Make way for newcomers to the generic market

April 3, 2006

Sun Pharma. Glenmark. Cadila. Orchid. Lupin. Aurobindo. Wockhardt. If you haven't heard of these generic companies, chances are good that you will in 2006. These newcomers are bound to become household names. This is the contention of Tommy Erdei, CFA, executive director, Healthcare, at ABN AMRO Corporate Finance.

Sun Pharma. Glenmark. Cadila. Orchid. Lupin. Aurobindo. Wockhardt. If you haven't heard of these generic companies, chances are good that you will in 2006. These newcomers are bound to become household names. This is the contention of Tommy Erdei, CFA, executive director, Healthcare, at ABN AMRO Corporate Finance.

Speaking to attendees of the Generic Pharmaceutical Association's annual meeting held recently in Boca Raton, Fla., Erdei predicted that 2006 and 2007 would be healthy years for the generic market, especially since many products are coming off patent. "You'll have a slowdown and then an uptick again in 2010 and 2011," he said.

Although many generic CEOs are optimistic that there is a great pipeline in terms of patents expiring, Erdei cautioned, "Despite that strong activity, in our view the growth rates in this sector are going to come down. The driver is that the market itself is growing dramatically. Five years ago, $10 billion of products coming off patent was a big number. Given the size of the generic market today, which in 2005 was $22 billion, for that market to grow 10%, you have to have about $2 billion worth of generic products."

Pointing out that although the number of Abbreviated New Drug Approvals being filed and approved has been picking up steadily over the past couple of years, Erdei emphasized that the reason the number of ANDAs has increased is not because there are more products coming off patent, but because more companies "are chasing the same product." He concluded with the following points:

In sum, "companies need to decide proactively how they are going to position themselves," said Erdei.