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Interview

António Donato, Vice President, Tecnimede Group, Portugal

05.02.2014 / Pharmaboardroom

antonio-donatoAntónio Donato, Vice President of Tecnimede Group, Portugal, discusses the Portuguese company’s internationalization and expansion process while highlighting the ways in which the Portuguese pharmaceutical environment must change in order to bring about a stronger local industry.

What challenges or opportunities has you experienced being part of a local company during the last few years in these difficult economic times?

The current economic crisis demonstrates that success is not carved in stone and the situation can change sharply overnight. For us it was a trigger for accelerating processes toward the internationalization of the company.

The impossibility to precisely predict new measures is an even greater challenge than the economic crises. We never know what is coming; we just know it is not good. It is increasingly difficult to plan and make strategic decisions.

Nevertheless our decision was to diversify our source of business. In the domestic market, this involved covering different opportunities emerging from making use of shared internal resources while splitting commercial models, such as generics, brands and healthcare. In foreign markets Tecnimede has concentrated its resources in generics. As attractiveness in terms of forecasted growth it is not fantastic in Europe, several Latin American and Asian countries are among our targets. Either we are already selling, transferring technology or registering.

Could you provide us with an overview of the state of the generics industry in Portugal?

As in recent years, generics currently present a negative growth rate in value, and considering that they are already accepted by the majority of potential users, one could consider Portugal a mature market for generics. Contrastingly, there is not a very high concentration of suppliers. There are still several competitors, most of who struggle to survive due to strong price erosion in the last couple of years. To play a role in the health system sustainability, generic manufacturers need stability and predictability. They cannot be just a political instrument to cut prices or a flag that flutters from time to time.

Access to the market is crucial. With unpredictable current arbitration procedures and huge costs, to decide whether a generic infringes a patent or not is absurd both for generics and originators. Nevertheless, by ranking, the biggest generic company in Portugal is an international group of three branches, the second is a Portuguese company, and the third is also Portuguese, our group (Farmoz and Pentafarma together).

Last month, PharmaPortugal and INFARMED agreed to promote the export and internationalization of domestic pharmaceutical companies in Portugal by streamlining procedures for exporting, including certificates of good practices, manufacturing authorizations and product certificates. Realistically, how effective will this be?

As a result of local economic crises the issue of internationalization is becoming more and more important for Portuguese companies. The pharmaceutical market is heavily regulated, and differences in regulatory systems typically lead to restrictions on the registration of medicines or establishment of new companies, which significantly impacts entry in some markets. Regulatory challenges are economic in nature, and are a consequence of issues like barriers to trade and internationalization. As such, cooperation and discussion with INFARMED and other competent authorities are crucial to the evaluation and definition of how Portuguese companies can enter foreign markets.

What is your internationalization strategy? Will you be looking beyond Portuguese-speaking countries?

We will. As a result of growing globalization, language is no longer a barrier. For instance, although Brazil is a Portuguese-speaking country, their pharmaceutical regulation is much closer to the FDA than European guidelines. Internationalization is a process that includes many incremental decisions and is influenced by several factors in the regulatory and local value chain environments. We can follow this process of adapting our files and products to international markets, particularly with the help of our agency. Internationalization into emerging markets involves a great deal of risk both politically and economically. A smoother regulatory path would greatly help the industry.

In order to succeed we need to have more countries and territories to the network. This does not mean we cannot expand in the R&D area. Realistically, Tecnimede needs to have four times its current sales in order to be considered a mid-sized pharmaceutical company and to generate enough money to support the full development of new chemical entities. Essentially, we need more volume and territories.

We have heard that the government has been pushing generics as a means of cost cutting for pharmaceutical expenditure. How have the generic branches of the Tecnimede group been able to take advantage of that?

Indeed, in our Tecnimede Group we have two generic branches in Portugal. We rank among the list of Portuguese companies with the biggest R&D investments. A significant part of this investment is dedicated to generic drugs development (capacity to go up to 15 files per year). Therefore, we can offer high quality generics and be seen as a major contributor to the sustainability of our healthcare system by providing savings, while increasing patient access to affordable treatments.

But the aim should really be savings instead of cost cutting. If a rational approach is not taken for costs, the entire sector may be at risk. We should take into account that the growth of generics segment is healthy, since for every euro this market grows, several euros are spared in overall spending, opening the door for innovation.

What is the breakup of revenue between your different activities in the Portuguese marketplace?

With the three branches together, Tecnimede, Farmoz and Pentafarma, we rank 13th according to IMS. Besides these commercial branches we also have very significant out-licensing activities in the domestic market. Next year generics will share 45 percent of our domestic sales, 30 percent brands and licenses, and 25 percent fees and supplies.

Tecnimede enjoys strategic partnerships with CROs based in Spain and Canada. Canadian contract research is well known for its high quality. What has this brought to the organization back home?

We decided to work with those CROs because they were able to give us what we wanted in terms of speed, quality, strategic and long-term collaboration, deep professional ties and trust. We always learn from the best. But we also have several different kinds of cooperation either with international private companies, or with universities. For example, in order to develop difficult-to-make products like biotech products, subcutaneous implants or new modified delivery systems, Tecnimede has created strategic industry-university partnerships that will substantially improve our ability for innovation and research.

How resistant are you to the idea of entry of foreign capital into the company’s shareholding structure? Do you anticipate much room for near-term consolidation in the Portuguese pharmaceutical industry?

Tecnimede is a privately owned company and it is not expected to change. This does not mean that in foreign markets we will not enter into joint venture agreements or alliances that facilitate our internationalization process. Some already exist and others are being discussed.

More than consolidation, Portugal needs cluster-based strategies. Organizations must focus on building an identity for a cluster, enhancing innovation though joint R&D projects, as well as focusing on business development, exports, joint acquisitions and international cooperation.

What is your strategic vision for the next three to five years?

Drugs are critical to improving and maintaining health, but controlling cost will remain a major challenge.

The core of the new drugs launching model will be diffusion, or the way to spread the innovation, among influencers and deciders as well as market access strategies. Regarding generics, it will be crucial to find the right trade-off between healthcare system savings and companies’ sustainability.

In the last few decades there have been several examples of successful companies just because they were able somehow to predict the future. Now the goal is to be as flexible and as fast as possible in order to be prepared for any new challenge. Because the pharmaceutical market is constantly changing, a company’s greatest asset is not a long-term competitive advantage, but rather the ability to respond to those changes.

One of the largest drivers in internationalization is a reactive motivation by which companies seek to respond to a decrease of domestic sales or increased competitive pressure. If you cannot find another driver, follow this one. But internationalization decisions are long-term, and involve substantial investment, time and expertise. It also involves in depth diagnosis of your company, identifying strengths and limitations.

To read more interviews and articles on Portugal, and to download the latest free report on the country, click here.

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