EP Vantage Interview - Dong-A seeking partners as Korean group looks abroad

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Dong-A, South Korea’s biggest drug maker by sales, is looking for a partner for its erectile dysfunction drug Zydena, which is in the same class as Viagra and a product it wants to start selling abroad following success in its domestic market, the company’s head of corporate strategic planning, Theodore Kim, told EP Vantage this week.

The move is part of the company’s strategy to seek growth in foreign markets, which has also seen the 75 year old company adopt a more “western” management style, publish its annual report and website in English for the first time, and attempt to become more transparent financially. Dong-A is also seeking partnerships in other areas such as generics, which it hopes will stand it in good stead amid a restructuring of the South Korean pharmaceutical industry.

The group is listed on Korea’s stock exchange and has a market capitalisation of almost $1bn. It has approximately a 6% share of the country’s very fragmented pharmaceutical market, which is forecast to be worth $12bn this year. The top 10 companies, which include most of the well known multinationals, only control around a third of the market.

Set for change

The South Korean pharmaceutical industry is set for change, largely driven by Government initiatives, Mr Kim says: “The government is demanding industry invest in US/EU standard GMP facilities, therefore companies other than the top players could face difficulties financially to comply."

On top of that, a change in pharmacy law in 2000 has lead to big shifts since it stopped pharmacists writing their own prescriptions, leading to a decline in the over-the-counter (OTC) market, as compared to the prescription drug segment. At the same time, patent laws are being tightened, improving the environment for branded, original drugs.

However, there is little opportunity for consolidation of the Korean industry through acquisitions, Mr Kim says, because the country’s industry is dominated by small players who do not have manufacturing operations that live up to international standards, and who are often focused on slow growing OTC drugs. Of the companies that sell their own branded prescription products, they are in conflicting therapy areas for Dong-A, while the drugs themselves are generic versions, making them unattractive targets.

Dong-A itself was built largely on the success of a big OTC product called Bacchus, a taurine-based energy drink that it has been selling for 44 years. Sales have been declining as the population has become more health aware and as OTC channels have disappeared since the 2000 law change; sales fell to W113bn ($113m) in 2007, from W198bn in 2002.

Think big

Rather than be left behind, Dong-A is also restructuring, and trying to think more like the multinationals that have the financial fire power and infrastructure in place that will enable them to grab a much bigger share of the market as the changes take place. Hence its focus is being sharpened onto the much faster growing prescription, or ethical drug segment, away from the OTC space.

Dong-A already owns the top selling, patent protected Korean drug, called Stillen, a treatment for Gastritis. Zydena, the ED drug, was launched in South Korea at the end of 2005, and has already captured a 21% share, according to Dong-A. The ED market split is similar to western markets; Viagra is the market leader with 45%, Cialis has 22% and Levitra a 4.3% slice.

Sales of Zydena grew 12% in 2007 to W11.17bn ($11m), and first-quarter sales indicate further growth is on the cards.

US opportunity

Like Viagra, Cialis and Levitra, Zydena is a phosphodiesterase inhibitor, generically called udenafil. Phase III trials have started in the US, and the company wants to find a partner to help fund the trials and ultimately commercialise the drug.

It would be fourth to the US market, which could see generic versions of Viagra appear in 2012; both facts could make potential partners reluctant to take a chance. However, Cialis has done well versus incumbent Viagra and new rival Levitra, and forecasts show analysts expect this to continue, with its duration of response a key sellling point. Zydena's fast onset and duration should bode well in this respect, and competition on price is also likely, all going in its favour.

 ($m)             Features *
Product Company 2003 2007 2012 First Introduction Patent Expiry Onset time Duration
Cialis Eli Lilly  74  1,144  1,917  2003  2017 16 mins 24-36 hours
Viagra Pfizer  1,879  1,764  1,335  1998  2012 1 hour 4 hours
Levitra Bayer AG  163  455  746  2003  2018 15 mins 4 hours
Zydena Dong-A  -  **11  -  2005   - 15 mins 12 hours

* Source: Onset time and duration statistics and Zydena sales figure provided by Dong-A, all other data from EvalutatePharma

** Zydena sales figure is for South Korean market only

Other opportunities

In terms of NCE pipeline, the group appears to be keeping its options open, and is focusing on quality of life drugs, metabolic disorders and GI drugs for the branded markets and new biologics.

In terms of generics, it has copycat versions of Lipitor, Cozaar and Aricept under development. Partnerships for its other drugs that are already on the market are being eyed; the company already exports many of its products to markets including China, Russia and Turkey.

If its efforts are successful, particularly in finding a partner for Zydena, Dong-A should become a more well known name in the pharmaceutical industy, outside of Korea.

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