India is a price sensitive market?
We do not have any short-term plans on this point though manufacturing in emerging markets is something that we are continually looking at. We currently do have manufacturing sites in China and Indonesia.
In May, the company announced an exclusive global research collaboration agreement with Connexios Life Sciences, a Bangalore-based biotechnology company, for AMPK agonists for the treatment of patients with Type II diabetes. Is the partnership route being seen as an option to quickly grow your presence in India?
BI firmly believes in harnessing the expertise of leading academic groups, public research institutes and biotech companies. The research agreement with Connexios is part of this strategy.
BI had many challenges in 2013, the biggest one was probably the US FDA warning letter for its manufacturing site at Ingelheim, citing ‘significant violations’ of the manufacturing process and also mentioned foreign particles detected in batches of active pharmaceutical ingredients (APIs). This issue has since been resolved as of June 2. What were the learnings from this episode?
BI strengthened the quality management structure in the Operations Division and formalised a culture improvement programme for employee levels to strengthen the quality mindset and behaviour in the organisation. Additionally, the company defined and implemented corrective and preventive actions (CAPAs) to address FDA findings and intensified collaboration with our own global network and external experts to identify and exchange best practices.
While releasing the 2013 results, Dr Andreas Barner, Chairman of the Board of Managing Directors, indicated that numerous changes to processes have been made since the company received criticism from the US FDA in May 2013 on the quality assurance processes at the Ingelheim facility; investments have been made in the sustainable quality of the products and in QA, and the company has taken steps to optimise production process at the Ingelheim facility. What was the expenditure that needed to be set aside for this process?
In a letter dated June 2, the FDA informed BI about the closure of the Warning Letter that was issued for the Ingelheim, Germany, manufacturing facility. After concluding its recent inspection in March and considering the company’s response with supportive documentation, the FDA determined the quality management and compliance systems of the facility to be acceptable.
BI invested more than Euro 130 million in 2013 after receipt of the Warning Letter to address issues and improve standards.
Another challenge was the closure of the Ben Venue, Ohio, US facility for sterile injectables, where efforts to improve production without interruption operations were not successful. Over Euro 500 million were set aside in 2013 for ‘extraordinary effects’. Besides, the Ben Venue settlement, what other expenses figure under this category?
Other expenses included for example the investment in the quality procedures at the Ingelheim facility with regards to the Warning Letter.
Do you anticipate any such ‘extraordinary effects’ expenses in the current financial year? For instance, against the expenditure on upgrading the Ingelheim facility, legal action against Pradaxa regarding its safety?
We are confident that the provisions we have allocated this year are adequate to cover ‘extraordinary effects.’
In CY2013, net sales [of the biopharma contract business] declined by around 18 per cent to Euro 449 million as a number of contract manufacturing contracts expired. 15 new contracts were signed in 2013 so what are the growth projections for the biopharma business for FY 2014?
A number of contracts expired in our biopharma contract manufacturing business, as expected, last year which resulted in declining net sales. However, we successfully concluded 15 new manufacturing contracts in 2013. This means that we have established the basis for future growth in the biopharmaceuticals business, which we already see materialising in the first months of 2014. And we will, of course, continue to expand our well filled pipelines. We do not publish specific growth projections for our businesses.
In early April, US FDA approval broadened use of Pradaxa in the US. Pradaxa was already approved for stroke prevention in patients with atrial fibrillation but is facing litigation concerning disclosure of risks due to severe and fatal bleeding. What impact will this new approval have on the ongoing litigation on the safety concerns surrounding Pradaxa?
There has been a comprehensive settlement of US Pradaxa (dabigatran etexilate) litigation at the end of May 2014.
The approval of Pradaxa for Deep Vein Thrombosis (DVT) and Pulmonary Embolism (PE) patients is based on results from three robust phase III clinical trials that demonstrated the efficacy of Pradaxa in the treatment and prevention of repeat DVT and PE compared to warfarin.
In a fourth trial, data showed a 92 per cent reduction in the risk of recurrent blood clots in patients treated with Pradaxa compared to placebo. With regards to safety, results showed that DVT or PE patients taking Pradaxa experienced significantly lower rates of bleeding than those taking warfarin, resulting in a favourable overall safety profile.
Following the US FDA approval in early April, the European Commission in June also approved the use of Pradaxa for DVT and PE patients in the European Union.
As a global pharma company in India, what is your view on the regulations governing the pharma sector in India? For instance policies regarding pharma patents and IPR, clinical trials and drug pricing?
We are aware that India is a price sensitive market and most healthcare spend is out of pocket.
We do look at these issues and endeavour to find an India sensitive pricing so that our products are accessible to the patients who require them. Having said that, the question of being rewarded for innovations cannot be ignored. BI, like many other companies, has a large investment in building innovation, we are also spending a lot on research and have an extensive pipeline.
We are firm believers that this investment should be rewarded but of course the ability to pay in India is not the same as the ability to pay in many other markets. We do reflect that in our pricing and we have a solid policy in India to look at India friendly pricing.
Could you give us a sense of how the company sees the performance of BI’s products in the India market?
In the consumer healthcare portfolio, Dulcolax is a strong brand. On the prescription medicine side, among cardiovascular products, Pradaxa continues to grow well in India. There is an ongoing litigation regarding Pradaxa in the US but we are confident that physicians all over the world will support the product. We feel the clinical trial data shows that it has clear benefits over Warfarin. Actilyse, Metalyse are heritage brands in the cardiovascular portfolio and on the diabetes side, Tragenta has had quite some success in a short time. So over all we are pleased with the performance. We also have an animal healthcare business but that’s still in very early days.
Net sales in 2013 have been low, around Euro 14.1 billion, representing a currency adjusted increase of 1.4 per cent. Like many of its peers, BI’s growth has been impacted by slowing growth and decreasing margins. What are the long-term growth strategies?
Growth will be similar in 2014. We predict that for BI, in 2015 and beyond, we will see growth coming back. Both due to the new product launches in the existing portfolios of cardiovascular, respiratory, CNS as well as newer portfolios like oncology, immunology, and biosimilar products come through. So we are not expecting growth to pick up in the next year but if we look at a five year horizon, we are sure growth will come back.
Given these low growth rates, what is the take of the founding family of BI in formulating strategy etc?
They are on the board but are not involved in the day to day management of the company. Strategy is discussed and decided at the board level during the shareholder meets which happens four times a year. We are not publicly traded so we are free to structure our operations with the long term in mind. We believe that success will only come if you have a longer term view than a short-term view of profits.
How is BI promoting the case of increasing accessibility to healthcare in India?
‘Making More Health’ is a global programme BI has in partnership with the Ashoka Foundation, wherein we support 50 social entrepreneurs (three of them in India) working with the community in the field of health. 2200 employees of BI work on these projects in their own time to share their expertise. The Banyan, run by Vandana Gopikumar in Tamil Nadu, uses a community care approach to treat and rehabilitate mentally ill homeless women. Save Life Foundation, headed by Piyush Tewari, is creating a trained network of trauma care first responders in Delhi. Sameer Sawarkar started Neurosynaptic Communciaitons to imporve access to healthcare in rural India through technology and he already has health kiosks running in Bihar and UP and a government hospital in Tamil Nadu.
(The correpondent visited Boehringer Ingelheim, Ingelheim, Germany on the invitation of the company)
