Middleman

The system through which pharmaceuticals are distributed and sold internationally is a mystery to me.  I am vaguely aware of one route in which the large manufacturers cut deals directly with retailers, like pharmacies and hospitals, and, less likely, with governments and non-governmental health organizations (NGOs) that may be buying through a subsidized programs like Unitaid, the Global Fund, or the GAVI Alliance (for a bit more on these programs, see my post, “More Bang for the Buck”).  But what about the smaller companies that may have innovative or useful generic drugs but without the deep pockets to operate internationally?  A recent press release brought to my attention a venture-backed company that was started to fill this need, and, I am thinking, may pay a role in bringing affordable medicines into the mid- and low-income countries.  The press release was by Elan Corp., a multi-billion-dollar pharmaceutical company based in Ireland, that announced a number of transactions that the company is making to spend the $3.25 billion it received when BiogenIdec purchased Elan’s rights to the multiple sclerosis drug, Tysabri (FierceBiotech press release).  In one of the deals, Elan is purchasing 48% of Newbridge Pharmaceuticals (Newbridge) for $40 million and will have an option to purchase the whole company by 2015 for $244 million which looks to me like a strong endorsement of Newbridge’s business model.

 

Newbridge “specializes in in-licensing, acquiring, registering and commercializing FDA, EMA/European and Japanese PMDA approved therapeutics to address the unmet medical needs of diseases with high regional prevalence in the Middle East, Africa, Turkey and Caspian (AfMET) Regions.”  The company was founded in 2007 with funding from Burrill & Co., a San Francisco-based private equity/media company, and a Kuwaiti government investment fund, and is run by a former Wyeth mid-East region executive, Joe Henein.  The company sells a handful of products, including a cancer diagnostic, into the top end of the self-pay market, and, while clearly Newbridge wants to maintain high profit margins over the short term, long term with improving economies and increased governmental investment in health the company may seek products and business opportunities farther down the pyramid with lower margins and higher volumes.  Their business development strategy statement suggests the company is open to new opportunities:  “We also actively search for new partners with Biotech, Research-based, Specialty, niche Generic, Biosimilar, OTC and point of care diagnostic opportunities.”  While Elan’s investment improves Newbridge’s immediate finances, a long-term affiliation is in question, since the Elan is the target of a hostile take-over by Royalty Pharma, a Canadian royalty management (for more on this soap opera see this FierceBiotech article).  Being the optimist though, I am hopeful that Newbridge with its AfMET regional expertise could become a commercialization partner for companies with innovative global health products. 

 

Another company I have noted that was started to meet the need for better drug distribution in the emerging markets is moksha8 Pharmaceuticals (Moksha8), which focuses on the emerging markets of North and South America.  Moksah8 is also a venture-backed company (the Texas Pacific Group) and has a more express statement of its intent to serve an unmet need for affordable drugs than does Newbridge:  “Moksha has gained through doing right actions irrespective of fear or greed and driven by a desire to the right thing.”  But exercise of this value and its long term future are not clear.  The four products it has marketed since its founding in 2007 are all from one company and are for treating CNS/mental illness, and in a recent deal in October 2012 company will be marketing more CNS products from Forest Labs, a mid-sized New York-based pharma.  Forest will provide up to $125 million in financing over two years and at the end of this period will have the option to acquire moksha8 in a merger transaction (Reuters article).  My spin is that, if moksha8 is acquired by Forest, the founders, in particular Simba Gill, a serial entrepreneur with big ambitions for emerging markets (at least as quoted in a 2011 Bloomberg article), will find sufficient funding to try the business model again.

 

What other options are out there for companies seeking sales and marketing channels into the lower tiers of the emerging market countries?  In a past posting (“S and M”), I wrote about three not-for-profits companies (different from “non-profits” in that each seeks to make a profit to sustain their operations) one of which that had created a division to handle the registration and commercialization activities similar to the business models of Newbridge and moksha8.  WomenCare Global (WCG) “provides access to high-quality, innovative and affordable reproductive healthcare technologies for contraception, fertility, and pregnancy management” to both public and private sectors in the underserved markets of Africa, Asia, and Latin America.  In 2011, WCG started a subsidiary, Devapharma Trading Ltd., to undertake “all product-related activities including global sales, regulatory standards, quality assurance, pharmacovigilance, medical affairs, logistics and supply chain management, and product commercialization” (WCG press release).  Unfortunately, it seems that Devapharma is not executing this plan since I found little signs of Devapharma’s activity and nothing on its products on the web or at the WCG site. 

 

So where does this meander into channels for international pharmaceutical distribution lead?  I’m encouraged that the existence of Newbridge and moksha8 indicates a viable business model for companies with regional commercialization expertise and hopeful that these companies, or others I don’t know about, will figure out how to sell needed products affordably and profitably.  But when and where and how is still a mystery.

 

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