The Thomson Reuters quarterly report on the US generics industry using strategic intelligence and competitive analysis information from Newport Premium™, the critical product targeting and global business development system from the industry authority on the global generics market.

MOVERS AND SHAKERSA PHARMA MATTERS REPORT.April-June 2010

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PHARMA MATTERS | MOVERS AND SHAKERS

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In this quarterly report, we look at a few of the companies beginning to make their marks on the US generics market either with their finished dose products or active ingredients, and analyze trends and statistics relating to the market as a whole.

PHARMA MATTERS | MOVERS AND SHAKERS

PHARMA MATTERS | MOVERS AND SHAKERS

WHAT iS An AnDA?

An Abbreviated New Drug Application (ANDA) is the first step for a generic drug in the US. It is submitted to the FDA to prove that the generic version is bioequivalent to the innovator drug in question. On approval, the generic version is added to the Approved Drug Products List (“Orange Book”) and the company may manufacture and market it. An ANDA may be submitted before the patent on the innovator drug expires. However, in that case, the ANDA must include a certification indicating that the filer does not seek to market the product before the expiry of the Orange Book-listed patents (“paragraph III certification”) or that the filer believes that its product does not infringe the Orange Book-listed patents or that the Orange Book-listed patents are invalid (“paragraph IV certification”).

WHAT Are “A” rATeD DrugS?

“A” rated drugs are considered therapeutically equivalent and can be substituted for each other. “A” rated drugs are designated as AA, AB, AN, AO, AP, and AT in the Orange Book.

SeCTiOn i: inTrODuCTiOnThe European Generic Association had its annual meeting in Rome in June 2010. Attendees concluded that conditions look positive for the US generic market while the European generic industry continues to struggle with delays to generic launches, disincentives for generic prescribing in a number of countries, increasing pricing pressures, and government-mandated price cuts.

Why does the situation look better in the US? First, a large number of products will lose patent protection over the next few years. Second, the pricing environment in the US has stabilized. Richard Silver from Barclays Capital explained that the relative pricing stability is the result of industry consolidation over the past 10 years and explained that the remaining competitors are more rational in their pricing strategies. Third, generic penetration is occurring at ever-increasing rates. For example, US generic substitution today occurs at 80 percent conversion over four to six weeks as compared to 60 percent within six to eight months just a few years ago. Drivers accounting for the rapid substitution rate include drug retailers’ increased focus on aggressive generic substitution with higher profitability, the rise of authorized generics, and therapeutic substitution.

The future is not all rosy, however, for the US generic industry. Raymond De Vre from McKinsey and Company warned the audience that the good times generic companies have enjoyed over the past decade will end soon. While the global generics market shows attractive growth with significant patent expiries for small molecules occurring in 2011 and 2012, there will be fewer small molecule opportunities after 2012. Although biologics present a large opportunity for generics beyond 2010, the manufacturing and regulatory hurdles are high and it remains to be seen how many companies can realistically invest in these products for the long term.

Mr. Silver expected industry consolidation to continue. However, he predicted that the majority of M&A activity will be focused outside the US. Certainly, there was a significant amount of M&A activity in the second quarter, and, as seen in the Notable Deals section of this report, there were a number of deals focused on emerging markets.

PHARMA MATTERS | MOVERS AND SHAKERS

SeCTiOn ii: AnDA ApprOvAlSTOTAl ‘A’-rATeD AnDAS by COunTry Of Origin Of AppliCAnT fOr April TO June 2010

During the second quarter of 2010, US-based companies received the most Abbreviated New Drug Applications (ANDA) approvals, with 62 approvals going to 24 groups. During the same period, 19 Indian companies received a total of 44 approvals. The approval numbers were considerably higher than during the first quarter, when US-based companies received 23 approvals and Indian companies received 22 approvals.

grOupS WiTH THe mOST ‘A’-rATeD AnDA ApprOvAlS fOr April TO June 2010

During the second quarter of 2010, Mylan (US) received 18 ANDA approvals, putting the company on top of the list, followed by Sagent (US) and Teva (Israel), each with 9 approvals.

