pharmaceuticals spain report 2008

SpainPharma reportJuly 2008

Spain: A “Patent” Challenge to InnovationGenerations of Spaniards over centuries have

had many reasons to be proud of their country, from renowned personalities in all artis-tic fields to world champions in sports like tennis, race-car driving, and football (at least in club competitions). More recently, Spaniards like to highlight the collective achievements of a society that has been able to overcome the devastating legacy of a brutal civil war and decades of dic-tatorship to become one of the most prosperous democracies in the world. Not to mention the economic and industrial leap taken over the last few decades, allowing Spain not only to cut dis-tances with the most developed countries in the world, but to actually surpass European heavy-weights like Italy in GDP per capita.

SPONSORED SUPPLEMENT www.focusreports.net

Spain Report

The Persistence of Memory, 1931, Salvador Dali

This sponsored supplement was produced by Focus Reports.Project Publisher: Beatrice ColletProject Editor: Robert MurilloEditorial Contributor: Nicola PadulaFor exclusive interviews and more info please log on www.focusreports.net or contact us at [email protected]

JULY 2008 FOCUS REPORTS S2

www.focusreports.net

Spain ReportSPONSORED SUPPLEMENT

The Pharmaceutical industry represents 1.5 percent of Spain’s GDP, and directly employs approximately 40,000 people in 270 companies. It is also the biggest contributor to R&D, spending approximately 800 million euros ($1.2 billion) or 18 percent of the total idustrial R&D spending. Emerging local companies are betting on creativity as their passport to the world, while the biotech sector is finding in-spiration in Spanish biodiversity. However, some are wor-ried that the industry’s ability to innovate is being challenged by a combination of recent governmental policies to keep drug prices down and a low level of patent protection and are looking at the new Spanish government for support.

Some maintain that Spain has one of the world’s best healthcare systems. “In less than 30 years, we have built a sys-tem that leaves little room for improvement in terms of univer-sality, cost, and access, with a very high level of satisfaction,” boasts Jose Martinez Olmos, General Secretary of Health of Spain’s Ministry of Health (MOH). Spaniards “value and re-spect our institution,” he says. “In fact, they consider it the second most respectable institution after the Crown.” Surveys suggest that 80 percent of Spaniards are satisfied with the sys-tem, whose pillars are public financing and universal access.

A strategic plan for pharma-ceutical policy was promulgated in 2004 by the MOH to de-crease public spending on drugs. Olmos says the plan was neces-sary to control spending that was growing at double-digit rates. “There was a lack of cri-teria when prices were assigned, meaning they were not linked to the real value of innovation.”

The Law of Guarantees and Rational Use of Medicines and Sanitary Products followed in December 2006. It created, among other things, a new Price Reference System (PRS) for drugs already on the market and off patent, calculated us-ing the three least expensive equivalents available in Spain. Drugs not facing generic competition, but off patent in the EU and with more than 10 years on the market in Spain, underwent an automatic 20 percent price reduction. These price cuts, which took effect in 2007, followed reductions of 4.2 percent in 2005 and 2 percent in 2006.

For the first time in years, the average prescription price has decreased. Drug expenditures grew 5.5 percent in 2007, compared to 11 to 12 percent in previous years. Maria Teresa Pages Jiménez, Director of Pharmacy and Sanitary Products at the MOH, one of the architects of the policy, does not hide her satisfaction. “I am proud to say the measures imple-mented have been a total success,” she says “In four years, we have managed to increase the budget of our national healthcare system by an average of 5.2 percent, a growth that places us in line with other European countries.”

But not everyone is excited. Pharma companies say the new policies hamper their ability to grow. An industry slowdown is already evident. While Spain’s economy grew 23 percent (in nominal terms) between 2004 and 2007, the pharmaceutical industry grew by only 16 percent. Eurostat studies comparing drug prices across Europe rank Spain 22nd among the EU 25, with price levels 23 percent below the average.

Price cuts are having a di-rect impact on pharma bottom lines. Many observers say their ability to continue investing in Spain is being negatively affect-ed—no small matter consider-ing the industry’s importance.

The problem is not just the PRS, but also Spain’s low level of patent protection, says Hum-berto Arnés, General Direc-tor of Farmaindustria (Spain’s

José Martinez Olmos,General Secretary of Health

Maria Teresa Pages Jiménez,Director of Farmacias y de

Productos Sanitarios

S3 FOCUS REPORTS JULY 2008


Spain Report

PhRMA). Because of certain safeguards Spain requested when it joined the European Economic Commuity in 1986, there is a “grey zone” for Spanish patents until 2012, which means that generics of certain drugs go on market in Spain several years before they do elsewhere, a situ-ation which MNCs are increas-ingly rebelling against by taking generics players to court. “The aggressive price reduction under the new PRS is having a negative

impact on innovative companies due to the fact that intellec-tual property protection is so weak in Spain,” says Arnes. He explains that “innovative companies have had to bring their prices down to the level of the cheapest generics.”

Lide Verdugo, Managing Director of Nycomed Spain, rec-

ognizes Spain’s challenges with regard to patents and prices, but is less preoccu-pied about them than most of her peers. “Despite the imperfections of its system, Spain’s pharmaceutical sector is doing better than the other big countries in the European Union. When I hear my col-leagues from other companies complain, I remind them to look beyond the Pyr-enees to see what is happening there.”

Innovative pharma companies are highlighting the important role they play in Spain’s R&D. In 1995–2004, the sec-tor saw a 12.2 percent average annual growth in R&D investments, well above Spanish industry as a whole. These fig-ures have dramatically dropped since 2006, which saw a mere 3.6 percent in-crease in R&D spending—less than the economy’s nominal GDP growth.

