Eli Lilly anticipates global revenue of between $22.6 billion and $23.4bn in 2013, despite the loss of exclusivity on Cymbalta in the US and paying royalties on worldwide sales of Byetta.

The company hopes revenue growth will be driven by its drug portfolio, animal health products and sales in Japan and the emerging markets, in particular China.

John C Lechleiter, Chairman, President and CEO, said the company has “made substantial progress in recent years” and he expects “2013 to continue that trend.”

Total operating expenses within the next 12 months are expected to be “flat to slightly decreasing” as Lilly continues to control expenses and improve productivity. It expects to spend between $7.1bn to $7.4bn on marketing, selling and administrative expenses and a further $5.2bn to $5.5bn on research and development.

Lilly expects other income and deductions to be somewhere in the range of $340 million and $490 million of net income in 2013. Operating cash flows of around $900 million will be in place to fund potential business development, pay company dividends and complete its share repurchasing programme.

“We are replenishing and advancing our pipeline, which now has 13 potential new medicines in Phase III testing,” said John C Lechleiter. “We are investing to drive growth in key currently marketed brands and in our counter-cyclical growth areas; and we continue to make productivity gains across our business to fund the R&D necessary to fuel our future growth, recapitalise our physical assets, maintain our dividend and support our share repurchase programme.”

The Indianapolis-based company also predicted it was “on track” to meet medium term financial targets. “From now through 2014, on an annual basis we still expect revenue to be at least $20 billion, net income to be at least $3 billion, and operating cash flow to be at least $4 billion,” said Derica Rice, Lilly Executive Vice President, Global Services and Chief Financial Officer.

Major pharma companies are paying multi-million dollar fines for alleged bribery in emerging markets, but these markets remain highly profitable.

Recent payments by Pfizer ($60m) and Johnson & Johnson ($70m) to settle charges under the Foreign Corrupt Practices Act (FCPA) represent only a small fraction of their revenue from the countries where the alleged offences took place.

However, steep increases in FCPA fines have been threatened if evidence suggests that pharma corporations regard them as a manageable cost.

Comparable European legislation, such as the Bribery Act in the UK, is tightening the net around overseas sales operations that pander to a culture of ‘goodwill’ gifts and other inducements.

Pfizer’s income from emerging markets is predicted to reach $10bn, while J&J has reported $6.5bn sales in Brazil, Russia, India and China.

Global Data analyst Michael Leibfried said: “The $60 million fine for Pfizer to a lay person sounds like quite a bit of money, but in perspective it took less than two days of Lipitor sales during its peak. It’s really just chump change for them.”

However, according to Kara Brockmeyer, chief of FCPA investigations within the Securities and Exchange Commission, no FCPA prosecution has so far needed to be repeated.

“I would hate to think the companies view enforcement actions as the cost of doing business,” she commented. “If we find that out, it will certainly increase the size of the penalty.”

In relation to the Pfizer settlement, she noted that a number of the company’s overseas subsidiaries “had bribery entwined in their sales culture”. Pfizer has since introduced an anti-corruption audit programme.

Novo Nordisk and Teva have also undergone FCPA investigations, with Latin American markets being a particular focus.

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.”

Pfizer has appointed new heads of three of its major business units from 1^st June.

Olivier Brandicourt (pictured) will become President and General Manager of the Emerging Markets and Established Products business units, replacing David Simmons.

John Young will replace Brandicourt as President and General Manager of the Primary Care business unit.

David Simmons is leaving Pfizer after 15 years to become CEO of global contract research organisation Pharmaceutical Product Development (PPD).

Ian Read, CEO of Pfizer, said: “We are indeed fortunate to have such a deep bench of talented leaders who can quickly assume new roles and maintain our momentum.”

Dr Brandicourt, a member of Pfizer’s Executive Leadership Team, has 20 years’ experience in the pharmaceutical industry. He has held a range of senior positions at Pfizer including medical, marketing and country management roles.

“Olivier is both a physician and a proven business leader who understands the many challenges of today’s changing industry and healthcare landscape,” said Read.

John Young will join the Executive Leadership Team. Currently Regional President of Europe and Canada for the Primary Care business unit, he has held a number of commercial positions in 25 years at Pfizer.

Read noted: “John has a deep understanding of the primary care landscape and will be a strong leader for this significant part of our business.”

India’s health ministry has claimed that ‘systemic improvements’ in the country’s drug approval procedures are needed, following a report on alleged corruption.

The parliamentary report alleges irregularities in the approval of drugs from major pharmaceutical companies, including major gaps in clinical evidence.

Companies including Eli Lilly and Bayer have challenged the accuracy of the report, which focuses chiefly on the failings of India’s drug regulator.

The Central Drugs Standard Control Organization (CDSCO) lacked adequate staffing or resources, the report found, and there was evidence of a “collusive nexus” between its officials, drug companies and medical experts.

An example cited was CDSCO’s acceptance of three expert opinions on Bayer’s anti-thrombosis drug rivaroxaban that were identical copies. Bayer responded that it had not played “any role in selecting these experts or evaluating their opinions”.

The report also claimed that CDSCO routinely approved drugs that were not approved in the EU or the US due to lack of clinical evidence.

Critically, it said that of 39 CDSCO-approved drugs it surveyed, 11 had not been tested on patients in different ethnic groups – a key requirement of approval in India.

An example was Lilly’s lung cancer drug pemetrexed – but the company insisted the drug had been tested on a large multi-ethnic patient base.

Irregularities claimed in the approval of drugs from Lundbeck, GSK and Novartis were similarly denied by the companies concerned.

The controversy reflects the growing importance of India and other ‘emerging markets’ for the global pharma industry.

