By Tracy Staton and Nesa Nourmohammadi
For generics makers, Big Pharma's patent cliff is more like a mountain. With preparation and drive and some luck, companies that specialize in copycat drugs can climb from one newly off-patent blockbuster to another, adding millions in sales along the way. Sometimes many millions: Ranbaxy Laboratories reportedly reaped $500 million in sales from its knockoff of Pfizer's ($PFE) cholesterol pill Lipitor during its first 6 months on the market.
Plus, branded drugmakers have been diversifying to make up for plummeting sales of their no-longer-exclusive megadrugs. Sometimes, that means joining hands with their generics-making rivals, often to take advantage of their low-cost production and broad access to markets in the developing world.
That's a double dose of growth serum for generics makers. No wonder, then, that some generics companies posted high double-digit growth rates last year. In fact, our fastest-growing generics maker, Sagent Pharmaceuticals, saw sales skyrocket 106% last year.
Consider Watson Pharmaceuticals ($WPI), which rolled out one blockbuster copycat after another, from an authorized version of Johnson & Johnson's ($JNJ) ADHD drug Concerta to its authorized Lipitor copy. Its 2011 growth rate was 46%. Or Dr. Reddy's Laboratories, which boosted sales 34% on copycat versions of Pfizer's $1.8 billion stomach drug Protonix and Eli Lilly's ($LLY) top-selling antipsychotic pill Zyprexa, among others. Meanwhile, partnerships and outright acquisitions pumped Sanofi's ($SNY) generics sales up 19% last year, making it the Big Pharma closest to qualifying for our list.
Taking full advantage of the patent cliff, some say, requires more than new products. It requires scale, not just for its well-known economies, but for sheer capacity. Ranbaxy provides another Lipitor-related illustration: It had a 6-month lock on Lipitor generics because it was first to file for FDA approval. But Ranbaxy wasn't absolutely sure it could fulfill the massive orders that would come in, not when it was still working with the FDA to resolve long-standing manufacturing violations. So, it made a backup pact with fellow generics giant Teva Pharmaceutical Industries ($TEVA).
When companies want scale, what do they do? M&A. Perrigo ($PRGO), the second fastest-growing company on our list, nabbed Paddock Laboratories last year for $540 million, while Watson bagged Greece's Specifar for $562 million. On a smaller scale, the Polish generics specialist Polpharma (our 10th fastest-growing, at 22%) has bought stakes in several emerging-markets drugmakers, including Turkey's Cenovapharma and Russia's Akrikhin. Dr. Reddy's, in 6th place, is eyeing deals in Russia now, and Watson, in fourth, has already agreed to buy the Swiss-based Actavis.
Before we turn to the first company on our list, which is growing via a very different yet very effective strategy, we'll cover the basics. This ranking is based on companies' generic sales only, as reported by EvaluatePharma, which also crunched the numbers. We edited the list a bit by knocking out companies with 2011 sales of less than $150 million. That made our cut-off growth rate 22%, creating a tie for 10th place between Polpharma and Hi-Tech Pharmacal. Read more for all the nitty-gritty.