“There are actions that would allow the government to control expenditures without harming innovation, such as better protecting patents and creating price reference systems that take into account the efforts and investment put into developing new drugs for pa-tients,” states Arnes. “The pharmaceu-tical industry is a strategic player in the government’s aim of increasing over-all R&D expenditures to 2 percent of GDP in the coming years, as outlined in the Plan Ingenio 2010.

Indeed, the focus on innovation was one of the main nov-elties when Prime Minister Jose Luis Rodríguez Zapatero an-nounced the formation of his new government after winning re-election in April 2008. He created Spain’s first Ministry of Science and Innovation, and named Cristina Garmen-dia—founder and president of local biotech company Genet-rix—its head. Innovative pharma and biotech companies are putting high hopes on the new ministry.

Though still lagging behind in major investments in ba-sic pharmaceutical R&D, Spain has been one of the most dynamic countries in terms of clinical trials for many of the world’s MNCs. Fernando Martin Delgado, Managing Direc-tor in Spain for the world’s leading CRO (Contract Research Organization) Quintiles, says that the country remains at-tractive “thanks to the quality of the scientists, physicians and the hospital system. Spain has opinion makers in key ar-eas such as oncology and CNS, and is also a major pharma-ceutical market it itself, which is why it plays an important role in terms of clinical trials in Europe.”

Retail

Rank Retail€ K AGR Dec

2007

% Growth AGR

Dec 2007

% Market Share

AGR Dec 07

Total Market # 8% 100%

Branded: 9,363,125 8% 93%

1 Pfizer 784,650 9% 8%

2 Sanofi-Aventis 599,787 13% 6%

3 Novartis 524,566 8% 6%

4 Almirall 520,916 3% 6%

5 GlaxoSmithKline 460,112 1% 5%

6 AstraZeneca 446,367 11% 5%

7 Johnson & Johnson 403,249 7% 4%

8 Merck & Co 381,681 0% 4%

9 Boehringer Ingelheim 320,238 27% 3%

10 Bayer 317,855 10% 3%

Total Others (252) 4,603,705 7% 49%

Generics: 662,220 21% 7%

1 Ratiopharm 116,076 51% 18%

2 Cinfa 115,197 77% 17%

3 Novartis 80,171 5% 12%

4 Mylan 53,434 11% 8%

5 Normon 52,674 10% 8%

6 Stada 52,433 2% 8%

7 Kern Pharma 32,531 38% 5%

8 Bentley Pharmaceutical 25,010 1% 4%

9 Alter 21,060 21% 3%

10 Esteve 20,010 144% 3%

Total Others (67) 93,625 -12% 14%

Source: IMS Health

SPONSORED SUPPLEMENT

Humberto Arnés,General Director of

Farmaindustria


Janssen-Cilag is one of those rare multinational corpora-tions (MNCs) that have been investing in Spain not only

to be a player in the world’s seventh largest (and Europe’s fifth largest) pharmaceutical market, but also to discover and develop new drugs. Since the start of its Spanish operations in 1985, the Johnson & Johnson subsidiary established a basic

research center in Toledo focused on drug discovery in depres-sion and schizophrenia—one of only five such centers for J&J Pharmaceutical R&D worldwide. It is also one of the few ba-sic research centers set up in Spain by MNCs, most of which limit their activities in the country to clinical trials. Janssen-Cilag also established a clinical research center, part of the company’s Global Clinical Operations Group, in Madrid.

Spain’s intellectual property issues are of particular concern for Janssen-Cilag. Some of the company’s drugs will face gener-ic competition several years before they do in other European countries. Martin Selles, Managing Director for Janssen-Cilag in Spain and Portugal, says, “What we ask the authorities is simply to offer us the same level of protection as in the rest of Europe. … It is becoming increasingly difficult to convince our HQ to continue betting on R&D in Spain if the local environ-ment does not appropriately support innovation.”

“Janssen-Cilag Spain currently has more than 90 people devoted to R&D, which is a very significant part of our head-count,” boasts Selles. In total, Janssen-Cilag employs more than 500 people in Spain, including a manufacturing centre in Alcalá de Henares, producing some of J&J’s flagship OTC brands for all of Europe. From a commercial perspective, Janssen-Cilag has been one of the fastest growing interna-tional pharmaceutical companies in Spain. “The company has gone from being number 45 in terms of sales with 40 mil-lion euros ($60 million) ten years ago to number seven cur-rently, with approximately 450 million euros ($700 million). This has also meant going from having less than 1 percent market share to 3.5 percent,” says Selles. Despite this strong performance, fueled by the launch of innovative products, the last couple of years for Janssen-Cilag in Spain have seen more modest growth as the overall market slows down.

Also well aware of the patent situation in Spain, Scher-ing-Plough’s Angel Fernández García is cautiously encour-aged by recent rulings in Spanish courts that have granted certain drugs protection from early generic competition. “Finally, our opinions and ideas are receiving the judges’ endorsement, and the courts are recognizing our rights to intellectual property protection on the same level as in other countries,” Fernández García says.

Fernández García has been with Schering-Plough for more than 30 years, in a career that began in customer service but eventually took him to management positions in the United States, Mexico, Argentina, and Switzerland. Since 2004, he has been back in his native country as Presi-dent and General Director of Schering-Plough Spain. In his own words, “Personally, I have been with the company since 1976 because it has continued providing me with pro-fessional opportunities and challenges.”



Janssen-Cilag’s Madrid offices

MNCs: Patent concern but still many bright spots



Spain Report

Schering-Plough’s Spanish sales figures paint a pretty pic-ture. In 2007, Schering grew 10 to 11 percent according to IMS, several points higher than the market, thanks to the good per-formance of all its main lines—OTC, ambulatory, and hospi-tal products. According to Fernández García, “The key to this growth has been our commitment to innovation and the trust we have gained from our stakeholders in Spain. This is all the more remarkable considering the challenging environment the pharmaceutical industry has been dealing with.”

