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STADA - A leading position in product development

Strategy and organization of development activities

For strategic reasons, STADA does not conduct any own research on new active pharmaceutical ingredients, but rather focuses on the development of products with active ingredients – generally active pharmaceutical ingredients – which are free from commercial property rights, particularly patents.

By observing this premise, all development activities within the STADA Group are aimed at achieving market readiness for new or optimized products. In case of medical products this is usually associated with obtaining a national approval from the responsible supervisory agencies in the scope of different, partly supranational approval processes.

STADA’s intended organic growth is based on the fact, among other things, that every year the sales companies are provided with a continuous flow of new products. This applies to the core segment Generics, in particular. Therefore the Group’s development activities, especially in terms of generics, are aimed at the long term; STADA is already working on new generic products whose potential launch dates are beyond 2015. Currently the approval horizon for generics with a Group-wide significance is usually at least three years. Products which STADA plans to launch in this period have usually already been entirely developed today and are in the approval process.

In view of the great importance of a successful product development for Group success all development projects for significant new products for the Group are usually centrally organized. The individual projects are realized under central control either in the Group’s various own development centers or in the scope of subcontracted development if the Group does not decide in favor of partial or full acquisition of third party dossiers and approvals. STADA thus makes use of a worldwide network of internal and external development partners – also, as is usual in the industry, by partially including competitors. One decisive success factor in this is STADA’s high degree of expertise to monitor such a network in a cost-oriented and timely manner by respecting the relevant commercial property rights.

Within the context of its development strategy STADA, for several years, has continuously expanded its internal product development capacities in order to increase the number of in-house developments of strategically important and major products. At the same time, this is associated with a reduction of initial supply commitments which, in turn, entail lower procurement and production costs in the first years following the market launch of such products. An increasingly significant role in the growing number of in-house developments is played by the various Group-owned development locations in low-cost countries.

Since the Group wants to use newly developed products for international marketing if possible, particularly also in the EU, STADA makes use both of national and supranational, particularly EU-wide approval procedures. With this a multitude of national approvals of a product can be achieved simultaneously in different EU countries. If STADA conducts approval procedures outside of the EU, the Group strives for these to be conducted, if possible, on the basis of the EU dossier of the corresponding product. With this international orientation of development activities, STADA aims at generating economy of scale effects through optimized batch sizes. For this, it is necessary to be able to fall back on a uniform formulation of a product within the Group, if possible on a worldwide scale.

The other strategic objectives of the development activities differ between the two core segments due to different sales requirements.

In the core segment Generics STADA sets the clear focus of the Group’s central development activities, these are aimed at providing, if possible, all international sales-relevant strengths or dosage forms of an active pharmaceutical ingredient for the Group portfolio as early as possible in an entirely developed form and equipped with all relevant approvals.

Depending on the local patent and approval situation as well as market strategy STADA then decides which active pharmaceutical ingredients are included in the local product portfolio of a sales company and at what point in time. In this context the launch of new generics is strived for promptly after the expiration of patents or commercial property rights because this significantly determines the long-term market success of generics.

In determining the respective concrete launch date for a generic in a national market, the Group’s expertise regarding the relevant commercial property rights is of crucial importance because their scope and duration can vary greatly from market to market. Both internal and external experts contractually committed to STADA regularly provide local management and Group management with legal assessments on the relevance of commercial property rights for individual products.

The activities for the development of new Branded Products are aimed at product and country-specific growth and/or earnings opportunities as well as compatibility with existing portfolios and Group structures. Therefore, product development in this segment can be better targeted toward individual national markets and have a more flexible time-frame.

This is complemented by individual local business units conducting their own development activities for new products that are not significant for the Group.

In addition to the clear focus of STADA’s product development, 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 from their national market environment.

The strength of STADA’s product development

STADA’s development and approval strength is mirrored in a constant flow of product launches. Thus, in 2008, 483 individual products were launched worldwide at Group level (previous year: 424 product launches) in individual national markets. That has been the highest number of product launches in the Group’s history as yet.

Overall, STADA launched 335 individual products worldwide in the first three quarters 2009 (1-9/2008: 322 product launches) in individual national markets.

The continuing well-filled product pipeline at STADA leads to the expectation, in the view of the Executive Board, of a continuous flow of new products in the future, particularly from generics in EU countries.

