The generic business model is based on LOE of innovators. Once the IP landscape is clear, and the compound is no longer protected by patents, the generic company can launch a cheaper version of the drug, without having to redo all the R&D. The big buck In the generic industry, especially in the US, is to be first to fight. This is really the holy grail of the generic industry. Generic manufacturers, being first, can make the difference between making a fortune, or making a living. Why? Because if you're first to fight, when the it gives you six months of market exclusivity. It means that for six months you are the only generic allowed on the market. And during that period, well, you can give a much smaller discount, let's say 20% versus the branded drug, and still enjoy automatic substitution at the pharmacy. But even if you get the first to fight, and get the market exclusivity, it only lasts for six months. So, you need to constantly refuel the pipeline because after six months, the sales decrease as a consequence of increased competition. And you end up with more players and you have to face price competition. So let's see how this translates into the REM cycle. First you need to moderately invest into R&D. All you need to do is PKPD versus branded drug. The whole process, including the regulatory part, should take you less than two years. The cost is relatively low too, less than five million, and the probability of success is relatively high, on average 90%. When you make it to the market, sales are relatively low, so if you get 100 million peak sales, this is good. Of course, this is a function of the innovator cells and your timing of entry. So if you enter first and you get the six months' exclusivity, you can 90% of the branded volume at 80% of the price. So that's not bad at all. So let's look at the real life example. If we go back to the Lipitor case, the company who managed to file first is Ranbaxy. In 6 months, they made 600 million and this is 25% of their normal revenue. So this is great, if you manage to file first. The problem is you don't always manage to file first. So, what really happens most of the time? Well, your sales portfolio also includes products where you were a later entrant. So, the reality is that the generic business, is a mix between low volume, high price. So this is when you get the six months of exclusivity. And hypo and low price. So this is when you don't get it. So, let's have a look at an example. So, here, it's a sales portfolio with three products in it. So, the first product, you managed to finlefirst, so you did great. You got the six months exclusivity, and you're able to give a 20% discount, versus Whereas the second product you entered right after the six months exclusivity that somebody else got. You compete in price and you offer 50% discount. And finally the third product you have in this portfolio you entered late in the game. There were already many players and you have to give a deep discount to win market share. So here you give a 75% discount. So, with this example, you can see how a generic portfolio is a mix of different launch timing situations. So now that you have a good overview of the generic model, let's move to the third major business model, the OTC model. In OTC, the drug is a generic drug but with a very safe product profile, which allows the patient to obtain the drug without prescription. The fact that the patient can obtain the drug without prescription, is really key in this business model because now, you can communicate directly to the consumer. So, the OTC business model is really closer to fast moving consumer goods, than really, to the pharma prescription industry as we know it So we need to constantly bring them to the same product. New formulation, new packaging, new, new, new, is the keyword. And pipe line is key again because you need to provide something new to the consumer all the time. So let's have a look at the Ibuprofen market. So what you do is you can have the same compound. You can have different brands. So you can have for example Advil or Nuropen or Motrin. They all do the same, that according to whatever, which one sounds the best to your ears, you may go with Advil, for example, which is my case. Then what happens is within the same brand, you segment your patients as well to maximize your sales, So you can segment by indications. Here for example, we can have Advil for muscle and joint pain, for arthritis, for migraines. You can also segment by age, adults versus children and you can also segment by drug format. So, for example, tablets versus liquid gels and within the scene, friends, what you can do additionally is for the same brand and the same indication, you can create a 360 solution. So here you have muscle and joint pains, okay, well, we have the solution for you. So here you can buy the caplets and you can also get the patch, and if it still hurts, well, you can add the cream, and then, hopefully, you feel much better. So you start to see how OTC is an entirely different animal on its own. So, speaking of animal, let's have a look at the Lamisil case. Lamisil in the West first launched in the 1990s. It's a great example of life cycle management. It started as a prescription pill for onychomycosis, then Novartis expanded the indications to include athlete's foot, and topical forms. And after exclusivity in 2007, Lavertis launched the OTC version. Over the years, they built great brand equity with Digger as a prescription drug. And the leverage is brand equity in OTC. So, This is base on direct to consumer marketing. And what you doing with direct to consumer marketing is that you do patient education, you explain what is the diseases about. So you explain what is a necomycosis and you also provide a solution. So here's Lamisil. So let's have a look at this ad from the artist. This is from 2003 at the time that Lamisil was still a prescription drug. >> Hey, hi. I'm Digger. Don't mind me, I'm just a demadiphite, you know, a nail infection. All I want is to get in here and live under your nail. You can't get me with clippers or those surface treatments you try on your own. I'm in too deep in your nail bed. I'm ever so comfortable, and might invite a few friends to settle in. >> Do you have thick, discolored, or flaky nails? Millions of people do. It may be caused by an active live infection. That's why you should ask your doctor about prescription only Lamisil. Unlike surface treatments, Lamisil is a pill that works through the bloodstream to target and attack the infection at its source, underneath the nail. In fact, you can start to see clearer healthier nails in just three months. Lamisil isn't for people with liver or kidney problems. Rarely, serious side effects in the liver or serious skin reactions have occurred, so your doctor may do blood tests. Other side effects, including headache, diarrhea, indigestion, and rash were generally mild. Ask your doctor about Lamisil. It's the number one brand for treating infected nails. Once daily Lamisil tablets. Get your nail infection where it grows. >> In 2007, when Lamisil lost IP exclusivity, Novartis launched the OTC version of Lamisil and Digger had to change careers from onychomycosis to athlete's foot. So let's have a look at what Digger is up to lately. >> Hey it's me, Digger, the athlete's foot fungus. You know what I love about the beach? Plenty of bare feet for me and my fellow foot fungi to feast on. All we need is some wet ground and you could be itching and burning in no time and once we get under your skin, we tend to stick around for a while. >> Got Athlete's Foot? Get Lamisil AT- >> [SOUND] >> The only gel with a powerful active ingredient that stays in the skin until the fungus is gone. Lamisil AT, wipe out athlete's foot. >> So now that you understand the importance of the pipeline, it's time to look at ways to get more compounds
