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STADA - A leading position in product development

Strategic and organizational basis of development activities

On the basis of the strategic positioning of the Group, STADA deliberately does not conduct any own research on new active pharmaceutical ingredients, but rather focuses on the development and marketing of products with active ingredients – generally pharmaceutical, which are no longer subject to any commercial property rights, particularly patents.

STADA’s development activities aim to achieve market readiness for new or optimized products. In the case of pharmaceuticals this is achieved by obtaining a national approval from the respective responsible regulatory authorities in the scope of differentiated, partly supranational approval processes.

The Group’s development activities are aimed at the long term, in order to drive organic growth via a continuous flow of new product launches in the core segment Generics. In this regard, STADA is already working on the development of generic products with potential launch dates after 2017. STADA calculates the regulatory preparation time including an approval period for generics with Group-wide relevance as currently at least three years. Products which the Group wants to launch within this time frame are thus generally already in the approval process today.

In view of the importance of successful product development, the planning and organization of product development at STADA is primarily centrally structured. The individual projects are realized either in the Group’s own development centers or in the scope of subcontracted development. In addition, in some projects, STADA partially or fully acquires third party dossiers or approvals.

In the scope of its development activities, STADA relies on an international network of internal and external development partners. In this regard, the Group – as is usual in this sector in some cases – also enters into joint development projects with competitors. Against this backdrop, long-standing expertise in managing such a network cost-effectively and in terms of the respective commercial property rights in a timely manner ranks as one of STADA’s strategic success factors.

For several years, the Group has increasingly focused on expanding the internal development activities, in order to increase the number of in-house developments of strategically important and high-sales products. This is at the same time associated with optimization of the procurement and production costs of new products in the first few years of marketing, as in this way STADA can reduce the potential acquisition of dossiers and the associated initial supply commitments.

As far as possible, STADA uses newly developed products for Group-wide marketing, primarily in the EU. In view of this, the Group has the goal of achieving international and supranational, in particular EU-wide approval procedures, in order to achieve numerous national approvals of a product in different EU countries nearly simultaneously. 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 fall back on a standardized wording. The international orientation of development activities also aims at generating economy of scale effects through optimized batch sizes.

In the case of other strategic objectives for the Group-wide development activities, STADA differentiates between the two core segments Generics and Branded Products, as they have different sales requirements.

The clear focus here is on development activities for the Generics core segment, as, with a share of 69% in Group sales, it has significantly higher importance. With a view to the local patent and approvals situation as well as the respective market strategy, STADA or the STADA sales company responsible decides which active pharmaceutical ingredients are to be launched at what time into a national market. In general, STADA aims to have completed the development of all internationally sales-relevant strengths and dosage forms of an active
pharmaceutical ingredient as early as possible, in order to make them and all required approvals available to individual sales companies on time after the expiration of a patent and/or commercial property right, as the long-term success of a generic also depends on its time of launch.

In this context, observing commercial property rights takes on crucial importance as their scope and duration can be very different depending on the market. As a precautionary measure, STADA management and Group management regularly receive legal recommendations on commercial property rights from internal and external experts. However, before and after the launch of new generics, there are in some cases legal disputes initiated by initial suppliers which are contrary to the Group’s assessment and, in exceptional cases, can lead to a negative result for STADA.

As 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, development in this core segment can be better targeted towards individual national markets and have more flexible scheduling than is the case for Generics.

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

In addition to the clear focus on the development of new products, the Group also pursues 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 carry out their own complementary development activities for certain products in their respective national market.

Sustainable and successful product development

As in the past, the sustainable and successful development and approval activities of the Group can be seen from the high number of annual product launches. In financial year 2010, STADA demonstrated this strength with the introduction of 572 individual products worldwide in individual national markets (previous year: 486 product launches) – once again the highest number in the Company's history.

The significant importance of this successful product development can be seen from the 10% of Group sales generated by products which STADA introduced in the last two years¹⁾²⁾ (previous year: 9%).

The high level of expertise in the area of product development in the STADA Group is demonstrated not only by the high number of successful new launches in the area of classic generics but also by several specific projects.

These include the development activities of BIOCEUTICALS Arzneimittel AG, a company initiated by STADA and predominantly financed via venture capital, whose business activities are oriented to biosimilar products³⁾ – and continue to concentrate on Epo-zeta⁴⁾ – In addition to studies on pharmacovigilance, in the context of these development activities, the Company strived for another expansion of the existing EU-wide approval for the subcutaneous application in the indication area of nephrology. After the so-called “positive opinion” by the EMA was achieved for this in the first quarter of 2010, STADA received approval for this additional indication from the EU Commission in the second quarter of 2010.

Overall, STADA launched 437 individual products worldwide in the first nine months of 2011 (1-9/2010: 442 product launches) in individual national markets.

In the third quarter of 2011, STADA Arzneimittel AG and Gedeon Richter Plc. signed two separate license and collaboration agreements for the development and marketing of two biosimilar products for the two monoclonal antibodies Rituximab and Trastuzumab.⁵⁾

In view of the product pipeline, which remains well-filled, the Executive Board expects a continuous flow of new product launches to continue in future, with a focus on generics in EU countries. 

1)	Financial year 2010 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-zeta 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 the Company’s corporate news of August 30, 2011