Global Insight Perspective | |
Significance | Canadian generics drug manufacturer Apotex will stop selling its products directly in Brazil, and is seeking a buyer for its plant in Itatiba, Sao Paulo state. |
Implications | The fierce competition within the domestic generic market, which is led by local drug-makers Medley, EMS-Sigma Pharma, Eurofarma and Biosintética, appears to have taken its first foreign victim. |
Outlook | The Brazilian generics market is expected to continue expanding in the short-to-medium term, boosted by the low prices of these products and the government’s efforts to increase their uptake. Meanwhile, local drug manufacturers are likely to prevail and maintain their leading position in the coming years. |
Apotex Decides to Stop Direct Sales in Brazil…
Affected by fierce competition in the Brazilian generics market, Canadian generics manufacturer Apotex has announced that it intends to stop selling its products directly in Brazil. Local newspaper Valor Economico reports that the company is also looking to sell its facility at Itatiba, in the state of Sao Paulo. This plant has been inactive since March. Apotex entered the Brazilian generics market in January 2002, attracted by the strong sales increases, and has invested around US$40 million in its operations there (see Brazil: 29 January 2002: Apotex to Move Into Brazilian Generics Market).
…While Ranbaxy is Determined to Remain, Despite Difficulties
Indian drug manufacturer Ranbaxy has announced it will maintain its presence in Brazil, despite recently reported difficulties. The company has devised a restructuring plan for its Brazilian operations in recent months and hopes to see positive results this year. As part of this strategy, Ranbaxy reduced the number of new product launches in the country last year and focused on renewing the registration of products already available. Ranbaxy held a 3% share of the generics market in June. For 2006, it hopes to post overall revenue of US$30 million, compared to US$23 million in 2005. Its product portfolio includes 56 molecules available in 130 presentations.
Novartis Reorganises Generics Business
Swiss pharmaceutical company Novartis recently announced plans to make Brazil one of the export bases of its Sandoz generic business. As part of this, the company is to invest 150 million reais (US$68.4 million) in upgrading its manufacturing plant in Taboa da Serra, in Sao Paulo. The work will be carried out through 2010 and is aimed at increasing the plant’s total production five-fold from the present one billion units per year. The additional output will only encompass generic medications, and most of it will be exported. The company has been focusing its efforts on the Brazilian generics market, with the aim of improving on its current fifth position, behind Medley, EMS-Sigma Pharma, Eurofarma and Biosintética.
Outlook and Implications
Apotex’s decision to leave the Brazilian generics market reflects how certain foreign companies are being affected by the fierce competition within this market. For instance, Spanish generics company Cinfa is understood to be seeking someone to purchase its plant in Atibaia, in Sao Paulo. Despite currently holding a 5% share of the generics market, Apotex seems to have made some mistakes in its strategy for the country. For instance, the company set up a plant that packaged imported bulk products, and on many occasions it had difficulties in managing its inventories and in getting its products through customs. The devaluation of the exchange rate also affected its operations in the early years.
There are over 50 companies currently authorised to commercialise generic drugs in Brazil. The sector is led by Medley with a 29% market share, closely followed by EMS-Sigma Pharma, with a 28.7% share. Other important players include Eurofarma and Biosintética, which was acquired by Aché last year. These four companies hold about 80% of the domestic generics market between them. However, consolidation of the market is expected to speed up, as large companies are squeezing small ones. Global Insight believes that the price factor continues to prevail within the generics market. In order to survive in this very competitive market, it is necessary to have a good network of raw-material suppliers, an aggressive business strategy, low fixed operational costs and to understand the country’s bureaucratic procedures.
The Brazilian generics segment has been experiencing notable growth since the products were first introduced. Demand for this type of medicines has been steadily growing, due to their low prices compared with branded drugs and government efforts to encourage the population to use them. Total sales of generic drugs amounted to 1.86 billion reais (US$849.1 million) in the 12 months to April 2006, marking year-on-year (y/y) growth of 31.3%. Generics also accounted for 10% of the overall pharmaceutical market in value terms (see Brazil: 14 July 2006: Sales of Generic Medicines Continue Rising in Brazil). The association of generic manufacturers, Pró Genéricos, expects sales of generic drugs to exceed US$1 billion at the close of this year.