Pfizer has dropped attempts to market its cholesterol-lowering drug Lipitor (atorvastatin) in the US, nearly five months after its patent expiry.

The company said its post-expiry marketing campaign had been successful, but generic erosion of the Lipitor brand would soon escalate.

The decision is a milestone in the history of the world’s best-selling drug, used to help prevent cardiovascular events in high-risk patient groups.

Pfizer has ceased negotiating new contracts to sell Lipitor to health providers in the US or promoting it through sales representatives or advertising.

Following its US patent expiry on 30 November 2011, Pfizer invested $87m in sustaining the brand through doctor marketing, advertisements and price rebates. The strategy succeeded in retaining 33% of market share, bringing in $383m in the first quarter of 2012.

However, the second wave of generic atorvastatin following Lipitor’s patent expiry in the EU in May has prompted Pfizer to give up on the brand that at one time accounted for a quarter of its revenue.

The company will continue to promote the drug in emerging markets, including China, where it could still earn billions of dollars.

An increase in pharmaceutical jobs in Europe helped the total number of life sciences roles increase by 3.7% in the first three months of 2012, according to a report.

ZRG Partners’ Life Science Hiring Index found pharmaceutical jobs increased by 25% in the first quarter in the EMEA region, despite a reduction in sales and marketing and R&D positions.

Job growth in the global medical device industry also increased by 6.8% as roles in the Asia Pacific region jumped by 102% – mainly due to recruitment by Philips and Siemens.

But the report found that outsourcing and CRO positions fell by 5.7% after roles in North America were substantially cut and jobs remained flat in Asia Pacific.

Hiring activity in the Americas decreased by a tenth, however it still recorded its highest level in the past two years, research found.

The EMEA region reversed a trend in the past six months as overall positions increased by 18% with a rise in pharmaceutical and outsourcing roles; medical device positions remained flat.

Regulatory, clinical and quality positions made up more than a third (36%) of jobs in EMEA, followed by IT, finance and general administrative positions (31%). Research and development roles made up nearly a fifth (18%) of overall positions with sales and marketing jobs making up 11% and manufacturing accounting for just 4% of all roles.

Emerging markets in the Asia Pacific region again helped boost the global outlook as the amount of jobs also increased by 18%, despite outsourcing/CRO remaining flat and pharmaceutical jobs falling.

Despite the US already cutting 4,800 jobs this year, according to outplacement consulting firm Challenger Gray & Christmas, the Index found that the Americas still account for 51% of global life science roles, followed by EMEA (28%) and Asia Pacific (21%).

The number of global pharmaceutical sales jobs fell by nearly two per cent (1.8%) last year as the industry faced a challenging twelve months, according to new research.

An audit by Cegedim Strategic Data (CSD) found the number of sales representatives fell from 421,223 in 2010 to 413,565 last year.

However, the decline in medical sales positions would’ve been far more had it not been for an increase in pharmaceutical sales jobs in emerging markets such as China or Brazil.

CSD research found that the US had the most pharmaceutical sales representatives (73,762), despite losing 7% of roles compared to the previous year.

China followed with more than 65,000 sales roles after it continued to enjoy double-digit job growth creating an increase of 18.6% in jobs last year. Japan ranked third with 54,236 jobs, despite seeing a decline in pharma jobs of 10%.

France saw the biggest decline in sales jobs in Europe as roles notably declined by 12%. Jobs were also down in Germany by 2% and in Italy by 1.7%. But markets in Spain and the UK remained relatively stable.

The news was much better in Brazil where field force levels increased by 3.5% in 2011 and saw the country have the fifth most pharmaceutical sales jobs of any country.

The audit also found that sales reps preferred detailing to healthcare professionals as the main channel for communicating promotional and clinical messages, and that sales representatives accounted for more than 60% of global marketing investments in 2011.

Merck KGaA saw record-breaking levels of revenue in 2011 as sales topped €10 billion for the first time.

Revenue was up 10.6% to €10.2 billion following the 2010 acquisition of the Millipore Corporation and growth in the Group’s four divisions – Merck Serono, Merck Millipore, Consumer Healthcare and Performance Materials.

Karl-Ludwig Kley, Chairman of Merck’s Executive Board, said the Group delivered a “good operational result in a challenging year” but confirmed that despite topping €10bn in revenue job cuts would still be made.

The company revealed last month it plans to cut jobs across all businesses and regions under new efficiency plans it aims will reduce costs and exploit new growth opportunities. (Read here)

Mr Kley says that the efficiency plans recognise the “competitive and market pressures” Merck faces in the future.

Despite the record breaking levels of revenue, overall operating result was down 11.5% to €985 million and net profits decreased 2.3% to 617 million Euros.

Sales increased by 17% to €2.78 billion and gross margin rose by 8.4% to €7.4bn. However, marketing and selling expenses were up 7.1% to €2.39bn and royalty, licence and commissioning expenses increased after increased sales of Rebif and Erbitux. R&D costs also jumped to €1.5bn after expensive late-stage clinical trials by Merck Serono.

Total revenues of Merck Serono increased 2.9% to €5.92bn compared to €5.75bn in 2010, which was described as a “solid performance” by the Group. Global sales of Rebif topped €1.69bn after increased demand in the US. Targeted cancer treatment Erbitux recorded sales of €855 million due to strong growth in emerging markets.

In Merck’s other divisions, Merck Millipore almost increased sales by half (48%) to €2.39 billion after growth in North America, Latin America and Asia. Its consumer health care arm saw revenue increase 5.1% to €484 million in 2011, and its Performance Materials division increased revenue slightly by 1% to €1.46bn.

The Group’s Executive Board now expects total revenues to increase slightly in 2012 and 2013.