| Summary: | 碩士 === 東吳大學 === 法律學系 === 105 === The biopharmaceutical industry is a critical industry related to people's livelihood and health. Thus, the product of biopharmaceutical research and development is often regarded as an important indicator for the development of the biopharmaceutical industry in the country. The process of developing a new drug has the characteristics of long process of R&D, high investment costs, high risk, high failure rate as well as high return rate once the new drug can be successfully launched onto the market. As a result, the developing process heavily relies on the protection of intellectual property rights, especially on the protections of patent and data exclusivity.
Before a new drug can be introduced to the market, it has to go through a long period of developing process like drug discovery, pre-clinical trial, clinical trials and New Drug Application, etc. However, a new drug has its licensing values in its different developing stages. Thus, the biopharmaceutical companies will often apply for patent protection for product’s active pharmaceutical ingredients in the early stage of developing process before the clinical trials. On the other hand, the biopharmaceutical companies will also carry out a strategy of product life cycle management to maximize the value of a new drug and minimize the competitive impact from generic drugs once the term of patent protection for the new drug expires. For example, the biopharmaceutical companies often apply for different patents to protect formation, indication expansion and combination drug in the process of development. Before the terms of all patents expire, they will switch prescription drugs to over-the-counter (OTC) drugs.
As to the new drug application (NDA), this thesis focuses on the legal procedure of the United States. In order to encourage generic drug competition and pharmaceutical innovation, reduce healthcare costs, and accelerate the approval process for generic drugs after the patent protection for brand-name drugs expire, the U.S. Congress passed “The Drug Price Competition and Patent Term Restoration Act” in 1984, commonly known as “The Hatch-Waxman Act.” The Hatch-Waxman Act has not only created a statutory generic drug process with section 505 (j) to establish the abbreviated new drug application (ANDA), but also introduce a patent linkage system and 180 days of market exclusivity for the First-to-File generic drug manufacturer who files Paragraph IV certification and wins a patent litigation with brand-name pharmaceutical company to get FDA’s approval. On the other hand, for the biologic drug products, the Congress referred to the purpose of Hatch-Waxman Act and enacted “The Biologic Price Competition and Innovation Act (BPCIA) of 2010” to regulate biosimilar products and the abbreviated Biologic License Application (aBLA). The BPCIA opens a wide door for global biosimilars to enter the U.S. market.
Since 2000, the traditional large pharmaceutical companies have confronted the problems of low outputs of R&D, high investment costs, and difficulties to introduce a new drug to the market. Those companies were neither able to control the entire process of developing a new drug from the stage of drug discovery to marketing, nor can they monopolize the whole market shares as they did before. From 2009 to 2018, the world’s top ten branded drug companies all confronted with big revenue losses due to the term of patent protection for the blockbuster drugs expired, which was so called the impact of “Patent Cliff”. In the meantime, those drug companies were also facing the fierce competition from generic drugs to share the new drug market. Under those circumstances, many global pharmaceutical companies often adopt the strategy of mergering and acquiring other biopharmaceutical companies or biotechnology companies in order to directly acquire the listed drugs in the market for compensating the big losses of the corporate revenues. Besides, through merger & acquisition deals, the acquiring companies also can enlarge their product pipelines, enter a new market and emerging key areas of medical drugs like the biological therapies for cancers.
During the global financial crisis, in the first half of 2009, there were several merger and acquisition transactions happened in the biopharmaceutical industry. Among the deals, there were three famous deals that caught the world’s attention. They were Pfizer merged with Wyeth, Merck merged with Schering-Plough and Roche acquired Genentech, Inc. This thesis takes the above three merger & acquisition cases as an example to discuss the background of the case companies and the motivation, strategies, models and product portfolios of the merger & acquisition deals. Besides, this thesis will also study how the IPR play a key role in the merger & acquisition transactions.
Through the analysis of the advantages and disadvantages of the three merger and acquisition cases, this study summarized that the value of the acquired companies mainly came from FDA approved drugs, promising drug candidates, key therapeutic drugs to treat cancers, complementary drugs and so on. This study found out that the acquired companies often adopt the strategy of product life cycle management in the stage of drug discovery to maximize the drug value and reduce the impact of generic drugs. Nowadays, with the expiration of patent protection for brand-name drugs, the fierce competition from generic drugs and the pressure of low R&D productivity, more and more companies adopt the product life cycle management to protect their market position long before the expiration of patents covering their drugs.
Since the global drug market has been shifting from traditional drugs to biologics, many international biopharmaceutical companies also shifted their focus from small molecular drugs to biologics. However, the biologic products will also confront the expiration of patents during 2010-2020. The patent expiration causes a sharp and sudden great loss in revenue for big biopharmaceutical companies as generic drugs entering the market. If the generic drug companies in Taiwan intend to enter the U.S. generic market, the companies should have winning patent litigation strategies to invalid the patents of brand-name drugs and get 180 days market exclusivity for the first-to-file generic drug company.
In order to enhance the global competency and enter the global drug market, the biopharmaceutical companies in Taiwan should follow the example of international big pharma companies to merge and acquire other companies for the purpose of acquiring complete product pipelines and strengthening their R&D capabilities. Under the trend of merger and acquisition in the global biopharmaceutical industry, I hope this thesis can be a reference for Taiwan’s biopharmaceutical companies for adopting merger and acquisition strategy in the future.
Keywords﹕Biopharmaceutical Industry, Brand-Name Drug, Generic Drug, Intellectual Property Rights, Drug Life Cycle Management, Merger and Acquisition, Due Diligence
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