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STADA - A leading position in product development

General basis of STADA’s development activities

STADA’s strategic positioning means that it does not conduct research into new active pharmaceutical ingredients. STADA rather focuses on the development and marketing of products with active ingredients – generally active pharmaceutical ingredients – which are free from commercial property rights, particularly patents.

Therefore, all the development activities pursued by STADA have the objective of achieving market readiness for new or optimized products. In the case of pharmaceuticals this is usually associated with obtaining a national approval from the responsible regulatory authorities in the scope of differentiated, partly supranational approval processes.

In order to drive the Group’s organic growth, STADA requires a continuous flow of new product launches every year in the core segment Generics. Therefore, Group development activities are focused on this long-term objective. For example STADA’s product development is now already working on the development of generic products with potential launch dates beyond 2016. So in the planning processes, STADA assumes a regulatory preparation time including an approval period for generics with Group-wide relevance of currently at least three years. Against this backdrop those products which STADA wants to launch in this timeframe are generally already in the approval process today.

As a successful product development plays an important role in the success of the Group, the initiative and organization of Group-wide development of relevant products is generally handled centrally. The individual projects are realized under central control either in the Group’s own development centers or in the scope of subcontracted development. In addition in some projects the partial or full acquisition of third party dossiers and approvals is possible.

This practice shows that STADA, within the scope of its development activities, relies on an international network of internal and external development partners, and partly – as is usual in this sector – in the context of joint development projects with competitors. In view of this, STADA’s long-standing expertise in managing such a network costeffectively and in terms of the respective commercial property rights in a timely manner has been an essential success factor for the Group.

Within the framework of the Group’s development strategy, STADA has continuously been expanding the internal development capacities over the last few years. Therefore the number of in-house developments of strategically relevant and high-sales products is to be increased, in order to avoid the possible alternative of dossier acquisitions and the initial supply commitments often associated with them and therefore to optimize the procurement and production costs of new products in the first few years of marketing.

As far as possible and reasonable under market aspects, STADA uses newly developed products for Group-wide marketing, in particular in the EU. Against this backdrop the Group has the goal of achieving both international and supranational, in particular EU-wide approval procedures, so that numerous national approvals of a product can be achieved in the different EU countries at the same time. Approval procedures outside of the EU should be carried out if possible based on the EU dossier of the corresponding product, so that the Group can always fall back on a standardized formulation. With this international orientation of development activities, STADA also aims at generating economy of scale effects through optimized batch sizes.

In the case of the additional strategic objectives, Group-wide development activities are different for Generics and Branded Products as the two core segments have different sales requirements.

Due to the sales share of Generics of 71% of Group sales and the associated significantly higher importance for the Group, the clear focus of development activities is on this core segment. Against this backdrop, STADA aims, as far as possible, to have developed all internationally sales-relevant strengths and dosage forms of an active pharmaceutical ingredient for the product portfolio as early as possible, in order to make them available to the sales companies on time, including all the required approvals.

With a view on the local patent and approvals situation as well as market strategy, STADA or the local STADA sales company then decides which active pharmaceutical ingredients are to be launched at what time into a national market. As the long-term market success of a generic depends on its time of launch, STADA strives for the introduction of a new generic as soon as possible after the expiration of a patent or commercial property right.

Within the framework of a concrete launch date for a generic in a national market, the expertise regarding the commercial property rights that have to be observed becomes very important as their scope and duration can be very different depending on the market. Against this backdrop, STADA management and Group management receive, both from internal and external experts, continuous legal recommendations on the relevance of commercial property rights. Irrespective of this, before and after the product launches of new generics, legal disputes partly filed by initial suppliers occur which in the case of complicated legal matters, can in exceptional cases, contrary to STADA’s assessment, also lead to a negative result for STADA.

Development activities for new branded products are oriented towards product and country-specific growth and/or earnings opportunities as well as compatibility with the existing product range and Group structures. Therefore, new product development in this core segment can be better targeted towards individual national markets and have a more flexible time frame than is the case for Generics.

In addition, individual local business units conduct their own development activities for new products that are not significant for the Group.