Schering-Plough’s acquisition of Organon BioSciences, finalized in late 2007, is likely to broaden the growth per-spectives over the coming years. “Thanks to this strategic acquisition, Schering-Plough has one of the most impressive pipelines on the market, focusing on several key therapeutic areas such as cardiovascular, CNS, women’s health, oncolo-gy, allergies and infectious diseases,” says Fernández García. Based on IMS data, the company predicts it will become one of the top ten pharmaceutical players in Spain in 2008.

The company was also moved up to the “Good” category in the 2007 Plan Profarma ranking, an initiative from the Ministry of Industry that rates pharmaceutical companies according to their local investments in R&D. “Although our company does not have any basic R&D facilities in Spain,

we are very active in Phase II and Phase III clinical develop-ment of our drugs in the coun-try. The main reason for this is Schering-Plough’s firm belief in the quality of Spanish research-ers and in our subsidiary’s abil-ity to absorb new investments, which will go toward the de-velopment of products for the entire Group,” says Fernández García. He underlines, howev-er, the need to improve the pro-cedures for clinical trials implemented by Spain’s 17 differ-ent autonomous regions. “The different levels of government in Spain should realize that they are competing with many other countries for the allocation of R&D investments and simplify the approval procedures.”

Risk-taking and integration, winning strategies Leading an integration process is never an easy task, even less so when you come from the smaller of the two companies involved. This is precisely the mission Lide Verdugo was given

Angel Fernández García,General Director of

Schering-Plough




as Managing Director of Ny-comed Spain when the compa-ny acquired Altana Pharma AG in 2006. With 250 employees in Spain, Altana was much larger than Nycomed, which had 50. The year 2007 was all the more challenging for the dynamic Verdugo and the new Nycomed Pharma Spain team since there were two important launches in the middle of the year. “Perhaps the most satisfying part of the integration process is that we were able to deliver the sales and EBIT objectives in 2007. At the end, we jumped to a turn-over of 160 million euros with over 80 million euros of EBIT ($250 million and $125 million, respectively). I am extremely proud of the team here,” Verdugo affirms.

Beyond being one of Nycomed’s five most important mar-kets, Spain has become a reference point in terms of suc-cessful new launches. “In today’s pharmaceutical sector, it is very important to be creative and able to think outside of the box. You need to anticipate the changes and be quick to be the first in initiatives and seize opportunities,” she says. “Drugs such as Tachosil and Preotact have achieved extraor-dinary performance in Spain thanks to creativity, and de-spite being one of the last countries to launch.”

Nycomed Pharma Spain aspires to enter the top 20 over

the coming years (currently it is 23rd) based on its new prod-ucts and pipeline, but it also sees growth opportunities in the OTC segment and in- and out-licensing agreements with other companies. As for Verdugo, another priority is to bring as many R&D projects to Spain as possible.

Another of Spain’s few but prominent women in the country’s pharmaceutical industry, Laura González-Molero, faced a challenge of her own in 2007, when she was in charge of building the new face of Merck in Spain, as it simulta-neously integrated the biotech firm Serono and divested the generics business. “This transformation has been an incred-ible opportunity because it means a unique chance to be a part of the design and shaping of a new company. I feel very fortunate to have this experience, as it is not an opportunity that comes by often,” says González-Molero.

As head of Serono—prior to its acquisition by Merck—

Spain Report

Phillipa Rodríguez, former General Director of AstraZeneca Spain

AstraZeneca, Madrid

As Phillipa Rodriguez takes a look back at her two years

at the head of AstraZeneca in Spain, the land of her an-

cestors, the nostalgia is palpable but also the satisfaction

of a mission accomplished. Indeed, her management of the

restructuring process in Spain in the midst of a challenging

moment for the industry earned her the position of General

Director of AstraZeneca in her home country, the United King-

dom, starting June 2008. “In Spain we have achieved a more

performance-oriented culture, with a customer-centric mind-

set and clearer accountability at all levels”, says Rodriguez.

The restructuring process included employee reduc-

tion; a decision which Rodriguez admits is difficult to make

understand, particularly in a context of positive growth for

the company. AstraZeneca Spain has been performing

very well when compared to subsidiaries in other devel-

oped countries, and was also one of the fastest growing

MNCs in Spain in 2007. But according to Rodriguez, the

restructuring was “ultimately necessary for AstraZeneca’s

sustainability in the long term. We can never stop embrac-

ing external change and one has to decide whether to

shape the future or be a victim of it”, she adds.

As she prepares to leave for a new challenge in the

UK, Rodriguez warns about the main weakness in her view

of Spain’s pharmaceutical sector: the patent issue. “We

would like to see the commitment to R&D investments

be recognized through better intellectual property protec-

tion, aligned to the TRIPS agreement. It is true that we

have seen recent and positive court resolutions regarding

patent protection, for example Lilly s olanzapine case, but

such decisions are not yet reflected in the Spanish author-

ities’ will to adapt legislation in this regard”, she says.

Despite the effects of early generics competition and

the price cuts introduced by the new price reference sys-

tem, Rodriguez remains optimistic about the possibilities

of AstraZeneca’s future investments in R&D in Spain.

“In Spain, AstraZeneca is already involved in 68 clinical

trials in collaboration with over 570 centers and 3700

patients. We are hopeful that there will be new R&D in-

vestments in all phases of clinical trials, with increasing

interest in basic research and translational science”.

