In August last year, Fresenius announced it was investing around $250m (€215m) into its site in Melrose Park, Illinois – located about 20km west of Chicago – to create several injectable manufacturing suites.
Fresenius broke ground on the Melrose Park expansion in September, and during a conference call last week to discuss third quarter financials CEO Stephan Sturm said his firm is evaluating “significant investments” at its other pharma manufacturing sites in the US.
These expansions in its US network – details of which are to be announced over the next few weeks – are in preparation for a surge in demand for generic injectables as patients and payers look to such products as a solution to rising healthcare costs, Sturm told investors.
“Despite the periodic political discussions on drug pricing, we continue to believe that generic medicines like ours will increasingly be seen as a solution to rising health care costs in the U.S. and around the world.”
He said US generic drugs represent 89% of the prescriptions but represent just 26% of the total costs of pharmaceuticals.
“Generic prices go down each year, while branded drugs typically increase. That being said, the average price of a sterile injectable pharmaceutical sold by Fresenius Kabi is below $5 a unit.
“We clearly believe that we are part of the solution to keep medicine affordable. We are deeply convinced of the long-term growth prospects of the generic injectables market in the US. That is why we are investing in the expansion and the further automation of our production facilities.”
Size matters
There have been a lot of interest in the injectables space over the past few months – Hikma has ramped up capacity at facilities in the US and Portugal, while Catalent has begun eyeing up injectable M&A opportunities – but Sturm warned smaller companies are likely to struggle competing in the space.
“Size matters in our industry. It will be increasingly tough for smaller companies to keep up with a growing capital intensity in our business. Capital constraints are bound to trigger capacity constraints as well as quality constraints,” he said.
“Given our size and diversification, we're generating reliable, strong cash flows, which allow us to implement investments and processes that anticipate and prevent such constraints. In summary, we see nothing out of the ordinary in the US generic market right now, but we have prepared Kabi's US business with decisive strategic steps for the next decade.”