Besides the clear focus on the development of new products, the Group also continues to pursue development activities in other areas such as:

• Expansion of the existing product portfolio through additional dosage forms or strengths
• Internationalization of nationally successful products
• Support of transfer projects in the production area by means of know-how transfer, for example
• Optimization of products already launched in order to reduce cost of sales or achieve better application potentials

In these areas too, individual local business units pursue their own complementary development activities for specific products in their indivudual national market.

Strong STADA product development

STADA’s development and approval strength is evident in the large number of products launched every year. Again in 2009 STADA was very successful with the world-wide launch of 486 products – and this is the highest number in company history – (previous year: 483 products) into individual national markets.

In the first half year of 2010 STADA launched 308 individual products worldwide (1-6/2009: 236 product launches) in individual national markets.

STADA’s product pipeline remains well-filled so that, in the Executive Board’s view, continuous new product launches, particularly with regard to generics in EU countries, can continue to be expected in the future.

The importance of this successful product development is shown in the sales share of 9% in Group sales generated by products which were introduced in the last two years¹⁾²⁾ (previous year: 8%).

In addition to this high number of successful development projects in the area of classic generics and with selected branded products, the high level of expertise in STADA’s product development can also be clearly seen through a few specific projects.

The development activities of BIOCEUTICALS Arzneimittel AG, a company initiated by STADA and predominantly financed via venture capital, whose business activities focus on biosimilar products³⁾ and whose development activities are operationally carried out by STADA, currently continue to concentrate on Epo-zeta⁴⁾. In addition to studies on pharmacovigilance, an expansion of the existing EU-wide approval for the subcutaneous application in the indication area of nephrology was strived for. After, as is known, the so-called “positive opinion” by the EMA was achieved in the first quarter of 2010⁵⁾, STADA received approval for this additional indication from the EU Commission on April 6, 2010.

The further development of a biosimilar with the ingredient Filgrastim⁶⁾ – also in cooperation and on behalf of BIOCEUTICALS – was suspended until further notice in the financial year 2009; various application opportunities for the development results achieved to date are being investigated.

In the course of the ongoing development activities for the active ingredient Filgrastim, BIOCEUTICALS had obtained protection of patented designs for certain possibilities of stabilizing this active ingredient in liquids, the violation of which through competitive products already distributed in Germany was successfully legally enforced by BIOCEUTICALS. As a result, the defendant competitors reached an agreement with BIOCEUTICALS in the context of an out-ofcourt settlement providing for, apart from a significant lump sum payment in the second quarter of 2009, further sales-related payments to BIOCEUTICALS in the future as long as the respective property rights are effective.

In addition, in the first quarter of 2009 STADA has begun preparatory work for the development of further biosimilar products from the product category of monoclonal antibodies⁷⁾. In 2009, costs for this in the amount of EUR 2.5 million have been accumulated. In this connection, the Company is investigating various financing models, as the development of biosimilar products is connected with significantly higher costs and more risks of failure than is the case for classic generics. From today’s perspective, STADA will not commence the development phase of clinical trials for this project which are expected at the earliest in the financial year 2011, if by then no corresponding financing concept including an external partner can be found.

1)	Financial year 2009 and previous year.
2)	Without products and sales from acquisitions.
3)	A biosimilar is a biopharmaceutical product, i.e. a drug with a protein as biopharmaceutical active ingredient which is produced by genetically modified cell lines which, despite different producing cell lines, compared to an initial supplier product which is already on the market, is so similar that the biosimilar has proven therapeutic equivalence.
4)	Erythropoietin is a biopharmaceutical active ingredient used in nephrology for treatment of renal anaemia for chronic renal insufficiency and in oncology for treatment of chemotherapy-induced anaemia.
5)	See STADA’s Annual Report 2009.
6)	Filgrastim is a biopharmaceutical active ingredient in protein form which is produced by living cell lines and used, among other things, in the treatment of neutropenia, for example following cytotoxic chemotherapy or bone marrow transplants.
7)	The total market potential for selected monoclonal antibodies (Trastuzumab, Rituximab, Infliximab and Cetuximab) is estimated to be approx. EUR 6.3 billion in Europe in 2015.