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Actavis Seeks Emerging-Market Partner to Copy Roche Cancer Drugs

Actavis Group hf is scouring emerging markets for a partner to help it copy complicated biotechnology medicines such as Roche Holding AG’s $7.7 billion blockbuster Avastin.

The closely held generic-drug maker, based in Zug, Switzerland, is seeking a partner that has already done substantial scientific work to show its versions of biological medicines are safe and effective, Chief Executive Officer Claudio Albrecht said in an interview in Zurich. Actavis is already in talks with some companies, Albrecht said.

Within the next decade, the majority of top-selling products to lose patent protection will be biologics, which are made from living cells, Albrecht said. Generic-drug makers that have relied on making fast, cheap copies of simple chemical compounds will need to invest more in research and development to make so-called biosimilars and build a sales force to market them to doctors, he said.

“The generic model as we knew it is dying as we speak,” Albrecht said. “You can’t do it the old way.”

Unlike chemical generics, biosimilars are likely to require patient trials, at least in Europe and the U.S., to prove they do the same thing as the original, regulators on both sides of the Atlantic have said.

Actavis may start developing biosimilars with a partner in emerging markets where such trials aren’t required, Albrecht said. Sales there could finance the clinical tests necessary to bring them to patients in Europe and the U.S., he said. Partner candidates might include companies in India or in Latin America, Albrecht said. Actavis had 1.7 billion euros ($2.4 billion) in annual sales last year, of which 5 percent came from emerging markets.

Larger Rivals

The Swiss generic-drug maker needs a partner to compete with bigger rivals such as Novartis AG and Petah Tikva, Israel-based Teva Pharmaceutical Industries Ltd., Albrecht said. Novartis, based in Basel, Switzerland, won the first European approval for a biosimilar, the growth hormone Omnitrope, in 2006.

Albrecht wouldn’t say exactly which drugs he wants to target, though he said they’re likely to include monoclonal antibodies, which mimic substances produced by the human immune system to fight infection.

“Obviously we’re looking at the big ones,” he said, citing Avastin, the world’s best-selling cancer drug with 6.46 billion Swiss francs ($7.7 billion) in revenue last year, from Basel-based Roche. “There are talks ongoing, but there is nothing concrete.”

Rituxan Copies

Meanwhile, Indian generic-drug maker Dr. Reddy’s Laboratories Ltd. began selling a new version of Roche’s Rituxan there in 2007. The drug had 232 million rupees ($5.2 million) in sales there in the 2009-10 fiscal year, according to the company’s annual report.

Biocon Ltd., India’s biggest biotechnology company, in October sold New York-based Pfizer Inc. rights to four biosimilar insulin products for an upfront payment of $200 million. Cipla Ltd., which built a $1 billion business making generic HIV treatments, said last year that it planned to sell biosimilar versions of Roche and Amgen Inc. medicines with a partner in China.

Albrecht, former CEO of Germany’s Ratiopharm GmbH, took over at Actavis about a year ago after leading an unsuccessful bid for private equity group EQT Partners AB to buy Ratiopharm. EQT sought to team up with Actavis to boost its chances, people familiar with the matter said at the time, eventually losing to Teva. The Israeli company bought Ratiopharm last year for 3.63 billion euros.

Acquisition Strategy

Actavis could finance an acquisition bigger than 200 million euros, and possibly as big as 1 billion euros, Albrecht said.

“It depends on the opportunity, and it depends on how the synergies fall,” he said. “I’m reluctant to move into such an opportunity. It would have to be a very, very good opportunity.”

The company is in the final phase of contract negotiations on a collaboration with Polish insulin producer Bioton SA and expects to sign by the end of the month, Albrecht said.

Actavis, backed by Deutsche Bank AG, overhauled its business after billionaire owner Bjorgolfur Thor Bjorgolfsson lost money in the financial crisis, leaving the Frankfurt-based lender with as much as 5 billion euros of debt, people familiar with the company said in 2009. The drugmaker refinanced its debt last year. Deutsche Bank took a 55 million-euro charge in the first quarter related to Actavis and said it expects "reasonably positive results" from the investment this year.

Possible IPO

Albrecht repeated that he’s weighing taking the company public through an initial public offering or pursuing a merger within three years. Albrecht said he would prefer for Actavis to be about three times its current size. He moved the drugmaker from Iceland to Zug in May.

“You need critical size, you need scale, you need tremendous growth in order to finance the new product ventures,” Albrecht said. “We are lacking critical size.”

Still, “not much will happen” for the next two years as the company continues to integrate the more than 15 acquisitions it made in 10 years through 2009, he said.

“We have to do something,” Albrecht said. “We haven’t made up our minds about whether it should be a public offering or a merger, but what is clear is that we still need some time to bring the company into the shape we want it to be.”

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