WHAT iS A uS Dmf?

A DMF (Drug Master File) is a confidential document covering a specific manufacturing facility, process or article used in the manufacturing, processing, packaging or storing of a bulk drug. A DMF is reviewed by the FDA only if an ANDA or NDA referencing that particular DMF is filed. An ANDA or NDA will not be approved until any issues with the DMF are resolved.

WHAT iS THe 180-DAy exCluSiviTy?

In order to encourage generic companies to develop non-infringing products and challenge invalid patents, the Hatch-Waxman act provides the incentive of 180 days of market exclusivity for the first company to file an ANDA with paragraph IV certification for a product. The FDA may not approve additional ANDAs for a period of 180 days commencing from the first commercial marketing of the first-to-file product. In cases where more than one ANDA with Paragraph IV certification is filed on the same day, the period of exclusivity may be shared.

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USAIN

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GERMANY

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JAPAN

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Sagent Pharm

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Teva

Pharmace

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Watson Pharm

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Novarti

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Aurobindo Pharma Ltd

Fresenius A

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Dr Reddy's

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Sun Pharmace

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dustries L

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Strides A

rcoLab Ltd

Lupin Ltd

Boehringer In

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18

9 9

6 6 6 65 5

4 4 4

PHARMA MATTERS | MOVERS AND SHAKERS

SeCTiOn iii: pArAgrApH iv CHAllengeSIn the second quarter of 2010, we learned of the first Paragraph IV patent challenges on six new active ingredients or combinations, down from 13 during the previous quarter.

grOupS WiTH THe mOST pATenT CHAllengeS On reCOrD AS Of June 2010

Teva continued to be by far the most prolific filer of ANDAs with patent challenges. At the time of writing this report, we were linking the company to challenges on 152 products, up from 149 products the quarter before. Novartis (Sandoz) and Mylan were in second and third place, with links to 83 and 81 patent challenge products, respectively.

WHAT iS A biOSimilAr ACCOrDing TO uS regulATiOnS?

A biosimilar product is defined in the Act to mean a biological product that is both “highly similar to the reference product notwithstanding minor differences in clinically inactive components” and for which “there are no clinically meaningful differences between the biological product and the reference product in terms of the safety, purity, and potency of the product.” Interchangeability is defined as a biological product that “may be substituted for the reference product without the intervention of the healthcare provider who prescribed the reference product.”

83

152

81

62 60

43 41 35 34 30 28 27

Impax Laboratories Inc

Par Pharmaceutical Companies Inc

Lupin Ltd

Daiichi Sankyo Co Ltd

Actavis Group Hf

Dr Reddy's Group

Sun Pharmaceutical Industries Ltd

Apotex Inc

Watson Pharmaceuticals Inc

Mylan Laboratories Inc

Novartis AG

Teva Pharmaceutical Industries Ltd

PHARMA MATTERS | MOVERS AND SHAKERS

prODuCTS firST expOSeD TO pArAgrApH iv CHAllengeS, AS repOrTeD by THe fDA beTWeen April AnD June 2010

ACTive ingreDienT: butoconazole nitrate

pOSTeD by fDA: June 8, 2010

brAnD nAme: gynazole-1®

nDA HOlDer: Kv pharmaceutical Company

• Perrigo has submitted an ANDA with Paragraph IV certification for a generic version of Gynazole-1 (butoconazole nitrate) vaginal cream.

• The Orange Book lists two patents covering Gynazole-1 vaginal cream.- US Patent 5,266,329 will expire on Nov. 30, 2010.- US Patent 5,993,856 will expire on Nov. 17, 2017.- KV has alleged that Perrigo infringes US Patent 5,993,856.

• At the time the first ANDA with Paragraph IV certification was submitted for a generic version of Gynazole-1 vaginal cream, Gedeon Richter, Mediolast, and Roche Palo Alto held DMFs for butoconazole nitrate.

ACTive ingreDienT: eletriptan hydrobromide

pOSTeD by fDA: June 8, 2010

brAnD nAme: relpax®

nDA HOlDer: pfizer

• Apotex and Teva have submitted ANDAs with Paragraph IV certification for generic versions of Relpax (eletriptan hydrobromide) tablets.

