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Expanding its footprint
May 2010
by David Hutton  |  Email the author
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LONDON—Taking steps toward the Indian market as an opportunity for organic growth, AstraZeneca has announced a license and supply agreement with Torrent Pharmaceuticals Ltd.  

Torrent will supply to AstraZeneca a portfolio of generic medicines for which Torrent already has licenses in a range of countries. Working in partnership with Torrent, AstraZeneca says it intends to brand and market these products in many of its emerging markets where it already has a strong commercial footprint.

According to Christopher Sampson, a global media relations representative from AstraZeneca, the company has a very focused branded generic strategy.

"Our starting point was the detailed country level work to highlight an initial portfolio of branded generics that would help us meet our goals for emerging markets growth—double-digit growth over the next five years, with business in the emerging markets amounting to 25 percent of our total revenue in 2014," he says. "We then conducted a thorough review of possible partners and suppliers. In the case of Torrent, we found that they had a complementary product portfolio and a proven ability to manufacture to AstraZeneca's high standards for quality. We believe they will be an excellent partner."
 
Sampson points out that in recent years, AstraZeneca has invested significantly in key emerging markets, and has built a strong presence in many of them.  

"Branded generics have always been a significant chunk of that business, where physicians and patients have a preference for trusted brands," he says. "Expanding the company's branded generics portfolio will help to leverage our established, proven sales and marketing presence in these countries."

Under the agreement, AstraZeneca will initially purchase from Torrent the licenses and market authorizations for 18 products in nine countries.  

"The agreement allows AstraZeneca to add further products and new countries where we see opportunities for growth, so we could potentially continue to buy licenses and market authorizations for additional products in additional countries, and pay Torrent for the supply of those products," Sampson notes. "We have also signed a 'heads of terms' with Torrent on a longer term partnership, but I really can't get into the details at this point. This new agreement creates a more collaborative relationship that would, among other things, help Torrent to better anticipate our needs."

The exact products and countries covered in the agreement are being kept confidential, as are financial terms.

"Assuming we commercialize these successfully, we believe we can broaden our portfolio of medicines not originated by AstraZeneca over time," Sampson adds.
Torrent will manufacture the medicines working to AstraZeneca's rigorous quality and process standards. Based in India, Torrent has been manufacturing medicines for more than 30 years and has a strong track record in registering and manufacturing a wide range of products.

"In markets where consumers and physicians have a strong preference for trusted brands, we believe AstraZeneca's long-standing reputation for quality is a sustainable competitive advantage," says Tony Zook, head of AstraZeneca's global commercial organization. "Working in partnership with Torrent will extend the range of branded medicines we can offer to patients in emerging markets, where we see continuing opportunities for our business to grow."

Zook says AstraZeneca selected Torrent because of "their complementary product portfolio and proven ability to manufacture to AstraZeneca's high-quality standards."
With $800 million to $1 billion being used up for a single drug innovation, AstraZeneca is trying to de-risk by adding more generics to its basket. It plans to utilize available funds to strike more licensing tie-ups for branded generics products, much like its deal with Torrent Pharma.

The emerging markets are forecast to contribute around 70 percent of pharmaceutical industry growth in the next five years, and branded generics represent approximately 50 percent by value in these emerging markets. AstraZeneca believes it can capitalize on this opportunity and over time plans to broaden its portfolio beyond the initial 18 products.

"In total, we have identified an initial portfolio of about 100 molecules that we would like to be providing in these markets (not necessarily all from Torrent)," Sampson notes. "Not entirely surprisingly, these molecules are in therapeutic areas where we already have significant experience. This broadening of our portfolio allows us to leverage our commercial infrastructure and physician relationships, especially where we have a strong reputation and where doctors particularly value the high quality that we offer. And in some cases, having a branded generic can strengthen our position in tenders by allowing us to create differentiated offerings."

While AstraZeneca hasn't disclosed specific markets where its branded generics products will be sold, there is a role for branded generics in many of the emerging markets.  
"Our broader emerging markets strategy includes continuing to grow in the large 'BRIC-MT' markets (Brazil, Russia, India, China, Mexico, Turkey)," Sampson says. But we also aim to extend our reach in high-growth small and mid-sized markets. We've acknowledged that BRIC-MT only represents 50 percent of the emerging market pharma opportunity, the other half is in small and mid-sized markets."

Overall, the success of the agreement with Torrent will be gauged on the supply of quality branded generics, which is one component of AstraZeneca's emerging markets growth strategy.  

"Ultimately we believe branded generics will constitute 10 to 15 percent of our business in emerging markets," Sampson concludes. "The success of this agreement will be measured in the context of our success in executing against our emerging markets strategy and reaching our targets for revenue growth."
 
 
Code: E051006

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