By David Wallace 28 Sep 2020
Sandoz sees key opportunities ahead in both the US and Canadian biosimilars markets, the firm’s US vice-president for marketing, market...
The global generics industry saw unexpected growth in the first quarter of 2020, with increases in sales seen mainly due to stockpiling and the hoarding phenomenon induced by the coronavirus crisis, as well as advance prescribing. As a result, many companies were able to achieve, or even surpass, their set targets for the quarter.
However, the recurrence of this overwhelmingly successful financial quarter seems unrealistic to most generics companies, as they predict that sales will drop or level off in the coming months. This is mainly based on the assumption that the first few months of 2020 saw an accelerated prescription fulfilment, meaning that patients may not require the same medicines again for some time; and that initial stockpiling trends will be counterbalanced by a reduced demand in the months to follow, as distributors and end users work through their stocks and are also more easily able to gauge which medicines they are using, allowing them to more precisely manage their needs.
Apart from fluctuating prescription trends, many companies have had to keep an eye out for possible supply chain disruptions driven by uncertainties caused by the pandemic. Many firms have also suffered delays to clinical trials, filing new applications and several strategic business moves. And though many companies saw a strong start to the year in terms of sales, a host of companies also took a blow to earnings because of the COVID-19 crisis.
Reporting “exceptionally good” figures, Teva acknowledged that its first-quarter sales of 2020, which were ahead by 5% to $4.36bn, came because of “extra patient-level demand in Q1, especially in March and a couple of weeks of very strong generics demand and OTC demand.” (Also see "Teva Moves On From Restructuring To Improving Margins" - Generics Bulletin, 11 May, 2020.)
The Israeli company saw a COVID-19 pandemic related increase in sales across all its geographic regions, especially Europe. Based on its first-quarter results, Teva also called its 28% operating margin target set for the end of 2023 “achievable.”
Novartis' Sandoz saw net sales of $2.5bn, driven by volume growth of 15 percentage points “including COVID-19 related forward purchasing.” Global sales of Biopharmaceuticals grew to $450m, mainly driven by continued strong double-digit growth in Europe. (Also see "Sandoz Sees Aurobindo Deal Collapse As ‘Opportunity’" - Generics Bulletin, 29 Apr, 2020.)
Mylan also saw its sales boosted due to COVID-19, with the company reporting a turnover jump by 5% in the first quarter (Also see "Mylan Delays Restructuring Amid COVID-19" - Generics Bulletin, 14 May, 2020.).
Similarly, a host of other leading companies reported increased sales of specific medicines. With an estimated net favorable impact of approximately $150m, or 1% in its first-quarter revenues due to COVID-19, Pfizer said that it saw a “stronger than usual demand for some anti-infective medicines as well as other sterile injectable products utilized in the intubation and ongoing treatment of mechanically ventilated COVID-19 patients.” (Also see "Pfizer’s Upjohn Business Sees ‘Expected Drop’ Of 37%" - Generics Bulletin, 5 May, 2020.)
Hikma too started the year on a strong note on the back of its global injectables business - including anesthetics, analgesics, sedatives, neuromuscular blocking agents and anti-infectives. The company’s non-injectable generics and specialty business in the US, Europe and the Middle East and North Africa region also saw a “good demand.” (Also see "Hikma Sharpens Focus On COVID-19 Demand" - Generics Bulletin, 30 Apr, 2020.)
After evaluating first half-year results for better understanding of the impact of COVID-19 crisis, Stada said that its sales rose by 12% to €2.61bn ($2.93bn). However, the company is still unclear on how the crisis will play out over the remainder of the year. (Also see "Stada Will Continue To Invest To Drive Growth" - Generics Bulletin, 3 Jul, 2020.)
Because of higher sales of antibiotics, antivirals and protein drugs, Aurobindo Pharma also saw a strong fourth quarter of its fiscal year ending March 2020. (Also see "Aurobindo Splits Out Biosimilars Business" - Generics Bulletin, 8 Jun, 2020.) And India’s Alembic Pharmaceuticals grew by a whopping 53% as its US front-end business passed the “milestone” of $250m in annual sales for its financial year ended 31 March to INR19.76bn ($263m), boosted by fourth-quarter growth of 84% to INR5.77bn. (Also see "Alembic Crosses $250m Annual Sales In US" - Generics Bulletin, 30 Apr, 2020.)