• The Orange Book lists two patents covering Relpax tablets.- US Patent 5,545,644 includes claims directed to the drug

substance, drug product, and the treatment of migraine with or without aura. It will expire on Dec. 26, 2016.

- US Patent 6,110,940 is directed to a crystalline form of eletriptan hydrobromide. It will expire on Aug. 29, 2017.

- Pfizer has alleged that Apotex and Teva infringe US Patent 6,110,940. In its notification letter, Apotex asserted that its proposed product would not infringe the patent because it would contain an amorphous solid form of eletriptan hydrobromide. Teva also indicated that its proposed product would not contain the polymorphic form of eletriptan hydrobromide claimed in US Patent 6,110,940.

• At the time the first ANDA was submitted for a generic version of Relpax tablets, Teva and Apotex held DMFs for eletriptan hydrobromide.

ACTive ingreDienT: eprosartan mesylate

pOSTeD by fDA: June 22, 2010

brAnD nAme: Teveten®

nDA HOlDer: Abbott

• At least one company has submitted an ANDA with Paragraph IV certification for a generic version of Teveten (eprosartan mesylate) tablets. We do not know the filer’s identity at this time.

• The Orange Book lists only one unexpired patent covering Teveten tablets.

US Patent 5,656,650 includes claims directed to the use of eprosartan stepwise or in physical combination with a diuretic for the treatment of hypertension. It will expire on Aug. 12, 2014.

• At the time the first ANDA was submitted for a generic version of Teveten tablets, Jubilant Organosys and Hetero Drugs held the DMFs for eprosartan mesylate most likely to be referenced in an ANDA.

WHAT iS A pArAgrApH iv CHAllenge?

Bioequivalent generic versions of drugs that are not protected by patents can be produced and marketed in the US by any company, subject to FDA approval. However, a generic company may obtain FDA approval before patent expiry if it certifies its product does not infringe the listed patents or the patents are invalid (paragraph IV certification). Patent holders may then sue the ANDA filer for patent infringement. If the patent holder sues the ANDA filer within 45 days of notification, the FDA may not approve the ANDA for 30 months from the date of notification. If no suit is filed within 45 days, the FDA may approve the ANDA at any time.

PHARMA MATTERS | MOVERS AND SHAKERS

ACTive ingreDienT: ketoconazole

pOSTeD by fDA: may 18, 2010

brAnD nAme: extina®

nDA HOlDer: gSK

• At least one company has filed an ANDA with Paragraph IV certification for a generic version of Extina (ketoconazole) foam. We do not know the filer’s identity at this time.

• The Orange Book lists only US Patent 7,553,835 for Extina foam. That patent includes claims to the drug product and its use in the treatment of seborrhea dermatitis. It will expire on Oct. 19, 2018.

• At the time of the first ANDA submission for a generic version of Extina foam, several companies held active DMFs for ketoconazole. This is not surprising because other generic ketoconazole products have been approved in the US for years.

ACTive ingreDienT: ranolazine

pOSTeD by fDA: June 8, 2010

brAnD nAme: ranexa®

nDA HOlDer: gilead

• Lupin has submitted an ANDA with Paragraph IV certification for a generic version of Ranexa (ranolazine) extended-release tablets.

• The Orange Book lists 10 patents covering Ranexa extended-release tablets, all expiring on May 27, 2019.

Lupin’s ANDA for a generic version of Ranexa included Paragraph IV certification to all 10 patents. Roche and Gilead have alleged infringement of nine of the patents.

• The FDA reported at least eight active DMFs for ranolazine on file at the time the first ANDA was submitted for a generic version of Ranexa extended-release tablets, including one held by Lupin.

ACTive ingreDienT: sunitinib malate

pOSTeD by fDA: April 19, 2010

brAnD nAme: Sutent®

nDA HOlDer: pfizer

• Mylan has filed an ANDA with Paragraph IV certification for a generic version of Sutent (sunitinib malate) capsules.

