As the era of blockbuster drugs draws to an end, the pharmaceutical industry is looking to fresh markets and new models of drug development while facing legislative changes as well as economic threats. Sarah Hanson looks at what lies ahead for the industry in 2012.

2012 looks set to be the year when pharmaceutical companies face their scariest outlook: peering over the brink of a patent cliff. Major pharmaceutical companies are realising that they can no longer rely on a broken business model that is dependent on blockbuster drugs, and are looking for alternative ways to maintain profits and cover the loss of revenues due to patent expiry. This throws up a host of commercial, legal and regulatory challenges.

Entering new markets
Major structural shifts are taking place in R&D and how intellectual property is financed, meaning that the life sciences sector is providing a rare bright spot in the pervading economic gloom. Over the last decade, there has been almost US$700bn worth of deals in the pharmaceutical sector, which remains one of the prime industries in terms of M&A activity. Now we are likely to be at the start of a fresh cycle of M&A activity in the industry, with a particular focus on emerging markets (BRIC, South-East Europe and Turkey) where the portfolios of many pharma companies remain weak.

Japan has enjoyed a particularly busy year in terms of pharmaceutical M&A: across all sectors, cross-border acquisitions by Japanese companies nearly tripled relative to 2010. Liquidity among Japanese pharma companies remains strong, as does demand for prescription medicines from an ageing population, enabling Japanese companies to enter into deals at a time of intense competition for intellectual property in the industry. In 2011 Takeda, the largest Japanese pharmaceutical company, completed its €9.6bn (debt-free, cash-free) acquisition of Swiss drug company Nycomed. On the back of this transformative deal, we expect the industry to undertake more M&A activity in Japan in 2012. Factors such as the economic climate, demography and the state of R&D pipelines should see more Asian acquisitions of European patented drugs.

Emerging markets also continue to receive significant life science private equity (PE) investment, with China and India gaining the most. Historically, the risk involved in R&D has led PE firms to avoid large pharma companies and the biopharma industry in general. However, recently some small deals have linked PE and venture capital with biotechnology, and we are seeing investment in a number of diverse projects in different life science areas. This growing trend is already playing out in Europe – according to the European Private Equity and Venture Capital Association, the total investment in life sciences in Europe increased from €3.4bn in 2009 to €5.7bn in 2010, while the total venture investment in life sciences accounted for 30% of the total investment in Europe in 2010. Such funding is likely to increase as the cash-rich life sciences sector is seen to be ’recession proof’.

A helping hand for R&D
Pharmaceutical companies looking to weather the storm of patent expiry on key products are also looking to diversify their pipelines and develop replacement products. With most companies struggling to make a return on high R&D costs pumped into prospective pipelines, additional support is vital.

In the UK, the Government hopes its new Patent Box legislation will give a welcome boost to research and development. When it comes into force in April 2013, the Patent Box will reduce UK corporation tax on patent profits to 10%, encouraging R&D activity and providing incentives for companies to retain intellectual property in the UK. This will make the UK competitive with other European countries such as Ireland, Switzerland and Hungary, which have had similar systems in place for years. While the existing system of R&D tax credits has given some relief for R&D expenditure, there has until now been no similar incentive for businesses to retain their IP in the UK once it has been created.

Legislation such as Supplementary Protection Certificates (SPCs) will also play a significant role in assisting companies facing the expiry of major patent portfolios and provide more protection for companies investing heavily in R&D. EU patent offices have long been able to grant SPCs where there has been a large gap for a company between filing a patent application and getting authorisation to market a drug. However, legal issues surround how SPCs apply to medicines that contain more than one active ingredient. In a landmark case in November 2011, the Court of Justice of the EU said that there is no reason why an SPC may not be granted for a single active ingredient that is specified in a patent where the marketing authorisation also contains other active ingredients. This (and other recent cases regarding SPCs) is likely to have further ramifications in battles between generic and pharmaceutical companies into 2012.

New legislation: help or hindrance?
New legislation coming into force will also have an impact on the pharma industry in the year ahead. Whether the expected IP and regulatory legislation will help or hinder pharmaceutical companies in this challenging climate remains to be seen.

