Among the coconut plantations and beaches of South India, a
factory the size of 35 football fields is preparing to churn out billions of
generic pills for HIV patients and flood the US market with the low-cost
copycat medicines.
US patents on key components for some important HIV
therapies are poised to expire starting in December and Laurus Labs -- the
Hyderabad, India-based company which owns the facility -- is gearing up to cash
in.
Laurus is one of the world’s biggest suppliers of
ingredients used in anti-retrovirals, thanks to novel chemistry that delivers
cheaper production costs than anyone else. Now, its chief executive officer,
Satyanarayana Chava, wants to use the same strategy selling his own finished
drugs in the U.S. and Europe. He predicts some generics that Laurus produces
will eventually sell for 90 percent less than branded HIV drugs in the U.S.,
slashing expenditures for a disease that’s among the costliest for many
insurers.
"The savings for U.S. payers will be so huge when these
generic combination drugs are available in the U.S.," he said in an
interview at the factory outside the Southern Indian city of Visakhapatnam.
Payers will save "billions of dollars," he said.
In the U.S., Laurus will be going up against much larger
companies like Teva Pharmaceutical Industries Ltd. -- the world’s biggest
generic drug company -- which will beat it to market on generic Viread and so
be the first to slash prices and lock down customers. Other generic companies,
both from India and elsewhere, many of whom are customers of Laurus, are
expected to enter the market too.
Meanwhile, the companies that hold the original patents,
like Foster City, California-based Gilead, have also been successful at
switching patients to their newer therapies to limit the impact of generic
competition on the old ones, according to Bloomberg Intelligence analyst
Asthika Goonewardene. He doesn’t predict a big impact from generic competition
to the $2.6 billion Gilead gets from HIV drugs.
Cost savings that were an advantage in the developing world,
may also prove less useful in a less price sensitive market like the U.S.
Between government programs providing treatment for the uninsured, and drug
company funded ones helping the insured with their co-pays, HIV patients in the
U.S. are often sheltered from the full cost of their medicines.
So patients themselves may have little incentive to switch
to cheaper alternatives, said Tim Horn, the New York-based deputy executive
director of Treatment Action Group, an AIDS policy think tank. Newer drugs
offer medical advantages to the ones going off patent, including fewer side
effects, and the switch from one daily brand name pill to a mix of two or three
may feel like a step back for many, he said.
For his part, Chava maintains he will eventually be able to
undercut bigger rivals like Teva on price, and the magnitude of savings offered
to insurers from generics will prove irresistible -- particularly as more
components of the older combinations go off patent in the next three years.
"We believe we’ll be able to bring cost effective
generic alternatives to the U.S. market," he said. "We have the
scale."
That willingness to compete on cost has made Laurus a bright
spot in India’s pharmaceutical industry in a year when the U.S. generics market
has been rocked by a protracted price war. Laurus’s stock has risen about 23
percent since its public market debut in 2016. Analysts are forecasting that
its revenue will rise to about $339 million in the current fiscal year from
$279 million in the previous year.
Laurus controls about 66 percent of the global market for
efavirenz, the chemical name for Bristol-Myers Squibb’s Sustiva, and 33 percent
for tenofovir, the chemical name for Gilead’s Viread, according to a report
earlier this year by investment bank Jefferies Group LLC.
A compact man of 54 with a trim mustache and rimless
glasses, CEO Chava laughs enthusiastically as he recounts the scientific
discoveries that helped give Laurus its edge. A chemist by training, he left
his job as a C-suite executive at another Indian pharma company to found Laurus
in 2005. He quickly saw an opportunity to improve the production process for
efavirenz, which Indian generic firms were already producing in bulk for the
developing world.
The key ingredient of efavirenz was a compound called
diethylzinc, which had to be imported from Europe, and has a propensity for
bursting into flames upon contact with water, or even humid air. So Chava and
his team eventually found an alternative in the combination of two chemicals
easily had nearby.
Where diethylzinc cost $80 per kilo -- plus all the
precautions needed to keep it from exploding -- the two replacement chemicals
together cost $5 per kilo. A similar innovation reducing the production cost of
tenofovir by 75 percent followed, he said.
For now, Chava’s new factory is only producing test batches
as it seeks to win regulatory approval to enter the U.S. It is meant to eventually
produce as many as 5 billion tablets annually. On Nov. 30, the company said it
had received tentative approval from the U.S. Food and Drug Administration to
sell tenofovir.
He expects his company could be in the market with its
version of tenofovir in three months or so, in partnership with another Indian
company with a U.S. distribution network. While that timeline could mean being
beaten to market by some of his competitors, he says he’s not worried.
"We don’t mind not being the first one," Chava
says. "But we want to be the last one standing."
Comments