• The Orange Book lists three patents covering Sutent capsules.- US Patent 6,573,293 and US Patent 7,125,905 include both

drug substance and drug product claims directed to Sutent capsules. They will expire on Feb. 15, 2021.

- US Patent 7,211,600 claims the treatment of gastrointestinal stromal tumors with sunitinib. It will expire on Dec. 22, 2020.

- Pfizer has alleged that Mylan infringes all three listed patents.

• At the time of the first ANDA submission for a generic version of Sutent capsules, Teva held the only active DMF for sunitinib malate reported by the FDA.

PHARMA MATTERS | MOVERS AND SHAKERS

SeCTiOn iv: nOTAble DeAlSMuch of the deal making activity in Q2 involved big pharmaceuticals expanding their presence in rapidly developing, emerging generic markets in India, Latin America, and Japan.

AbbOTT

One of the most active deal makers in Q2 was Abbott. After obtaining a diverse portfolio of branded generics products and significant presence in emerging markets by acquiring Solvay Pharmaceuticals at the beginning of the year, Abbott agreed to pay $3.72 billion for Piramal Healthcare’s Indian formulations business in May and announced collaboration with Zydus Cadila. The acquisition, which also gives Abbott a production facility at Baddi, is expected to close during the second half of 2010. According to Abbott, the deal will give them the No. 1 position in the Indian pharmaceutical market.

The collaboration agreement between Abbott and Zydus Cadila covers the development and commercialization of branded generics in 15 emerging markets. Initially, Abbott will commercialize 24 products from the Zydus portfolio with an option to commercialize more than 40 other products. The products cover a number of therapeutic areas, including pain, cancer, respiratory, neurological, and cardiovascular diseases.

pfizer

Pfizer, meanwhile, announced in May that it had entered into two more collaboration agreements with Strides Arcolab of India. Recall that in January, Pfizer expanded an earlier arrangement with the Indian generic company, Strides Arcolabs, for the supply of 40 off-patent products, including mostly injectable anti-cancer treatments. One of the May agreements covers 38 generic oncology products which Pfizer will commercialize in the EU, Canada, Japan, Korea, Australia, and New Zealand. The second agreement involves Pfizer commercializing niche sterile injectables in the US

SAnOfi-AvenTiS

In the second quarter, Sanofi-Aventis announced a joint venture with Japan’s Nichi-Iko to boost its profile in the fast-growing generic drug market in Japan. The company’s goal is to be in the top five generic drug producers in the Japanese market within five years. For more information about the opportunities and challenges foreign companies face in pursuing Japan’s generic market, download our white paper, The Japanese Generic Drug Market: Opportunities and Strategies for Success, at go.thomsonreuters.com/japanese_whitepaper.

PHARMA MATTERS | MOVERS AND SHAKERS

glAxOSmiTHKline

GlaxoSmithKline expanded its business in Latin America by acquiring Laboratorios Phoenix in Argentina. Phoenix has a broad portfolio of branded generics covering therapeutic areas including cardiovascular, gastroenterology, metabolic, and urology. The deal also includes a manufacturing facility near Buenos Aires.

vAleAnT

Not to be outdone by big pharma, generic companies also were involved in significant deal-making, with Valeant, a branded generics and specialty pharmaceutical company based in California, standing out. The company, which agreed to merge with Biovail of Canada in June, completed its acquisition of New Jersey’s Aton Pharma in May, and announced an agreement to acquire a Canadian OTC company called Vital Science Corp in April. Also in April, Valeant announced an agreement to acquire yet another privately held branded generics company in Brazil. Within the last 12 months, Valeant has acquired Bunker Industria Farmacêutica Ltda and Instituto Terapêutico Delta Ltda in Brazil, along with Tecnofarma SA de CV and Laboratorios Grossman SA in Mexico.