Saying Adiós


her Spanish team received that company’s “best affiliate” dis-tinction in 2005. Not much later, and already in her role as director of Merck, González-Molero was awarded the 2007 Executive of the Year award by the Chamber of Commerce of Madrid, becoming the first woman ever to achieve this. “The key to turning any proj-ect into a success is to firmly believe it, and to be fully com-mitted,” she says. “Of course, it is also necessary to put in a lot of hard work and effort, and to count on an equally motivated team.” Throughout her professional career, she has always tried to challenge the status quo, “in order to encourage innovation, because often people are very conser-vative and unwilling to take risks and make tough decisions. Avoiding risk is not a winning strategy.”

González-Molero is quick to point out that Merck Spain’s performance in 2007 was very positive in terms of growth, and higher than the group’s overall rate. “Merck’s ambition and my own are to be the best,” she says. “This means con-tinuously improving and leading the rest based on innova-tion, which is the cornerstone of the company.”

Despite the recent relocation of the oncology preclini-cal research—following Merck’s strategic decision to focus these activities in Boston and Darmstadt, which resulted in the company falling from “Excellent” to “Very Good” in the Plan Profarma ranking—González-Molero highlights the importance of Spain in terms of clinical trials. “We par-ticipate in the majority of the group’s clinical trials from the very early stages of R&D. Spain is recognized on a European level for the quality of its scientists, and is a reference point in several pathologies. There is a clear view that Spanish hos-pitals can provide added value to our operations,” she says. Not least significant is Merck’s commitment to maintain a considerable manufacturing presence in Spain at a time when relocation of production is the norm in the industry.

Innovative locals charging ahead

Talk to analysts about Spain’s pharmaceutical industry, and what you are likely to hear—off the record—is that what

the country needs to become a top-tier player on the global scene is a truly multinational Spanish company. If the coun-try’s pharmaceutical industry aspires to be in the same league as France, Switzerland, or Germany, it will have to produce a company akin to Sanofi-Aventis, Novartis, or Bayer.

For Antoni Esteve, President of Spain’s number two phar-

maceutical company, Esteve, and also President of Farmain-dustria, the road for both local and international players is no other than innovation. “Now that Spain is considered an attractive country to develop business and industrial activity, we should be intelligent enough to understand that what it needs in order to remain competitive in the future is R&D,” he says. None of Spain’s emerging local companies yet have the capacity to rival major MNCs internationally, but there are signs that the leading Spanish players are finally ready to take on the world’s pharmaceutical market, with aims of becoming a global forces to reckon with.

One such player is Barcelona-based Ferrer, one of Spain’s top three companies, with sales of 630 million euros ($980 million) in 2007, a 15 percent increase over the previous year. Already 51 percent of the company’s business is generated outside of Spain, with a large presence in South America and subsidiaries in Germany and China. Jordi Ramentol, CEO of Ferrer, explains, “The company’s strategy is to enter for-eign countries through partnerships in order to have the best possible market understanding and share potential risk.”

Ferrer bases its development on a strong commitment to R&D and innovation, as its “Excellent” ranking in the Plan Profarma attests. “The pharmaceutical industry is very com-petitive,” says Ramentol. “If you want to survive, you have to constantly reinvent yourself. From the beginning of our history, we realized that the only way to successfully oper-ate was to be flexible and innovative, focusing on unspoiled market niches and developing our own products to promote our company’s image internationally.” Ferrer is also betting on the biotech sector through its “inCode” project for per-sonalized medicine. “From the important investments un-dertaken in recent years, we expect 15 high quality products to come through the pipeline, mainly in the oncology and cardiovascular areas, which will enable us to enter the US market,” adds Ramentol.

Conscious of the need to better interact with the stake-holders in Spanish healthcare, Ferrer is one of the most ac-tive companies in establishing public-private partnerships. “A few years ago, collaboration between the public and private worlds was problematic due to cultural reasons, but this is changing,” says Ramentol. “Spain has leading research cen-ters producing valuable knowledge, which should be shared with the private sector, in order to be able to transform it into effective improvements for society.” Ferrer is also a clear ex-ample of Spanish companies getting as serious about CSR as any other MNC in the world. “We want to become a world reference in terms of sustainability, and the company has al-ready achieved several acknowledgements in this regard, such as the AAALAC for animal treatment in clinical trials and the LEED platinum recognition concerning ecology for our new state-of-the-art R&D facilities,” he says.

In another shift toward global business standards, fam-



Lide Verdugo, Managing Director of

Nycomed



Spain Report

ily-owned pharma companies are starting to shake off their reluctance to cede some control to the stock markets. The trend was set by Spain’s largest pharma player, Almirall, when it went public in 2007. The move was soon followed by Rovi, a medium-sized company that went through its own IPO in December 2007. “This IPO was necessary in order to access the liquidity in the stock market, and to gain the nec-essary visibility on the international arena as we grow out of Spain’s borders,” says Rovi CEO Juan López-Belmonte.

In its first few months on the stock market, the company has faced a less-than-favorable financial environment, but as López-Belmonte points out, “Rovi has been successful thanks to our ability to maintain sustainable growth with a relatively low risk profile, a complete and relatively young product portfolio, and a leading position in the contract manufacturing field.”

Rovi’s growth strategy is based on three main drivers. The first is the company’s vision to become the leading Span-ish company in the specialty segment, a field in which Rovi is experiencing a tremendous growth, having launched sev-en compounds in the last three years. The second growth driver, in which Rovi is already a major worldwide player, is contract manufacturing in the very specific area of pre-filled syringes. The third driver, which represents the company’s bet on the future, is the R&D pipeline in which Rovi has been heavily investing for several years and today includes more than 15 ongoing projects.

“Rovi changed its business model in the early 1990s, as the management realized that developing proprietary compounds was the only way to gain a sustainable competitive advantage

over the competitors in the long run. Therefore, the company launched a series of new investment in R&D pipeline. Rovi’s first success in developing proprietary compounds was Be-miparin, the only second generation, low molecular–weight heparin. Today the product is marketed in more than 40 coun-tries worldwide, representing the most important milestone in Rovi’s history,” says López-Belmonte.

