Blockbusters are usually treated as the crowning achievement for pharmaceutical firms; discovering, developing and marketing a product with more than a billion dollars in annual sales is indeed profoundly difficult and rewarding. But sustaining that success can be even more challenging, as firms that have grown large on great products must work even harder to maintain their trajectory.

The difficulty of sustaining growth is felt even more acutely by generic firms, for whom exclusivity is usually measured in months and products that define a company’s sales one year often don’t merit a mention in the next annual report. So how do you build on the biggest generic success ever – Sandoz International GMBH’s enoxaparin, which just rang up more than $1 billion in annual sales in 2011 in what appears to be a first for a generic product?

The answer is straight-forward, if not particularly for the faint of heart. “Our focus from a strategic perspective is on what I call differentiated products,” Sandoz Global Head Jeff George said in an earlier interview.

“By differentiated I mean not only difficult to make, which is typically about difficult to manufacture. What I’m talking about is difficult to scientifically develop, difficult to manufacture, difficult to commercialize, and, as we see in the case of enoxaparin, difficult to get regulatory approval,” he said.

Jeff George, global head of Sandoz

The enoxaparin ANDA (a generic of Sanofi’s blood thinner Lovenox) is indeed famously complex, a lengthy review that FDA now describes as a template for handling biosimilar applications when they are eventually submitted Also see "Lovenox Generics: FDA’s Split Opinion On ANDA Approval Fully Supported By Court" - Pink Sheet, 7 February, 2012..

Enoxaparin sales helped Sandoz leapfrog Fresenius SE & Co. KGAA, Hospira Inc. and Teva Pharmaceutical Industries Ltd. to become the world’s leading generic injectables company with $3.4 billion in category sales, based on moving annual totals from IMS through September 2011. The number-one status is a point of pride for the company on its homepage, but the key threat to it – generic enoxaparin competitors – is also the top bullet point of the “2012 key challenges” that George listed as part of a year-end earnings call by corporate parent Novartis AG.

Sandoz lost is legal effort to keep Amphastar Pharmaceuticals Inc. and Allergan PLC’s product off the market in January when the firms launched at risk after an appeals court stayed a preliminary injunction ([A#14120126004]). Despite the loss of the injection ruling, Sandoz’s case against Amphastar and Watson is ongoing. Sanofi’s Winthrop subsidiary also relaunched the authorized generic that it had put on market when the Watson/Amphastar product was approved last fall.

Costly Differentiation

Due in part to this new competition, and following double-digit growth in 2010 and 2011, Sandoz is projecting a “slight decline” in total sales for 2012, but the firm continues to invest in differentiated products. When George became head of Sandoz in October 2008, “about 27% of our sales came from these differentiated products,” he said. By the end of 2011, that number was 47%.

Those differentiated products come at a cost, with Sandoz pouring $640 million into R&D in 2011. “Our strong focus on differentiated products requires substantially greater investments, particularly for biosimilars,” George said, but the firm also is focusing on products for respiratory and oncology applications and emerging markets. Increased R&D spending is another 2012 challenge George identified.

Sandoz recently announced the initiation of two Phase III clinical trials for biosimilars, one for filgrastim (Amgen Inc.’s Neupogen) in the U.S. market (Sandoz already sells a biosimilar in Europe), and another for global development of pegfilgrastim (Amgen's Neulasta). The latter study will support pegfilgrastim’s development globally and be used for the U.S., European Union and other markets; the reference product is Neulasta.

Organic Growth And Strategic M&A For R&D

In addition to the research investments, Sandoz has made some acquisitions, but “we grow primarily organically,” George said. “I think there is a risk of getting addicted to inorganic growth, and we have not fallen prey to that at all.”

“The M&A that we’ve done has been very targeted and focused in specific therapeutic areas or geographic expansion areas,” he said. Ebewe Pharma, which Sandoz acquired in 2009, “gave us a global platform in oncology injectables with very specific, important technologies that allow us to provide affordable access in the oncology space that we, in the past, had only pieces of” Also see "Generic Injectables: Pharma Takes A Shot At A Growing Market" - Pink Sheet, 9 November, 2009..

Oriel Therapeutics, which Sandoz bought in 2010, “was in the respiratory space, where you have an industry segment that is over $30 billion, and less than 10% of that is off-patent,” George noted. “And yet if you look out five years, half of that is going to be off-patent with big, blockbuster molecules in asthma and COPD. … This was an acquisition that gave us a tremendous foundation in technology, both in terms of the drug delivery system as well as the dry power inhaler device itself” Also see "Respiratory Generics: Big Potential But A Tough Market To Crack" - Pink Sheet, 24 May, 2010..

Three Advantages From Novartis

George has also emphasized the classic route to generic profits – first-to-file applications. Historically, Sandoz had not focused on patent challenges, but since George became head, “we’ve made significant improvements in the number of first-to-files. … If you look back at the 2001 to 2007 period, the cumulative was not much more than 10, so we’ve really ramped up our efforts in this area.” Sandoz had 11 confirmed first-to-file applications in both 2010 and 2011, and now has a total of about 165 pending ANDAs at FDA, including more than 100 Paragraph IV challenges.