A number of significant regulatory issues are being debated in Europe. A Directive is being developed to improve the EU pharmacovigilance system, simplify regulatory decision-making, provide a legal basis for more proactive pharmacovigilance by both regulatory authorities and the industry, and involve patients more closely in reporting adverse drug reactions. Though it was adopted in 2010, compliance is not compulsory until 2012. The legislation will bring about the most profound change to the legal framework since 1995, when the EMA was set up. The European Commission, EMA and Member States have been carrying out work to implement the legislation, but companies still lack clarity on many of the new obligations. It is likely that the new requirements will be introduced in phases beyond the original July 2012 implementation deadline.

At a time when social networking continues to grow and become part of the daily routine of many working lives, pharmacovigilance is particularly important. The pharma industry must recognise that social networking and reporting are taking on a rapidly-increasing significance in the marketing, discussion and exchange of information concerning drugs. There are pharmacovigilance obligations at all stages of the life cycle of a medicine and the process of drug monitoring; the pharmacovigilance system will need to take account of this, not least because the increasing use of social media also poses interesting questions around geographical legal jurisdiction.

Discussions continue about the introduction of a Directive that would require substantial changes to the regulation of clinical trials. In March 2010, the Chancellor of the Exchequer announced that the Government would review the UK’s implementation of the Clinical Trials Directive in order to reduce perceived gold-plating and to increase the proportionality of the system. The MHRA has stated that it intends to wait for the outcome of the European negotiations before reviewing and amending the UK legislation.
2012 may also herald significant changes in the way drugs are marketed. EFPIA in particular will be under the spotlight this year as the implications of amendments to the advertising of medicines become apparent. Currently, the advertisement for a medicine must be in line with the product’s Summary of Product Characteristics (SmPC). Hence off-label promotion is not allowed. EFPIA has approved an amended Code of Practice on the promotion of prescription-only medicines to, and interactions with, healthcare professionals.

The changes to the Code make allowance, for example, for the provision of a limited number of samples to healthcare professionals for a limited time (Art. 16).  Previously, following EU Directive 2001/83/CE, the provision of samples was not allowed (due to concern over inducement); but in accordance with national and/or EU laws and regulations, a limited number of medical samples may now be supplied on an exceptional basis and for a limited period. A reasonable interpretation of this provision is that each health professional should receive, per year, not more than four medical samples of a particular medicine that he/she is qualified to prescribe for two years after he/she first requests samples of that particular medicine.

A landmark year
Last year saw significant developments for the pharma industry – and for lawyers – which look set to continue through 2012. With deals such as Takeda’s acquisition of Nycomed in 2011, we expect the trend of commercial and economic power shifting eastward to continue. Increased diversification, coupled with regulatory hurdles, will set a challenge for the pharma industry. Whether companies will survive and thrive on this challenge remains to be seen as the year unfolds, but the structural upheaval felt as a result of life beyond the patent cliff is already being witnessed.

Sarah Hanson is a partner at CMS Cameron McKenna: the UK branch of CMS, a leading European provider of legal and tax advice.

Takeda Pharmaceutical will acquire Brazilian pharmaceutical company Multilab Industria for $246m in cash, plus up to $20m in future milestone payments.

The acquisition shows the Japanese company’s growing interest in high-growth emerging markets.

Last year Takeda bought Swiss company Nycomed for $13.7bn, boosting its access to European and emerging markets.

Earlier this year it purchased US company URL for $800m.

Multilab is a mid-sized pharmaceutical company selling branded generics and OTC drugs, with an annual revenue in 2011 of $69m.

Among the products Takeda will gain is Brazil’s leading OTC cold and flu medication, Multigrip.

The acquisition, expected to close by the end of September, will place Takeda among Brazil’s top 10 pharma companies.

“This acquisition significantly reinforces Takeda’s position in Brazil, which is the world’s sixth largest economy,” said Jostein Davidsen, Corporate Officer, Head of Emerging Markets Commercial Operations at Takeda.

“Takeda has ambitious plans for growth in emerging markets. Brazil is our second largest emerging market after Russia/CIS and the acquisition of Multilab is a clear signal of our intention to become a significant player both in Brazil and other high-growth markets.”

Takeda will purchase US company URL Pharma for $800m in order to build its portfolio of drugs to treat gout.

