Viagra patent expiry in July 2014 arouses interest from Chinese pharmas to target US$81.4 billion market

Viagra patent expiry arouses interest from Chinese pharmas

Staff Reporter

2013-07-26

Pfizer’s Viagra patent will expire in July 2014 and Chinese corporations such as Guangzhou Pharmaceutical Holdings and Lianhuan Pharmaceutical are getting ready to flood the market with generic versions of the erectile dysfunction drug. In fact, the expiry of Viagra’s patent is just one instance from the over 600 patented drugs whose patents started expiring after 2012, according to the Chinese Medical Report.For the Chinese market, where 90% of the drugs are generics, the cheaper version of an erectile dysfunction drug will target a 500-billion-yuan (US$81.4 billion) market.

In 2012, patents of Merck Sharp & Dohme’s Montelukast Sodium Chewable Tablets, Novartis AG’s Valsartan and Abbott’s TriCor all lapsed. There are at least 15 other drugs, commanding a US$29 billion market, that will no longer be protected by patents in 2013.

Data revealed that erectile dysfunction drugs has a market potential of 20 billion yuan (US$3.3 billion), and Viagra accounted for about 5% of the total. Viagra sales have exceeded 2 billion yuan (US$326 million) globally.

Responding to the end of Viagra’s patent, Pfizer China stated that it will not take any specific action to protect its Viagra market from being cannibalized by cheaper versions.

In November 2011, the patent for Pfizer’s Lipitor expired. The drug had once generated company sales of over US$10 billion annually. Revenue generated by the drug plummeted after the expiration and hurt Pfizer’s quarterly financial reports for 2012.

Lipitor’s sales in the United States slid by 80% during the second quarter of last year.

Now several Chinese drug makers are gearing up to release generic versions of Viagra. Guangzhou Pharmaceutical Holdings already obtained a license to produce the drug in 2005. The company is expected to be the first domestic company to sell Viagra generics. Pfizer is expected to be impacted considerably, if foreign drug makers also join in producing cheaper versions of Viagra.

A researcher pointed out that the expiration of patents has handed generic drug makers an enormous business opportunity. Research and development for an original drug usually takes 10 to 15 years and cost up to billions of US dollars.

In comparison, the production of generics is a lot simpler and costs much less. The Chinese generics drug market is estimated to be worth nearly 500 billion yuan (US$81.4 billion) by 2015.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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