OTHer

Other major deals by generic companies in the second quarter included the definitive agreement for Sandoz to acquire Oriel Therapeutics, a privately-held US specialty pharmaceutical company focused on respiratory care. This acquisition will give Sandoz exclusive rights to a portfolio of generic candidates, three development projects, Oriel’s FreePath drug delivery system, and Solis multi-dose dry powder inhaler, which uses the FreePath technology. It has been reported that FreePath has the potential to address some of the hurdles facing regulatory approval of generic inhaled medicines in the US

In May, Endo announced an agreement to acquire HealthTronics, a leading US provider of urological products and services. The deal is part of Endo’s strategy to diversify and expand its offerings of urology products.

Orchid, an Indian generic company, is trying to buy Karalex, a sales and marketing operation in the US The company needs an increased US-based sales capability in order to take advantage of its pipeline, which includes patent challenge products that Orchid is believed to have been the first to file for, and is thus entitled to exclusivity. Karelex was founded in 2007 by two former executives of Par Pharmaceutical.

PHARMA MATTERS | MOVERS AND SHAKERS

SeCTiOn v: Opening mOveSBased on our research of ANDA filings and Paragraph IV challenges, we highlight some of the companies making significant game play in the US generics industry.

ipCA lAbOrATOrieS lTD.

Ipca is a fully integrated pharmaceutical company based in Mumbai, India, making both finished dose products and active pharmaceutical ingredients for many international markets.

Ipca’s active pharmaceutical ingredients (API) manufacturing facility at Ratlam has been inspected by the US FDA on a number of occasions. The company sells numerous APIs from that facility to the US market. Its dose facility has also been inspected by the US FDA.

Ipca, which holds 10 active ANDAs, has so far launched most of its products to the US market through alliances.

In 2006, Ipca entered into a strategic alliance with Ranbaxy Pharmaceuticals Inc. (now part of Daiichi). Under this alliance, the products were going to be marketed by Ranbaxy. Initially the dose products were going to be manufactured by Ranbaxy using Ipca’s active ingredients. Subsequently, both the API and finished dose were going to be manufactured by Ipca. The alliance covered a number of products, including atenolol, furosemide, hydrochlorothiazide, hydroxychloroquine sulfate, metformin HCl, and metoclopramide. The ANDA for metformin has since been discontinued.

In 2007, Ipca entered into another strategic alliance focused on the US market, this time with Heritage Pharmaceuticals of New Jersey. Under the terms of the agreement, Ipca was going to develop, register, and manufacture the products, including propranolol, and Heritage would sell and market them in the US

inTellipHArmACeuTiCS inTernATiOnAl inC.

Intellipharmaceutics of Toronto, Canada, specializes in the research, development, and manufacture of both novel and generic controlled-release and targeted-release oral solid dosage drugs.

The company is currently involved in a number of patent challenges in the US One of the challenges was in partnership with Par Pharmaceutical for a generic version of the Attention Deficit Hyperactivity Disorder (ADHD) drug Focalin XR® (dexmethylphenidate hydrochloride). In May 2010, the parties stipulated to the dismissal of the litigation. Intellipharmaceutics’ management expects that marketing of its generic version of Focalin XR would commence no sooner than Q4 2012.

Intellipharmaceutics’ partnership with Par Pharmaceutical goes back several years. In November 2005, the two companies announced an agreement for the US market to co-develop controlled release formulations of generic drug products. In August 2007, Par Pharmaceutical purchased a 4.2 percent equity interest in Intellipharmaceutics and the two companies entered into another agreement regarding the development and launch of controlled release generic drug products, bringing the total number of drugs under development to six.

In May 2010, Intellipharmaceutics announced that the US FDA had accepted its filing for an ANDA for a generic version of the antidepressant Effexor XR® (venlafaxine hydrochloride). On June 14, 2010, the company announced it had filed an ANDA for a generic version of Protonix® (delayed release pantoprazole sodium). The company has since then been sued by Wyeth LLC, a wholly owned subsidiary of Pfizer Inc., regarding its venlafaxine application. The company also has generic carvedilol and seven undisclosed products in its pipeline.

PHARMA MATTERS | MOVERS AND SHAKERS

PHARMA MATTERS | MOVERS AND SHAKERS

NOTES

PHARMA MATTERS | MOVERS AND SHAKERS

NOTES

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