And far from being worried about a patent challenger growing its midst, Sandoz’s brand parent has been terrifically supportive, George said. “It’s a tremendous competitive advantage to be part of Novartis.”

George said that the key piece of support is “the ability to collaborate on not only technical development and manufacturing, but on clinical development,” as Sandoz tackles “more complex products such as quasi-biologics, like enoxaparin, or in respiratory or in biosimilars.”

Sandoz’s biggest generic achievement to date, though, came through outside collaboration. “We spent years working with a fantastic team of scientists at Momenta to analytically characterize enoxaparin, which is a complex generic, though not a biosimilar,” George said. “And of course we’re partnered with them also on [Teva’s] Copaxone, where we have the first to file.”

The second major advantage that Novartis provides is “access to talent,” George said. “Novartis has incredible talent, I think some of the best talent in the world.” Before moving over to head Sandoz, George was Novartis Pharma’s head of emerging markets for the Middle East, Africa and Southeast Asia, and was previous head of Western and Eastern Europe for Novartis Vaccines. Before joining Novartis, he held positions at Gap Inc. and McKinsey & Company.

George noted that there have been significant changes to the Sandoz executive committee since he joined, with many of the recent hires from Novartis (see chart).

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The third advantage Novartis offers is “from the standpoint of capital to take risks,” George said. “It’s not just being able to do a $1.3 billion deal to acquire Ebewe Pharma,” it’s about resources for organic growth.

“If I look at small molecule development costs, these typically are $2 to $3 million a pop, maybe throw in a million for litigation, so you’re looking at $3 to $4 million on average for an oral, solid, pill, tablet, capsule in the U.S. If I look at biosimilars, it may cost you, on the low end, $50 to $75 million, but on the high end it’s $200 to $250 million” for a global development program. “So the resources that a company like Novartis has outweigh those of a lot other companies that might want to go into biosimilars.”

The hybrid business model of brands and generic coexisting under one corporate roof is becoming increasing popular, but George emphasized that “Novartis has been at this for a long time. We’ve been in generics for the better part of three decades. A lot of people started talking about biosimilars in 2009, 2010 and even 2011. Novartis has been at this for well over a decade, and I think there is a learning curve advantage with these products.”

Novartis resources also allowed Sandoz to make the “tremendous investments that we’ve made” in enoxaparin, George said, “not only into the analytical characterization and the technical development, but into the manufacturing and supply chain for this product.”

Resolving Manufacturing Challenges

Manufacturing will continue to be a challenge for many Novartis products as the company responds to an unusually pointed GMP warning letter from FDA sent late last year Also see "Sandoz GMP Warning Letter: Is The Problem Documentation, Or Leadership?" - Pink Sheet, 6 December, 2011.. George listed “quality investments and remediation expenditure” as the other key challenge for 2012.

Sandoz “continues to produce in each of our three sites in North America that were under the warning letter,” George noted on the earning call. “We had imposed a number of areas of slowdown at those sites prior, and we made significant progress over the year. I think it's important to put this in the context of the broader program that we launched over 18 months ago, called the Quality Transformation Program at Sandoz, where we are really looking to raise our level of quality operations across the network.”

Launched in May 2010, the QTP program aims to strengthen Sandoz’s quality and manufacturing operations by upgrading leadership, investing significantly in key facilities and augmenting processes and systems. QTP governance is led personally by Jeff George and Matthias Pohl, Sandoz’s head of global quality assurance. The company said that the initiative includes in-depth monthly Sandoz Quality Leadership Council meetings where the key QTP work-streams are reviewed and progress on the North American site remediation is evaluated. In addition, the entire Sandoz Executive Committee is involved in weekly quality meetings, also initiated in mid-2010.

“These three sites make up 12% of our Sandoz U.S. sales, and 16% of our Sandoz North America sales. And we're investing heavily to ensure that we fulfill all of the FDA obligations and they continue to ship,” George said, although “we are working with FDA in a couple cases where we're discontinuing products, particularly out of our Boucherville site.” Sandoz said the discontinued products will be non-life-saving multi-source products, and the reductions will help the company decrease site complexity and focus on targeted improvements.

“I should mention that each site had a new management team since prior to the warning letter, both at a site head and site quality head level and we committed over $170 million of capital expenditure and site expenditure at these three sites, the majority of which had been planned and initiated several months prior to the November warning letter, and in fact in many cases prior to the inspections that we had from FDA last summer,” George said.

Staying well ahead of the agency’s enforcement curve, just as George has kept Sandoz out in front on product development, would seem key to laying the foundation for more potential blockbuster years for the firm.

[Editor’s note: This story has been updated to clarify that Sandoz’s suit against Amphastar and Watson is ongoing and to correct a typographical error that indicated enoxaparin’s billion-dollar sales year was 2010; it was in fact 2011.]

Managing The World’s First Blockbuster Generic: An Interview With Sandoz’s George

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