Pfizer Inc has agreed to license an array of generic pills and injectable medicines from India's Aurobindo Pharma Ltd as the world's largest drugmaker looks to off-patent medicines for growth.
In the deal announced on Tuesday, Pfizer said it expectedthe products acquired to deliver more than $200 million in annual revenue in 2013, according to David Simmons, general manager of Pfizer's established products business unit.
The products expand Pfizer's growing generics portfolio and are versions of drugs originally made by companies other than Pfizer. Financial terms of the deal were not disclosed.
Pfizer is focusing on off-patent medicines as one avenue to spur profits as the drugmaker encounters generic competition that threatens revenue of its own top sellers. Pfizer's current roster drugs that have lost patent protection amounts to $10 billion in annual sales.
We're committed to dramatically changing our established products portfolio from a significantly shrinking segment of the business to an engine of positive growth, Simmons said in an interview.
Simmons previously told Reuters that Pfizer was seeking licensing arrangements to expand the generics business. The company expects more deals this year, he said.
In the Aurobindo deal, Pfizer will gain rights to 38 pills in the United States and 20 in Europe as well as an additional 11 in France. Pfizer declined to name the medicines, saying they covered a broad range of therapy areas including cardiovascular disease and central nervous system disorders.
In the United States, the pills will be sold through Pfizer's Greenstone unit, which currently sells about 60-80 generics.
New York-based Pfizer also acquired U.S. and European rights to 12 injectable antibiotics, including penicillins and cephalosporins.
Pfizer, which has had about 18 injectable drugs in the United States, has prioritized making licensing deals to expand its injectables business, in which it believes there are relatively few rivals and maintains it has a competitive cost structure. Simmons previously said he wants a U.S. portfolio of 100 injectable drugs perhaps in five years.
The agreement expands on a five-product U.S. deal entered into in July 2008 with Aurobindo, with which Pfizer first worked in 2006 through its animal health division, Simmons said.
Going forward, we plan to expand our product portfolio through additional activities with Aurobindo and other companies as well, Simmons said.
Simmons said the deal involved strict quality controls, including allowing Pfizer to have its employees in the Aurobindo plant during production runs for Pfizer.
We're focused on making sure any medicine that gets sold with the Pfizer brand name on it is held to the same quality standards as our original branded products, he said.
Some analysts question whether generics fit well with pharmaceutical companies that specialize in brand-name drugs, partly because they are viewed as a lower-margin commodity business. But Simmons said the profit margins from the deal and future agreements would meet Pfizer's standards.
We're not deteriorating Pfizer's margin standards because we're going into the off-patent market, he said. (Reporting by Lewis Krauskopf; editing by Leslie Gevirtz)