Another milestone is expected to come in 2009, as Rovi finalizes clinical trials for Bemiparin in diabetic foot ulcer, which should take it to important new markets such as the United States. Rovi’s international business is just recently starting to take off, and 2008 should see a 30 percent growth in overseas sales compared to 2007. According to López-Bel-

Laura González-Molero, Director of Merck, receiving the “Executive of the Year 2007” award from Esperanza Aguirre,

President of the Madrid Community


Merck, strong pharmaceutical and chemical presence in SpainMerck KGaA’s long presence in Spain goes back to the year 1924. Since then, it has consolidated itself over the years as one of the most

important companies in the Spanish pharmaceutical sector. More than 1,000 employees are spread across Merck’s different facilities in

Spain, which consist of manufacturing, research and development (R&D), and commercial activities. Merck has a strong presence in Spain,

with two headquarters based in Madrid and Barcelona, three production sites and eight commercial offices. The Merck Serono Division is

based in Madrid, whereas the Consumer Healthcare Division and the Chemicals Division are located in Mollet del Vallés (Barcelona), where

the support departments as well as the main logistic departments (warehouse, distribution …) of the company are also located.

Manufacturing and commercial networkMerck has three manufacturing sites in Spain, producing chemicals, pharmaceuticals, and biopharmaceuticals. The pharmaceutical production

plant is located in Mollet del Valles, and with an area of 18.000 m2 is dedicated to the development, production, storage, and distribution of

pharmaceutical products. The product lines include both prescription drugs and OTC products. The chemical production plant is also located in

Mollet del Vallés, and is focused on the production of active pharmaceutical ingredients (API) for the pharmaceutical and cosmetic industries.

Finally, the biotechnological production plant covers an area of 6.500 m2 and is located in Tres Cantos (Madrid). This plant is responsible for

the production of Merck Serono’s recombinant growth hormone for the entire Group, as well as the company’s main gonadotrophins, which

are also exported for worldwide needs.These plants are all operating at the strictest levels of quality – ISO 9001-2000 and ISO 14001:2004

certified – and have been inspected and approved by the corresponding National and International Sanitary Authorities.

Merck’s facilities in Mollet del Valles (near Barcelona)

Merck’s presence in Spain is complemented by 8 commercial offices, located in Barcelona, Bilbao, La Coruña, Granada, Madrid, Sevilla,

Valencia and Alicante.

Corporate Social ResponsibilityIn addition to its numerous Corporate Responsibility (CR) engagements on a global level, Merck is committed to social activities in Spain through its

participation in initiatives such as Fundación Salud 2000, one of the most important foundations in the field of health in the country. Since its creation

in 1991 under the sponsorship of the former Serono (now Merck Serono Division), the foundation works with the aim to promote improvements

in the area of health in all possible ways, through four fundamental pillars: (i) the promotion of cutting-edge research in basic sciences and in

therapeutic areas of high social impact, (ii) supporting the study and development of Bioethics and Health Law, (iii) diffusion of knowledge, through

the organization of different events, courses and seminars, and (iv) defending health as a fundamental right of every individual.

Merck is also a very active and committed player in the Spanish pharmaceutical arena, as member of the most relevant associations in the

pharmaceutical sector such as Farmaindustria, BioMadrid, CataloniaBio, and ASEBIO’s Board of Directors, among others.



Spain Report

Seeing a big pharmaceutical company such as Ot-

suka create a joint-managing directorship – in this

case for Spain through Imma Barber and Manel Lopez

– is quite a rare occurrence, just about as unusual

as seeing a Japanese pharmaceutical company grow

at double digits in Europe. The Spanish duo of Mrs.

Barber and Mr. Lopez were named joint-managers

in early 2008, and are firmly committed to continue

with Spain’s outstanding performance which earned

it “Best Otsuka Affilliate in Europe” award in 2005.

It was a landmark year for Otsuka Spain, particularly

thanks to the launch of the company’s star schizo-

phrenia drug Abilify.

Since then, as Barber points out, Otsuka has been

consolidating its leadership in its different development

areas such as medical devices, in vivo diagnosis, and in

pharmaceuticals with a new indication of Abilify for bipo-

lar disorders. “Otsuka is also preparing launches in the

cardiovascular field, a new focus area for the company

towards the future”, states Barber.

Although Otsuka Spain was officially created only in

1998, its presence in the country dates back to 1979

when it acquired a local company. “This was a good

starting point for the launch of Otsuka’s strategy in

Spain”, says Lopez, since “Otsuka did not have to begin

from scratch in the country, and could already count on

production facilities, quality control, laboratories, and a

sales force organized in specific areas”. This has helped

Spain become a first-line country for Otsuka in Europe,

spearheading the commercialization of a whole portfolio

of products in the region. “We are actually responsible

for developing the Southern European region for the

company, including countries like Portugal, Greece and

Italy”, he adds.

Imma Barber and Manel López, Joint-Managing

Directors of Otsuka

When two heads are better than one...

Otsuka’s “European Quality and Control Laboratory” is

based in Barcelona




monte, “We expect that in four to five years time, international business will account for an im-portant percentage of our total sales, with a strong focus on the European and US markets”.

Rovi’s ranking in “Excel-lent” category of the Ministry of Industry’s Plan Profarma illustrates the company’s com-mitment to innovation. Rovi is running extensive clinical tri-als in heparin derivatives and different indications of Bemiparin. Likewise, the company is investing in proprietary delivery technologies such as OCAP for oral compounds, and ISM, which is a sustained-release, injectable technology. Rovi is not going at it alone, and is in fact one of the most dynamic companies in terms of working with other stakeholders in the Spanish pharmaceutical sec-tor, as their 20 million euros ($20 million) investment in new facilities in Granada demonstrates. “Establishing successful public-private partnerships [PPP] is one of the toughest chal-

lenges Spain has to face in its quest for innovation. Rovi aims to work with public institutions such as universities all over Spain, in order to transfer the academic knowledge to the industrial setting, where the know-how can find practical applications,” states López-Belmonte.

