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AstraZeneca (NYSE:AZN) to be Supplied by Torrent Pharmaceuticals


Thursday, March 11th, 2010

AstraZeneca (NYSE:AZN) has made a long-term deal with Torrent Pharmaceuticals to provide them with generic drug products.

Costs to manufacture generic drugs are about 75 percent less than costs in mature markets, making it a highly desirable place to make these types of deals. Several companies have recently made generic product deals with Indian companies, and that is sure to increase as cost controls become even larger factors in doing business.

Torrent already has licenses to operate in a number of countries. AstraZeneca will take those generic medicine and re-brand it under their specific labels, with a large number of them being in emerging markets.

The original strategy will be to acquire 18 products from Torrent, which would include the authorization to market via the licenses. Those products will be marketed in nine countries to begin with, while looking to expansion at a later time once they've established themselves in the original nine markets.

With patent protection running out on some of AstraZeneca's larger drugs, this is probably a move to generate revenue and profits as this happens by 2014.

Three of the best-selling patented drugs will be included in the loss of patent protection: Crestor for lowering cholesterol, Seroquel for cancer and Nexium for ulcers. That leaves a huge hole to fill, the reason for making this move at this time.

This is a great way to do business when you look at it, as the costs of creating new drugs and getting them patented, accepted and marketed takes a huge amount of time and money with no guarantees.

Taking existing generic drugs and branding them is a very cost-effective way to do business and generate revenue and solid profits, while a company works on unique products of its own, while still not needing to count on major breakthroughs to survive.

Cost is a major factor in general, as servicing emerging markets is the growth area of the future for the pharmaceutical industry, which is estimated to account for 70 percent growth in the sector over the next five years.



Article by Gary B

The views expressed are the subjective opinion of the article's author and not of FinancialAdvisory.com



Tags: astrazeneca , generic drugs , torrent pharmaceuticals