Moksha8 Finds New Life for Old Drugs in Latin America
In late 2008, a startup called Moksha8 convinced Pfizer (PFE) to do an unusual deal in Brazil. In exchange for a cut of sales, Moksha8 would promote a decades-old antibiotic called Vibramycin, along with several other brands in Pfizer’s portfolio of older drugs no longer protected by patents. Forecasting declining sales against competition from lower- priced generics, the pharmaceutical giant had stopped investing in Vibramycin’s sales and marketing.
Capitalizing on the willingness of newly affluent Brazilians to spend on brand-name drugs, Moksha8 marketed aggressively to doctors in the country’s major cities, increasing 2009 and 2010 sales for Vibramycin by roughly 40 percent above Pfizer’s dour projections. Says Victor Mezei, Pfizer’s country manager for Brazil: “We consider this a positive partnership.”
Simba Gill, formerly chief executive officer of Redwood City, Calif., biotech company Maxygen, started Moksha8 in late 2006. His bet: Pharmaceutical companies, which cut nearly 300,000 jobs from 2000 to 2010, could use extra feet on the ground in challenging but potentially lucrative emerging markets. A British citizen who was born in Tanzania to East Indian parents and who owns homes in San Francisco, Hong Kong, Rio de Janeiro, Delhi, and United Arab Emirates, Gill gave a lot of thought to the company’s name. Moksha is a Sanskrit word that means liberation from suffering; the numeral 8 is a nod to the Buddhist eightfold path.
In Brazil and Mexico -- Latin America’s biggest economies and pharmaceutical markets -- Gill saw a sweet spot: Growing middle classes and rising incomes account for 75 percent of the $30 billion Latin American pharmaceutical market. What’s more, he says, consumers in both countries pay out-of-pocket for pharmacy purchases, so private insurers and government payers wield little influence over an individual’s decision to pay more for name-brand medicines.
While the U.S. remains the world’s largest market for prescription medicines, with $300 billion in 2009 sales, it is declining in importance. Having accounted for 41 percent of all global drug spending in 2005, the U.S. share will drop to just 31 percent in 2015, according to IMS, a supplier of pharmaceutical sales data. IMS forecasts similar weakening for the U.K., France, Germany, Italy, and Spain. With annual sales growth of 14 percent to 17 percent, it says, emerging markets will account for 28 percent of worldwide drug spending in 2015. “It’s not too large an intellectual leap to see that this is the moment for emerging markets to be the key growth driver in our industry,” says Gill.
“Aggressive Cash Compensation”
Unlike a distributor that gets a fee for service, the 220-employee company gets paid according to how much it improves regional sales for its partners. That means managing a supply chain that is more complicated -- and sometimes more corrupt -- than in more developed countries. Moksha8 must sell its products to wholesalers and distributors that in turn, sell to pharmacies. With offices in Philadelphia, Mexico City, and São Paulo, Gill recruits experienced hands and younger locals from outside the industry. They are motivated by what Gill calls “aggressive cash compensation;” only about a third of employees’ total pay is guaranteed salary, with the rest derived from incentives.
Moksha8 complements the in-house sales forces of Big Pharma partners, which tend to focus on higher-priced new products. For smaller drugmakers, Moksha8 may constitute their overseas presence. When the H1N1 swine flu epidemic broke out in Mexico in 2009, for example, Moksha8 executives got meetings with health officials and successfully advocated for swift approval to import an experimental treatment called Peramivir, produced by BioCryst Pharmaceuticals (BCRX) in Birmingham, Ala. “There’s no way a company like us in the U.S., with no feet on the street and no experience dealing with local governments, could have got that done,” says BioCryst President and CEO Jon Stonehouse.
Despite representing just three large partners -- Pfizer, Roche (ROG), and Watson Pharmaceuticals (WPI) -- in two countries, Gill says Moksha8 should generate $160 million in sales in 2011, noting that “four to five years from now, we should be at half a billion in sales, with $100 million to $150 million in profit.” However, Marcello Albuquerque, IMS’s business director for Latin America, warns that continuing global economic turmoil could crimp growth. “Economic growth and income distribution could change if Latin America is hit by the global crisis at a level that would put the brakes on,” he says. “That’s what happened in the ’70s.”
Nonetheless, Gill plans to double down in the region, moving into Chile and Colombia in the next couple of years. He will draw on close to $150 million in investments from TPG Capital, Montreux Equity Partners, Watson, and Brazilian conglomerate Votarantim. He is also bullish on opportunities in North Africa and the Middle East. “We like the region because it’s complicated,” Gill says.
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