Not to be overlooked are Rovi’s contract manufacturing and licensing agreements, which account for over 50 percent of the company’s revenues. The company is a global leader in the pre-filled syringes contract manufacturing business, which represents one of the fastest growing segments in the

Antoni Esteve, President of Esteve and President of

Farmaindustria

Ferrer manufacturing plant in Germany



Spain Report

pharmaceutical industry. Rovi is one of the few companies capable of processing a wide array of sy-ringe devices, and is therefore a key supplier to major pharmaceu-tical companies in the world.

Laboratorios LETI is another example of a Spanish company at-taining a leading position in a spe-cialized market segment. LE-TI’s origins date back to 1919, when it was established as a vaccine producer. But in the mid-1980s, the company decided to concentrate on special-ties in which it could become an important industry player. “Allergy immunotherapy was the first area that we chose, based on the company’s know-how, managerial capabilities, and the segment’s characteristics,” says LETI’s President, Jaime Grego.

He adds, “We developed an excellent R&D department, and built a new state-of-the-art manufacturing plant. When the company was granted the patent for Depigoid, our star

product in immunotherapy, we entered Germany, the largest and most challenging market in this field.” LETI has also es-tablished a subsidiary in Portugal and long term distribution agreements in Europe, Latin America, Asia, and Africa. Says Grego, “Internationalization is now a priority. We are begin-ning to build business activities in the United States.”

In addition to immunology, LETI also specializes in other areas such as the Dermatology and Personal Care (DPC) seg-ment. “We have followed a strategy of innovation by com-bining our own research with in-licensed products in spe-cialized areas in vaccines, diagnostics, reagents for research, and assisted reproduction technologies,” says Grego. In diagnostics, LETI has introduced the rapid test concept for respiratory infectious diseases in the Iberian Peninsula, and is also introducing point-of-care diagnostics in other areas such as for HIV in oral fluids. In the booming field of as-sisted reproduction, LETI introduced the culture media in specialist clinics across Spain and Portugal, a technology de-veloped by Danish company Medicult of which LETI is the largest industrial shareholder.

For Grego, LETI’s success is based on the three pillars of “specialization, innovation, and a strong customer orien-

Juan López Belmonte,CEO of Rovi




46.7%

11%6.8%

5.0%

5.0%

5.0%

4.4%

4.3%

4.3%3.9%3.7%

Spanish Hospital Market Share Roche 451,522 11.0%

Sanofi-Aventis 278,269 6.8%

BristonMyersSquibb 205,593 5.0%

Abbott 205,383 5.0%

GlaxoSmithKline 204,615 5.0%

Amgen 179,620 4.4%

Schering Plough 175,544 4.3%

Gilead Sciences 174,888 4.3%

Wyeth 158,721 3.9%

Grifols 150,066 3.7%

Total Others 46.7%

Source: IMS Health

tation, which reflect our com-mitment to more rational and sustainable healthcare through self-care, prevention, and early diagnostics.” He adds that the company’s target is to double its size given the products and technology LETI has on-hand and its innovative pipeline.

Local pharma and biotech industries are not the only ones to conquer new horizons with the “Made in Spain” trade-mark. Only 10 years since its creation, Antares Consulting has not only consolidated itself as the sole company in Spain offering services to the entire chain of the health sector, but also to create a name for itself in neighboring markets.

Pharmaceutical companies constitute Antares Consult-ing’s second business area in terms of turnover, after hos-pital clients. Lluis Triquell, Partner & Director of Bioindus-tries and Pharmacy at Antares, created the division from scratch in 2000. “We have gone from being completely unknown within the industry to working with some of the biggest Spanish and international names in the business,” says Triquell. The pharmaceutical sector curently represents about 30 percent of Antares’ revenue. Triquell would like to see it reach 50 percent.

“Our competitive advantage is without a doubt our pro-found knowledge of the entire Spanish healthcare system. By choosing us, clients do not have to spend time and money ex-plaining to other consultants the basics of the sector, because we know it by heart,” says Triquell. Antares works with pharmaceutical companies mainly in strategic marketing and organization, including the development of commercial plans and the creation of new business units. Supported by its So-cial Services area, Antares Consulting also designs compre-

hensive or specific CSR plans, offering its expertise in the strategic, operational, and development phases of a project.

As Antares Consulting grows in size, clients, and revenue, it also aims to become a reference in the health sector at an international level. After testing the waters in Latin Ameri-ca, the company has decided to focus its expansion closer to home. “We have direct presence in Portugal, Switzerland, France, and Belgium—all countries where we feel very com-fortable developing our value-added consulting business,” says Triquell. “The health authorities there truly appreciate our specialized approach. Contrary to other consulting com-panies, we speak in their language.”

Franco-American ‘mano a mano’ in CRMThe mergers and acquisitions (M&A) frenzy of the last sev-eral years has spread to the industry’s service providers, as illustrated by Cegedim’s acquisition of Dentrite in 2007. The outcome of the Franco-American integration has created Ce-gedim Dentrite, global leader in CRM and database solutions for the pharmaceutical sector. In Spain, Dentrite was four times larger than Cegedim in revenues, and it was Ignacio Huergo, formerly head of Dendrite, who was named General Manager of the new integrated company in the country.

The new organization offers a broad portfolio of products and services, and today counts 58 clients in the Spanish mar-ket. Spain is the fifth largest market for Cegedim Dendrite in terms of revenue, but Huergo points out that the country is also important to the company for other reasons.