While Endo’s generics segment alone saw an uptick of 15%, to $251m – where increased demand of medications used to treat patients suffering from COVID-19 contributed $30m of the $32m generics rise (Also see "Endo’s Generics Add $30m Due To COVID-19 Impact" - Generics Bulletin, 13 May, 2020.) – Lannett reported that third quarter sales in its financial year ending in June 2020 increased by $8.3m over the second quarter on higher than expected sales, “as patients appear to have purchased extra supply of their medications and some customers increased their purchases of some of the products to address patient demand and avoid shortages.” (Also see "Lannett Hits A High After Loss Of Levothyroxine" - Generics Bulletin, 12 May, 2020.)
Laurus Labs’ generics segment saw higher sales from low- and middle-income country tenders, contributing almost 30% of total revenue for the year that grew by 24% to INR28.32bn. In addition, the company’s antiviral offering in the generic active pharmaceutical ingredient segment also saw “stable revenues” and showed “robust growth.” (Also see "Laurus Labs Registers Revenue Record" - Generics Bulletin, 16 Jun, 2020.)
For Latvia’s Olainfarm, its results for the month of March alone showed sales growth of more than a fifth, which contrasted with the turnover drop of almost a tenth for the firm across the entire three-month period of the first quarter of 2020. (Also see "March Uptick Suggests Reversal For Olainfarm" - Generics Bulletin, 27 Apr, 2020.) Due to increase in demand for its prescription product portfolio, Slovenian firm Krka saw sales increasing by more than a fifth to €462.9m, during the first quarter of 2020. (Also see "Coronavirus Trend Helps Improve Krka’s EBIT By 85%" - Generics Bulletin, 26 May, 2020.)
Finland’s Orion also recorded a “temporary spike” in demand caused by COVID-19 induced stockpiling mainly for its range of generics, the sales of which grew by 28% to €94m. (Also see "Orion Pragmatic After First-Quarter COVID-19 Impact" - Generics Bulletin, 5 May, 2020.)
Most of the pharma companies that saw an unprecedented growth in the first quarter of 2020 also saw derailed plans, however. They have predicted a fall in the following quarters based on an anticipated decrease in demand of previously stockpiled products.
Both Mylan and Teva called it a “mixed bag situation.” While Mylan had to delay its restructuring initiative and its planned merger with Pfizer’s Upjohn, Teva’s remarkable first-quarter figures were marred by the risk of reduced physical interaction between sales force and healthcare professionals, which in turn could lead to a slower uptake on its new products.
Teva’s CEO Kåre Schultz said the numbers were “not at a sustainable level,” adding that “I do expect that we will see a somewhat reversal of some of that demand here in Q2.”
Though Endo reported double-digit growth during the first quarter of 2020, it withdrew its previously provided full-year 2020 financial guidance because of uncertainties around COVID-19 that could cause potential delays in some of its new product regulatory filings planned for 2020 in its sterile injectables and generics segments.
Endo estimated that its total sales in the second quarter will “decline in the low-20s percentage range compared to the first quarter of 2020,” especially in its generics segment.
Krka noted that the sales growth caused by the increase in COVID-19-induced demand eventually “slowed down and is currently at the planned and anticipated level.”
Aurobindo expects Q1 of its current fiscal year, up to June, to see some softening. However, the company predicts that demand will again pick up from July. Laurus Labs also expects its growth rate to continue and improve in the coming quarters.
In terms of bolstering the supply chain, generics companies started to build on sufficient safety stock to address needs as the pandemic hit.
Teva has been changing its production schedules to prioritize the products that are more in demand now. Referring to production hubs like China and India, Schultz said, “we all know that raw materials and finished goods are concentrated in terms of manufacturing in a few countries, especially raw materials and API.”
Sandoz CEO Richard Saynor has warned that the governments and regulators may tighten regulations to prevent shortages, “leading to changes in sourcing strategy industry-wide.”