URL’s lead product Colcrys, a treatment for acute flare-ups of the arthritic disease, will be marketed alongside Takeda’s drug for chronic gout, Uloric.

Takeda expects the acquisition to close within two months and to add $550m to its revenue for 2012.

Douglas Cole, President of Takeda Pharmaceuticals USA, said the deal would make Takeda the only company offering both acute and chronic gout therapies.

“This allows us to give them the whole story on gout,” he commented. “That complementary message is valuable when we talk to physicians on patient care issues.”

Takeda will pay $800m upfront to buy URL Pharma, and the deal may include future performance-based payments.

Colcrys generated more than $430m in revenue for URL Pharma in 2011.

Gout, an arthritic disease of joints and tendons, causes intense pain. The disease is increasingly prevalent in the US due to the growing prevalence of obesity.

Uloric lowers blood uric acid levels in adults with gout, helping to prevent flare-ups, whereas Colcrys reduces pain during such episodes.

The deal is the third major acquisition by Takeda in recent years, following its purchases of Millennium Pharmaceuticals for $8.8bn in 2008 and Nycomed for $13.7bn in 2011.

Takeda will axe 2,800 R&D, sales, operations and administrative jobs by the end of 2015 in new measures to align its global workforce and further integrate its takeover of Nycomed.

The company plans to consolidate a number of R&D sites and functions with the loss of 2,100 jobs in Europe and 700 in the US, primarily within Takeda Pharmaceuticals North America.

Yasuchika Hasegawa, President and CEO, Takeda, says the changes are needed to ensure “efficient and flexible operations moving forward”.

The company estimates the restructuring plans will cost approximately 70 billion Yen and generate cost synergies of approximately Yen 200 billion by 2015.

The intention to align its workforce, consolidate site operations, and strengthen its global presence was first outlined in the company’s 2011-2013 Mid-Range Plan. Takeda says its latest streamlining measures will bring further efficiencies to sustain medium and long-term growth targets starting in 2015.

It now plans to align Nycomed’s former operation structures and processes with its own global headquarters in Japan and the newly defined organisations of the Chief Commercial Officer and Chief Medical & Scientific Officer, and its expanded affiliate network worldwide.

Takeda will also adopt a new strategy away from a product portfolio focused on mature, high selling products to a more diverse range of treatments. In order to do this, Takeda will invest in R&D on core therapeutic areas, while using internal and external resources to create new innovative products.

Takeda is launching a Vaccine Business Division to expand its vaccine business worldwide.

The Japanese pharma giant has appointed Dr Rajeev Venkayya as head of the new division.

The new vaccines division will take over the company’s development of paediatric vaccines as well as licensing innovative products from outside.

Takeda will pursue alliances to support the global expansion of the vaccine business.

Within Japan, Takeda has established itself as a major supplier of paediatric vaccines for influenza and polio, and is also developing an HPV vaccine.

The company’s recent acquisition of Nycomed, which has a strong business infrastructure in Europe, is expected to support the development of the new global vaccine business.

Rajeev Venkayya is currently the Director of Vaccine Delivery for the Global Health Program at the Bill & Melinda Gates Foundation. He was formerly the Special Assistant to the President for Biodefense at the White House, where he was responsible for developing and implementing the National Strategy for Pandemic Influenza.

“While the global vaccine market continues to expand as emerging countries grow, the short supply of affordable vaccines still poses a serious problem,” said Dr Tadataka Yamada, Takeda’s Chief Medical & Scientific Officer. “In Japan, the issue of how we should go about ensuring supply of vaccines, particularly against emerging infectious threats, represents an urgent challenge.

“Pharmaceutical manufacturers will be expected to play a critical role in addressing these issues, and under the leadership of Dr Venkayya, Takeda has taken a step forward in fulfilling its responsibility as a leader in the industry.”

Takeda Pharmaceutical Company has created several new positions as part of its “Transformation into a New Takeda”, restructuring the company’s business operations.

The new roles include Chief Medical and Scientific Officer (CMSO) and Chief Commercial Officer (CCO).

The CMSO is set to replace the existing post of Chief Scientific Officer, to be filled by board member Dr Tadataka Yamada, a medical doctor and scientist with strong experience in pharmaceutical R&D.