“We are a key subsidiary because our team has proven its ability to be a pioneer in implementing the company’s new so-lutions. Concretely, Spain is the most active country in intro-ducing Cegedim Dentrite’s mobile intelligence solutions. Being the first in new territories brings its challenges, but it is also extremely rewarding to be developing innovative solutions and contributing to Cegedim Dentrite globally,” he says.

After surpassing its objectives in 2007, Cegedim Dendrite

Jaime Grego,President of LETI




is experiencing 2008 as a year of ongoing projects. “The main challenge is to continue maximizing synergies within the new organization, leveraging the best of both worlds: people, so-lutions, experience, and positioning. In addition, Cegedim Dendrite is following a two-year roadmap for the migration to one unique net CRM platform, integrating different appli-cations such as multimedia, key account, and opinion leader management. The plan is to have all of the functionalities on the market in 2009.

Booming biotechAfter decades of watching from the sidelines as other coun-tries rode the biotech waves of the 1980s and 1990s, Spain is finally catching up. It now has more than 250 companies dedicated to this sector, and several hundred more with some degree of biotech activity. Luckily for Spaniards, in contrast to the recent slowdown of one of the country’s main growth drivers—construction—the booming local biotechnology sec-

tor is growing at more than 25 percent per year, one of the highest rates among the developed economies.

Jorge Barrero, General Secretary of ASEBIO (Association of Spanish Biotech Companies) at the time of the interview, and now Cabinet Chief at the new Ministry of Science and Innova-tion, exudes optimism. “The cultural barrier Spain had with regard to biotechnology has been eroding, startups are prolif-erating, and capital is becoming more available,” he says. “In Spain, we are still behind other developed countries, but at least people have started to believe that the country has a role to play in the international biotech arena.” Spain’s biotechnology sector still has many obstacles to overcome, such as access to financing, a lingering mentality hostile to research-based prof-its, and inadequate public incentives to innovation. “We should learn more from the American experience, which shows that sometimes more subtle tools of financing innovation, such as directly creating business relations with the biotech companies, can have a big impact,” says Barrero.

Eduardo Portella (left), President of Antares Consulting, and Lluis Triquell (right), Director of the Bioindustries and Pharmacy Division

LETI production plant




According to Barrero, one of the main challenges is to transform the image Spain it-self has on the global arena. “Spain is a country which internationally is associated with many positive things, thanks to its culture, way of life, nice weather, cuisine, etc., but is not really seen as a sci-entific place. This is not a fair assessment, given that Spain is responsible for 4 percent of the world’s R&D and has dynamic industries. We need to work on changing the perception of the ‘Spain’ brand in the world,” he says. ASEBIO is organizing BioSpain 2008, to be held in Granada in September, to showcase Spain’s booming biotech sector and the investment opportunities.

One Spanish biotech that has leaped ahead of the rest is Pharmamar, part of the Zeltia Group, which was founded by Jose Maria Fernández-Souza in 1986, with a unique business model. “The idea was to look at the ocean for marine organ-isms that could give us medicines,” says Fernández-Souza. “Nature has already given us many treatments of biological origin; there was no reason to believe that marine organisms could not hold the same potential, especially considering that 75 percent of the species on earth live in the oceans.”

With more than 60,000 marine organisms in its collec-tion, 17,000 patent applications, and constant new discover-ies, Pharmamar’s niche approach has turned it into the world leader in research and development of marine-based drugs. The company’s strategic decision to focus on oncology led it to a major achievement in 2007, when it was able to bring its first drug, Yondelis, to market. “Yondelis is a big milestone for the company, but also for Spain, because it is the first time EMEA has approved a compound from a Spanish com-pany,” says Fernández-Souza.

“Over the coming years, Pharmamar should be in positive figures, thanks to the sales of Yondelis and its second indica-tion for ovarian cancer, which is slated for launch in 2009,” says Fernández-Souza. In addition to Pharmamar’s ongoing efforts to generate treatments for different kinds of cancer, Zeltia Group created Neuropharma in 2000, which is con-centrating on finding marine organisms with properties to treat Alzheimer’s and other neurodegenerative diseases.

Aiming to help more companies achieve Zeltia’s success in mixing research with entrepreneurship, The Genoma España Foundation was created in 2002. Its mission is to promote the biotechnology sector and act as a link between research groups, capital investors, biotech companies, and society. According to Jose Luis Jorcano, Genoma’s General Director, the foundation offers a link for building successful

public-private partnerships in Spain. “The current necessity to transfer academic knowledge to the industrial sector, in order to make these findings and discoveries really useful for the public, requires enhancing the level of cooperation among the different sectors. Genoma was a pioneer in per-ceiving this necessity, and is one of the leading players in es-tablishing agreements between the public and private stake-holders,” Jorcano says.

Spain’s up-and-coming biotechs can also look for inspi-ration to the multinational biopharmaceutical companies, which are increasingly active on the Spanish market. Califor-nia-based Gilead Sciences attained a growth rate of 33 percent in Spain in 2007, an impressive performance that Roberto Ur-bez Plasencia, General Director since early 2008, is looking to maintain. “This is a fantastic number for a large and mature market like Spain,” boasts Urbez, adding that “Gilead Sci-ences is leader in the key HIV area, where we have 26 percent market share in Spain.” Spain is already Gilead Sciences’ third most important world market, after the US and France.

According to Urbez, “The plan is to consolidate our lead-ership in HIV treatment and further our development of hepa-titis drugs. Gilead Sciences’ expertise in these life-threatening diseases will surely become a model to help us develop new drugs in other key areas.” Gilead will be launching a new hep-

atitis drug in 2008, as well as a Atripla, a novel HIV treatment together with BMS. The expan-sion into new areas, following the acquisition of Myogen in 2006, is mainly concentrated on treatments for cardiovascu-lar and respiratory diseases. “In five years’ time, our ambition is to become the number one bio-tech company in the Spanish market,” he says.

