Apocalyptic Generic Prophecy

The generic environment becomes challenging every day that goes by. Raising competition from international developing countries that wisely invested in their infrastructure to comply with the US and EU requirements are mounting. Indian generic producers already control 55 percent of the per packs supply in the US, and it seems this figure won’t decrease anytime soon. New generic producers from China and additional emerging markets make their move to take over the generic developed markets supply and they’re combined per pack supply stands on over 65 percent of per pack supply to the US, with the similar trend but lower market share in Europe. The discussed factors generate a very crowded business environment and shrink the (PLC) product life sickle and first to launch opportunities. Pharmerging companies become more sophisticated and leverage their I.P friendly environment towards first to file in the US and early launches in Europe, where patent restriction allows such entry. Moreover, the US Trump administration is scrutinizing pharmaceutical companies in order to minimize the gap between prices of generics in the US compared to other developed countries that currently represent 3-fold higher prices in the US. The ironic fact is that although generic drugs represent 90% of the dispensed drugs in the country it only accounts for less than 20% of the overall expenses of drugs. One would expect a dual effort to reduce both generic and innovative drug prices, with more focus towards innovative because of the relatively high weight of budget impact (i.e., 80% innovative vs 20% in generic). Historically it is easier to scrutinize generic producer over innovative because of their relatively low lobbing support and lack of uniformity, on the contrary innovative companies enjoy from massive lobbing and deep pockets to eliminate effectively any debate on the subject by waiving on the importance of fueling the innovative engine and the hiking prices of product development that currently standing on $2.2 Billion. If that is not enough, the latest lawsuits by various US states towards numerous fundamental generic players as Mylan, Teva, Endo and more, illuminate the heavy hammer than could be utilized by the US government against anyone who dears to cross the rules. Sophisticated arguments and/or methodologies that seems to pass at first can lead to catastrophic outcomes that could be devastating. The current outstanding gigantic lawsuit is towards price-fixing and the opioid pandemic solicitation claims. Both legal acts were pursuing by most of the US states where their aggregate amount can be well over $10 Billion USD. Teva is in the center of the discussed allegations with an exposure that can reach up to $4 Billion USD. Another important factor that big generic companies need to deal with includes high long-term debt that was taken on the high tide and euphoria period of 2012-2015. Most of the generic players missed their yearly sales goals where the vast majority present an ongoing decrease in profitability and lower their quarterly and yearly profit and free predicted cash flow either openly or by accounting tricks. If this is not enough the leading generic players had to declare goodwill impairment following results and their enterprise value significant Y/Y decrease, fact that increase their covalent to debt and risk the longevity of their current and future debt raising. This Apocalyptic tornado that we are facing in the generic sphere is not going to relieve anytime soon, with more competition, more government price reduction acts (e.g., the latest drafting of the allowance of drug importation from Canada to reduce prices), more investigations fuel by mounting amount of hungry lawyers that looking to benefit first themselves regardless of the predicted social impact that can result in bankruptcy of one or some generic giants, event that doesn’t seem unrealistic today. Every problem can count as an opportunity to more agile generic companies that were limited effected by the written above events, in this very competitive generic market environment. One that bold the most is Alvogen and Alvotech that last year cross the $1 Billion-dollar sales in just 9 years from the establishment. The company has a robust, well-diversified portfolio covering both developed and developing countries. Alvogen

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