Discussing the longer-term outcomes of COVID-19 that the healthcare sector could see, Sandoz said that it has been seeking ways to make supply chains “more resilient and agile, without adding cost.” (Also see "Sandoz Insists Industry Has COVID-19 Responsibility" - Generics Bulletin, 9 Jun, 2020.)
Despite supply-chain uncertainties, Sandoz decided to keep prices stable for certain essential medicines that may be used in the treatment of coronavirus cases, specifically antivirals that reduce the impact of coronavirus and antibiotics to combat pneumonia. (Also see "Sandoz Pledges Price Stability Amid Coronavirus" - Generics Bulletin, 27 Feb, 2020.)
Though Mylan said it did not experience any meaningful disruption from its more than 500 third-party supply partners located around the world, it continues to monitor its inventory levels of raw materials and dosage forms.
While Endo has encountered delays for certain products in its generics segment due to “modified production schedules to safely maintain operations in response to COVID-19,” Lannett said that its supply chain for products and key agreements has only been modestly affected by challenges associated with COVID-19.
However, Lannett assured that it has the capacity and flexibility to ramp up production quickly if required. CEO Tim Crew added, “We have long articulated [that] our supply chain has less global fragmentation than that of many of our competitors.”
Hikma‘s CEO Siggi Olafsson has acknowledged the “challenging market conditions that have arisen as a result of COVID-19.” The company proactively managed its inventory and stock levels by working closely with its supplier networks. (Also see "Hikma Outlines Strategy For Coping With COVID-19 Demand" - Generics Bulletin, 13 May, 2020.)
Similarly, Olainfarm has also insisted that the group has “sufficient inventory for the foreseeable future, which enables it to plan production without interruptions.”
While most companies did not suffer negative impacts from the coronavirus pandemic outbreak on first quarter revenues, the same has not been true for all firms, especially in India.
India’s Sun Pharmaceutical was not able to make some supplies due to the COVID-19 crisis. The company saw some challenges in terms of availability of stocks in April too. (Also see "Sun Sees New Prescriptions Drought Amid COVID-19" - Generics Bulletin, 1 Jun, 2020.)
Sun complained of a lack of new prescriptions since the lockdown in India started in April and most of the private clinics closed.
Biocon’s fourth-quarter earnings also took a direct hit because of pandemic-related disruptions, especially its biologics arm. The company’s movement of inventory to distributor channels was adversely affected in March. While the Indian firm anticipates a “good recovery, “all eyes are on the anticipated US launch of biosimilar insulin glargine and its interchangeability status.
America’s Teligent reported a decline in its turnover by 5% to $16m in the fourth quarter of fiscal 2019 ending March 2020. (Also see "Despite New Launches, Teligent Sees A Disappointing Q4" - Generics Bulletin, 21 Apr, 2020.) Due to the coronavirus outbreak, the company is further projecting a reduction in the first financial quarter of its 2020 year, expecting revenues of around half that of the fourth quarter of 2019. Teligent is not going to be providing financial guidance for the full year of 2020, while its efforts to resolve a warning letter by the FDA have also seen delay due to the global pandemic.
Many companies also turned to digital instruments to keep the process of commercial operations going. The need for digitization in the healthcare sector became more prominent with the drop in sales rep visits due to the lockdown.
Companies like Teva implemented digitization tools like “e-detailing.” Moreover, Teva reported no job losses related to COVID-19. Schultz observed that “we have kept everything operational,” adding that “we basically haven’t interrupted the supply chain worldwide.” Safety of employees was also “a key consideration,” Schultz noted, with “no reports of anybody being infected due to going to work.”
Most companies declared taking all necessary measures to contain the spread of the infection and protect the health of their employees.
In order to handle its promotional strategies, Hikma has also highlighted a major move towards digital promotion. The company confirmed that “it has been going extremely well. Online promotional events have enabled the company to contact the doctors digitally.”
As the companies gear up to report on the second quarter of the year soon, the generics industry will soon be able to ascertain if its predictions regarding the possible drop in sales will stand true or not. Given the fact that the generic companies across the world continue to deal with the coronavirus crisis, their latest predictions going forward will also be noteworthy.
28 Sep 2020
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