Generically speaking

“Generic products have saved the national healthcare sys-tem approximately 8 billion euros ($12.5 billion) over

the last 10 years,” says Angel Luis Rodriguez de la Cuerda, General Director of AESEG (Association of Spanish Generics Pharmaceuticals Producers). That’s a powerful statement, in a context in which governments over the world make efforts to contain exploding healthcare expenses. “For patients, generic drugs mean greater access to medicines they need. For the government, which in Spain ultimately pays the near totality of the pharmaceutical bill, generics play a key role in the sus-tainability of the healthcare system,” he adds.

The authorities have gotten the message, and have been

Ignacio Huergo, General Manager of Cegedim Dentrite

Jorge Barrero, former Secretary General of ASEBIO




supporting the development of generic drugs in Spain, at least in principle. Rodriguez de la Cuerda explains that “though there is a lot of talk about the need to support generics, the actions do not follow in the speed and scope we expect. The main problem is that the authorities’ policy has been exclu-sively focused on stimulating the generics consumption from the offer-side of the equation, particularly through price cuts. This may have generated an increase in generics consumption in terms of units, but in value we are still at very low levels.”

Another big concern for the generics industry is that courts have recently ruled in favor of branded drug companies on pat-ents for product and not only procedure. “All that the generics industry is asking for is for the 1986 framework to be main-tained and enforced,” says Rodriguez de la Cuerda, adding that, “companies have made business plans based on the legislation in effect … Not recognizing this right changes the rules of the game for the industry, and creates a high degree of legal uncer-tainty.” According to AESEG’s estimations, if the branded in-dustry succeeds in blocking generic versions of drugs that would normally go off patent between 2008 and 2012, the cost to the health system would be at least 2 billion euros ($3 billion).

The generics market has been expanding at around 20 per-cent a year for several years, and considering the low penetra-tion of generics in Spain—7 percent, compared to the Europe-an average of 30 percent—there’s immense room for growth. For Raul Diaz Varela, President of AESEG and also President & CEO of Kern Pharma, “it is true that if we do not manage to change the patent scenario resulting from the recent court decisions, there will be delays and slower growth than previ-ously expected. However, there are still many molecules not affected by the TRIPS agreement which offer opportunities.”

Kern Pharma began as a contract manufacturer when the Indukern Group acquired a Roche plant in 1999, but as the years passed it started developing its own generics business, and is already one of the top ten companies in the Span-

ish market. Diaz Varela explains that part of the success is due to Kern’s “relatively early entrance in the generics busi-ness, which allowed us to establish the company and be well prepared for the subsequent arrival of many international companies. Now there it is a very competitive market with Spanish and many international players.”

Almost inadvertently, Kern ended up specializing in low-price/high-volume generics that international companies often ignore. “This strength in volume has allowed us to in-troduce our brand to the market, to the point that today it is well recognized by both doctors and pharmacists, and Kern products are found in any pharmacy in Spain. Most other companies can only aspire to achieve this after making mas-sive investments in marketing,” says Diaz Varela.

Although contract manufacturing business still accounts for roughly half of revenue, Diaz Varela’s vision is to consolidate Kern as a pharmaceutical lab specializing in generics. “Kern Pharma believes in having a strong portfolio, excellent sales force, increased R&D, and our own products, which give us the opportunity to enter licensing agreements abroad as well,” he says. In fact, Kern already has a subsidiary in Portugal, a distribution company in Venezuela, and licensing agreements in over 20 countries. “Soon we expect around 20 percent of Kern Pharma’s turnover to come from the licenses for export markets,” says Diaz Varela, who is particularly interested in South America, and European markets such as Italy, Turkey, and Poland. These markets will surely be key to achieving the mandate Kern has given itself to double sales in five years.

While ambitious Spanish companies are increasingly look-ing outward, the world’s leading generics players have been busy establishing their presence in Spain over the last several years. Some of the industry’s biggest names, such as Teva, Dr. Reddy’s, Ranbaxy, and Actavis are making inroads in Spain’s competitive generics market. Dr. Reddy’s arrived in 2005 through a local acquisition, and has had to endure a particu-

José Maria Fernández-Souza (second from right), President of Zeltia, welcomes King Juan Carlos and Queen Sofia of Spain (second and third from left) to the inau-

guration of Pharmamar’s new research facility in Tres Cantos, Madrid

Roberto Urbez Plasencia, General Director of Gilead Sciences



Spain Report

larly tough environment characterized by price reductions and low margins. But General Director of Reddy Pharma Iberia, Jose Mosquera, sees an upturn in the next few years. “Our situation will considerably improve as we are able to expand our portfolio through the company’s own pipeline from India, which in terms of costs is very competitive,” he says.

One of Mosquera’s main concerns regards the effects of the new Price Reference System, which has resulted in a dis-count war among generics players. Mosquera proposes a dif-ferent approach: going directly to the end users of the drug.

“We have to communicate to people, and show them that generics are just as good as the branded drugs, and that we also offer them something more,” he says.

“Spain has the potential to be a huge generics market for Dr. Reddy’s. Over the next five years, Spain could become a very important subsidiary, possibly the third largest in Europe (not counting Russia), after Germany and the UK,” adds Mosquera, who believes that Reddy Pharma also has what it takes to be among the top five generics players in Spain a few years down the road.

Raul Diaz Varela, President & CEO of Kern Pharma and

President of AESEG

Kern Pharma’s manufacturing facilitiesAngel Luis Rodríguez de la Cuerda, General Director of

AESEG


email: [email protected]

pharmaceuticals spain report 2008

Documents