The CCO will be responsible for the company’s global sales structure, replacing existing positions in International Operations in the US, Europe and North Asia.

Takeda’s Chief Executive Dr Frank Morich will claim this position, who will lead sales strategies in the US, EU and key emerging markets.

The restructuring of the company is said to relect Takeda’s recent acquisition of Nycomed, which the firm described as “another significant step towards globalisation”.

Takeda fully acquired Nycomed in October in a cash deal worth €9.6 million.

Lundbeck has appointed Jens Peter Balling and Iman Barilero as vice presidents in its R&D organisation.

The new appointments follow Lundbeck’s recent consolidation of its R&D activities into one organisation, creating a new unit.

Peter Balling (pictured, right) has been appointed as Vice President of the new unit, which will focus on regulatory product support, patient safety and quality assurance of clinical research.

Barilero (pictured, below) will be responsible for increasing Lundbeck's strategic efforts to build and maintain constructive cooperation and dialogue with national and international regulatory authorities.

Anders Gersel Pedersen, Executive Vice President of R&D at Lundbeck, said: “The regulatory and safety areas are an increasingly important prerequisite for this. The creation of one new unit and the increased focus on the other gives us a strong position in these areas.”

Peter Balling joined Lundbeck in 2006 as divisional director of global pharmacovigilance, previously working at Novo Nordisk and Nycomed.

Barilero began work for Lundbeck in 2007, when she served divisional director of regulatory development, strategy and policy, with previous experience at Hoffmann-La Roche and Johnson & Johnson.

Search for careers at Lundbeck.

Takeda Pharmaceutical has called a halt on big deals following its recent $13.7 billion buyout of Nycomed.

Takeda’s President, Yasuchika Hasegawa, has said that the company will hold back on big mergers and acquisitions to “focus on integration for the next year or two”, adding that Japanese companies have been typically poor at integrating foreign acquisitions in the past.

Hasegawa said that domestic deals are even harder to get right, and told the Wall Street Journal that “it’s not worth it”.

He commented that acquisitions outside Japan tend to work better when companies are looking to fill in gaps, such as Takeda’s plans to develop products and pipeline projects to make up for loss of patent protection on its leading drug, Actos.

Nycomed, a Takeda company, has appointed Jostein Davidsen as its new Head of Emerging Markets.

Mr Davidsen will take on the post in addition to his current role as Area Head of Russia/CIS, reporting to Frank Morich, EVP, International Operations at Takeda Pharmaceuticals International, and CEO of Nycomed.

“Jostein's strong track record of leading Russia/CIS over the past 17 years makes him an ideal candidate for this position,” said Mr Morich.

“His extensive knowledge of the industry, combined with vision and tenacity, has propelled Russia/CIS to become one of Nycomed's top revenue contributors.”

Takeda’s acquisition of Nycomed in September 2011 was driven by Nycomed’s presence in Emerging Markets in Russia/CIS, Latin America, Middle East-Turkey-Africa and South Asia.

Takeda is a research-based global company with a main focus on pharmaceuticals. The combined company has an active commercial presence in the therapeutic areas of metabolic diseases, gastroenterology, oncology, cardiovascular health, CNS diseases, inflammatory and immune disorders, respiratory diseases and pain management.

Takeda Pharmaceutical Company has acquired Nycomed in a deal worth €9.6 million on a cash-free, debt-free basis.

The combined company will be commercially active in the therapeutic areas of metabolic diseases, gastroenterology, oncology, cardiovascular health, CNS diseases, inflammatory and immune disorders, respiratory diseases and pain management.

Current Takeda Executive Vice President of International Operations, Dr Frank Morich, has been appointed as CEO of Nycomed.

Yasuchika Hasegawa, President and CEO of Takeda, said: “Partnering the two organisations will have complementary effects and further increase our potential to become a truly global pharmaceutical company.”

Dr Morich said that the combined company’s pharmaceutical market will cover more than 70 countries, with a presence in Japan, North America, Europe and Asia.

“I look forward to bringing Takeda and Nycomed together to ensure we can achieve enhanced revenue, growth and diversification, while maintaining the strong momentum of both companies,” he said.