The importance of the successes in product development becomes evident in the fact that 8% of STADA’s sales are borne by products that were launched in the market¹⁾ within the last two years²⁾³⁾; this value is in the area of the respective previous years and is proof of the STADA Group’s continuously high development performance.

In addition to this wide range of successful development projects, STADA’s product development is also characterized by successes with several special projects.

Based, for example, on work done by the Group’s Serbian development center, the Group achieved an FDA⁴⁾ approval for the production and the export to the USA of the product Lemod Solu^® (injectable Methylprednisolone⁵⁾ in the strengths 40mg as well as 125mg in a special dual-chamber ampoule) in the fourth quarter of 2008. The feature of this product is the special application form of a dual-chamber ampoule which makes for a comfortable, i.e. quicker and safer application and which, as yet, no other generics supplier worldwide has in its product port folio in this form. Against this backdrop there is the opportunity for the STADA Group to expand export to the USA by several million euros per year over the next years.⁶⁾

Moreover, the market launch of the first biosimilar by sales companies of the STADA Group was particularly outstanding in 2008. 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. The development of biosimilar products is connected with significantly higher costs and more risks of failure than is the case for classic generics.

Against this backdrop, the Group makes use of the development of the two biosimilar products Erythropoietin-zeta (Epo-zeta)⁷⁾ and Filgrastim⁸⁾ which has been pursued since 2001 via BIOCEUTICALS Arzneimittel AG, a company initiated by STADA and predominantly financed via venture capital, in which STADA has a shareholding of 15.86%.

After the successful approval of Epo-zeta for the indications nephrology and oncology for the EU and for Serbia in the fourth quarter of 2007, STADA launched Epo-zeta as the Group’s first biosimilar product via the Group-owned subsidiary cell pharm Gesellschaft für pharmazeutische und diagnostische Präparate mbH under the brand name SILAPO^® in Germany and via the Serbian sales company Hemofarm under the brand name Eqralys^® in fiscal year 2008; both sales companies hold corresponding semi-exclusive sales licenses from BIOCEUTICALS for their respective national markets.

For the second biosimilar project Filgrastim, for which cell pharm holds an exclusive worldwide sales license, first clinical studies, have been underway since the second quarter of 2007. Against the backdrop that first competitors have already received an EU-wide approval for a Filgrastim biosimilar it will, however, have to be reviewed in the remaining course of the year in view of these competitors’ market data which will then be available whether the continuation of the Filgrastim project by BIOCEUTICALS and the later marketing through cell pharm remain economically promising.

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 antibodies, reviewing at the same time various financing models; with this, the development pipeline is to be expanded by important biopharmaceuticals at an early stage.

Finally, for the first time STADA, in fiscal year 2008, obtained approvals in six European countries for the prefilled syringe dosage form for the branded product Apo-go^®, which was also purchased in the context of the acquisition of the British Forum Bioscience Group in 2007; the international marketing of this branded product which has until now been primarily sold in the United Kingdom and Ireland thereby received important impulses, opening up opportunities for significant additional sales in the double digit million area with this product in the following three years.

1)	Reporting year 2008 and previous year.
2)	Without products and sales from acquisitions.
3)	Without sales of generics with the active pharmaceutical ingredient Olanzapine launched in Germany in November 2007 whose sale was terminated by the German sales companies in 2008 after a negative patent decision.
4)	Food and Drug Administration. (FDA): approval, supervisory and monitoring authority for the US pharmaceutical market.
5)	Methylprednisolone: active ingredient from the substance class of corticoids for the emergency treatment of infectious diseases.
6)	An exclusive sales license for Lemod Solu® for the USA was awarded to the US hospital products company Hospira Inc., Lake Forest, Illinois.
7)	Erythropoietin (abbreviation Epo) is a biopharmaceutical active ingredient in protein form, which is produced by living cell lines. Depending on the individual cell lines used and the production process associated with it, so-called glyco structures (oligosaccharide-chains) can differ minimally. Epo-alpha and Epo-beta, among others, have been on the market already for some time; the Erythropoietin biosimilar being developed by BIOCEUTICALS is Epo-zeta. Erythropoietin is used in nephrology for the treatment of renal anemia with chronic renal insufficiency and in oncology for the treatment of chemotherapy-induced anemia.
8)	Filgrastim (also called G-CSF) is a biopharmaceutical active ingredient in protein form, which is produced by living cell lines. Filgrastim is used, among other things, in the treatment of a neutropenia, for example following cytotoxic chemotherapy or bone marrow transplants.