Emerging markets are key to pharma's long-term growth strategy, but shaky patent protection continues to create tension there. The debate over intellectual-property rights intensified last week as AIDS advocates wrote letters, staged press conferences, and finally crashed the annual shareholder meeting of Abbott Labs in Illinois to call for a global boycott of the drug giant.

Although companies like Merck and Novartis have also battled moves by developing nations--most notably Brazil and India--to break patents and allow the sale of cheaper generics, Abbott's frustration reached the boiling point recently. The company set off a firestorm when it said it would no longer register its new products in Thailand, a stance it had seemed to back away from soon after. But according to the 

, Abbott CEO Miles White told the meeting that the firm would stand by its decision to withhold drug applications, an announcement that was greeted with cheers from shareholders.

The controversy centers on the World Trade Organization's compulsory licensing rules, which--put simply--allow generics makers to produce copies of patented drugs for public health crises, like HIV, in hard-hit, resource-poor nations. Innovator drug companies, however, would prefer to address the crisis through their already-established drug discount programs. Abbott, for example, had previously dropped the annual per-patient cost of Kaletra to $2,200 in Thailand, but local officials argued that that tab remained out of reach. By contrast, the price tag Abbott had set for Kaletra for AIDS patients in Africa is $500 a year.

Before the Abbott dustup, Thailand had strong-armed Merck into offering deeper discounts by threatening to break the patent on Sustiva (efavirenz). Brazil took up the same demand just this week.

IMS Health's recent state-of-the-industry report found that while growth has slowed in Europe to 4.4 percent (or $126.9 billion), sales in Latin America grew 12.7 percent to $33.6 billion, and Asia (outside Japan) and Africa grew 10.5 percent to $66 billion. But Murray Aitken, IMS' senior vice president of corporate strategy, noted that pharma hasn't yet overcome the "tension" between the business opportunities in emerging markets and their evolving patent laws.

The drug industry appears to have the support of US officials, even if its position has been unpopular. The Thai News Agency reported that Ralph Boyce, US ambassador to Thailand, addressed journalists in Bangkok after meeting with Mongkol Na Songkhla, the country?s Public Health Minister. "We respect the Thai government decision to issue compulsory licensing," Boyce said, "but what we would like to see is the negotiations between the Thai government and representatives of major drug companies."

USA for Innovation is running full-page ads in 

, urging Congress to intervene against Thailand's "draconian measures on foreign-owned companies." The nonprofit, which is led by former ambassador Ken Adelman, a member of the Defense Policy Board and senior counselor at Edelman Public Relations--whose clients include Abbott Labs--is also releasing a video about the issue to the "people of Thailand" via YouTube, the video-sharing Web site.

Abbott representatives did not respond to requests for comment. But in a statement they noted that they are compromising with the Thai government by further reducing the price of antiretroviral drug Kaletra/Aluvia (lopinavir/ritonavir). The new price is $1,000 per patient.

Not everyone agrees that drug makers are being victimized in what advocates for people with AIDS have dubbed a "patent vs. patient" battle. Groups ranging from Doctors Without Borders to the AIDS Healthcare Foundation to the Interfaith Center on Corporate Responsibility are pressing drug makers to approach access to antiretrovirals as a human-rights issue.

Articles

Activist protests steal thunder from Abbott's shareholder meeting.

Abbott Is All Thai'd Up in Kaletra Crisis

AstraZeneca has bought MedImmune in an all-cash $15.2 billion deal. And while the larger company's hunger for new products was no surprise, the high price raised plenty of analyst eyebrows--and even some shareholder ire.

With patent expirations coming fast and furious over the next four years, and new products only creeping through the pipeline, another wave of M&As has seemed inevitable to many industry observers. But instead of the stately marriage of giants witnessed during the blockbuster '90s, pharma is now seeing strategic--and, it's hoped, more productive--unions that involve access to specific technologies or compounds.

The MedImmune purchase is AstraZeneca's first venture into the vaccine space--a sign that the market is expanding after risk-averse drug makers scaled back their investments. Five companies now control 80 percent of vax production, according to market research firm Wood Mackenzie, but their expanding bottom lines are attracting competition. A case in point: Sanofi-Aventis--hurt by patent challenges, FDA approval delays, and safety issues (the industry's profit-stealing trifecta)--reported an anemic 2.5 percent growth in its pharmaceuticals division but a far healthier 22.7 percent sales spike in vaccines.

MedImmune has six vaccines in its pipeline, targeting such diverse diseases as pneumonia, avian flu, and Epstein Barr. The Maryland-based pharma already markets Synagis (palivizumab) for an infant respiratory infection and inhaled flu vaccine FluMist. With $1.07 billion in sales, Synagis represented 87 percent of MedImmune's revenue last year, although FluMist scripts have underperformed.

The acquisition also builds on AstraZeneca's foray into biologics, launched last year with its $1.3 billion grab of Cambridge Antibody Technology. "We have taken very decisive action to significantly accelerate...that biologic strategy," said CEO David Brennan. "Strengthening the pipeline has been our highest priority."

The deal adds expertise in infection, oncology, respiratory conditions, and inflammation--creating crossover with therapeutic categories that AstraZeneca is already investing in. The British drug giant previously announced it was changing its R&D strategy, entering more lucrative areas and exiting crowded ones like gastrointestinal and hypertension. MedImmune not only adds 45 R&D projects to AstraZeneca's 118. It also lays the groundwork for further licensing deals in biologics and vaccines, according to John Patterson, who heads development at AstraZeneca. The larger company projects about $500 million in synergies, according to CFO Jon Symonds, who added that MedImmune has an estimated compound growth rate of 12 percent through 2010.

These bright, shining promises sent the price of the deal soaring--to $58 a share, a 21 percent premium to MedImmune's share price and 11 times the biotech's earnings. At AstraZeneca's annual general meeting the day after the deal, shareholders raised their doubts--and voices--about both the price tag and the portfolio fit of the MedImmune merger. According to the 

, one man asked whether it was an "act of desperation, when you have failed in our proven therapies"--a reference to four recent late-stage drug failures AstraZeneca has suffered. Defending the deal, board chair Louis Schweitzer said, "This is clearly not an act of desperation. The MedImmune acquisition was considered by the board months ahead of the decision to buy it." Morgan Stanley, according to Reuters, said the high price "puts significant weight on AstraZeneca to deliver on the proposed synergies." CEO Brennan noted in a conference call that he expects the acquisition to be "earnings enhancing" beginning in 2009.

The size of the deal tops Schering-Plough $14.4 billion offer for Organon--a March merger that seems to have kicked off a seasonal spending spree across Big Pharma.

Pricey merger adds expertise in vaccines, biologics.

Pharmaceutical Executive-05-02-2007

Abbott Is All Thai'd Up in Kaletra Crisis

AstraZeneca Serious, 'Not Desperate,' in MedImmune Deal