Generic Biotech Drugs Could Vault Industry to New Heights

Article excerpt

If you think the generic drug industry has grown a lot lately, you ain't seen nothin' yet. There's still a lot more growth to come, promised Jerry Treppel, senior v.p. at Dillon, Read & Co., at a generic drug conference sponsored by his New York City equity research firm, which specializes in pharmaceuticals.

According to Treppel, a fresh development that could take this industry to new heights is generic biotech drugs. The patents for such blockbuster biotech drugs as EPO (Epogen, Amgen; Procrit, Ortho Biotech) : t-PA (alteplase, Activase, Genentech), the interleukins, and others will begin to expire around the start of the next decade. But this fact has not seeped into Wall Street's consciousness yet, he noted.

Producing bioequivalent copies of these injectable drugs is not a barrier, he believes. The technology is there, and facilities are now under construction for the purpose of manufacturing generic biotech drugs. "All one needs is fermentation capability, sterile manufacturing, and access to worldclass biotechnology brainpower. There are companies in this industry that possess those characteristics already," he said.

Another prediction the generic drug analyst made is that "the industry will wind up with user fees." User fees, which are fees drug companies pay to the Food & Drug Administration to speed the review of drug applications, would "alleviate the ANDA bottleneck now found at the Office of Generic Drugs," he explained.

Although some generic companies are opposed to user fees, Treppel contended that the sooner they are implemented, the better. The reason, he explained, is that the generic industry's customers are "increasingly narrowing down the number of suppliers they are willing to deal with." Any generic firm that can quickly expand its product line will have a leg up on its competition.

In Treppel's view, the U.S. generic industry will "consolidate to a few very large players, and the trend is already under way. By the end of this century, most of the larger generic companies will really be hybrids, both generic and brand, making their revenue and earnings stream much more predictable than today."

Taking stock of the industry, the executive said it has won some important fights this year. As examples, he cited the approval of generic albuterol metered-dose inhalers and sucralfate (Carafate, Hoechst Marion Roussel), drugs with difficult bioequivalence issues. …