WorldCity Business Magazine

The right prescription

by Arlene Dela Torre

A number of independent pharmaceutical companies have set up shop in South Florida, distinguishing themselves with headline-grabbing innovation.

Nabi Biopharmaceuticals has made a splash with its vaccine research, including an antismoking vaccine that is nearly ready for market. Miami drug maker IVAX rocked the pharmaceutical world when it was acquired for $8 billion by an Israeli company that wanted to become the world’s largest generic-drug manufacturer. And Noven, a specialist in medical patches, has been given the government’s green light to market a patch for children with attention deficit hyperactivity disorder.

According to a study by the Milken Institute, a California think tank, Florida’s pharmaceutical sector in 2003 directly employed nearly 6,500 workers and was indirectly responsible for almost 22,000 jobs statewide. The study predicted that by 2009, the pharmaceutical industry workforce in Florida would swell to 8,800.

Big global players have offices in the Miami area. They include Schering-Plough, one of the United States’ oldest drug manufacturers, tracing its history to the late 18th century.

But the locally based independent players are the ones that have been showing the most unusual innovation.

The South Florida companies are involved in all aspects of the pharmaceutical industry and include companies that specialize in treatments for heart and respiratory problems. There are generic-drug manufacturers as well as over-the-counter drug producers and nutraceuticals, or companies that produce nutritional supplements, vitamins and herbal treatments.

Many of Florida’s pharmaceutical companies offer contract manufacturing, marketing, and distribution services for other companies Additionally, Florida is also home to a number of contract research organizations and other life sciences companies that help support the pharmaceutical industry.

Over the years, the area’s companies have turned out to be attractive acquisition targets.

The most recent deals were the $8 billion purchase of IVAX by Teva in Israel and the acquisition of Andrx, headquartered in Plantation, by California drug manufacturer Watson Pharmaceuticals in a deal valued at $1.9 billion.

One big family

There is yet another significant link for many of South Florida’s drug companies: They share the same family tree.

“There is a connection between the South Florida pharmaceutical companies, Noven, IVAX, Kos Pharmaceuticals, Andrx, and a reason behind why so many pharmaceutical companies are situated here, aside from the great weather and benefits of our location,” said Joseph Jones, Noven vice president of corporate affairs.

“We are branching from the same parent, Key Pharmaceuticals,” he added.

Phillip Frost, a Miami Beach dermatologist, built Key Pharmaceuticals into a specialist for drug-delivery systems, then sold the company in 1986 to New Jersey-based pharmaceutical giant Schering-Plough. Frost then went on to create IVAX, which went one step farther and developed drugs. At IVAX, the company founder reassembled many of his Key Pharmaceuticals collaborators.

Those executives have since gone on to become the small pool of players who were and, in some cases, still are the drivers behind South Florida’s pharmaceutical industry.

Kos Pharmaceuticals, which specializes in cardiovascular and respiratory drugs, was founded in 1988 by Michael Jaharis, one of the major shareholders of Key Pharmaceuticals. When it started, Kos’ COO was David Bova, the former director of product development at Key.

Andrx Corp. co-founder Elliot Hahn was another Key alumnus, as was Noven founder Steven Sablotsky. Noven’s current CEO is Robert Strauss, a one-time president and CEO of IVAX.

It was back in 1958 when the biopharmaceutical industry debuted in South Florida. That’s when brothers Walter and Joseph Coulter began manufacturing blood analysis equipment in what was to become Miami- Dade County.

But it was at Miami-Dade’s first economic summit, in 1998, that the importance of the industry and the jobs it could create was spotlighted. In the years since, Florida’s state government has identified the biomedical technology industry as a “high impact” industry deserving special attention, including export promotion and business assistance.

The state offers incentives and tax exemptions in an effort to make Florida an attractive location. The state recently provided $300 million in seed money to persuade the nonprofit Scripps Research Institute, headquartered in California, to open a biomedical research unit in Palm Beach County.

The appeal was the claim that the institute would create 44,000 jobs and bring a 44.8 percent return on the state’s investment.

In February, Scripps Research’s Florida office announced a joint project with IBM to research pandemic viruses.

Location is another one of Florida’s business advantages. The state’s existing export services infrastructure and its connection to Latin American markets are crucial to Florida companies interested in leveraging growth in emerging markets.

Noven

Noven Pharmaceuticals in Miami received a big boost recently: The U.S. Food and Drug Administration had approved distribution of its patch to treat attention deficit hyperactivity disorder.

“The approval of Daytrana [patch], the first non-oral medication for ADHD, is outstanding news for Noven, Shire and patients,” Noven CEO Robert Strauss said in announcing the development in April.

The Daytrana patch with methylphenidate, the same active ingredient as brand-name drugs Ritalin and Concerta, is aimed at children from ages 6 to 12 and is expected to be on the market in the first half of this year. When applied to a child’s hip, it averts the need to give doses of medication throughout the day and is designed to stay on during most children’s activities, including swimming and bathing.

The Centers for Disease Control and Prevention estimates that 4.4 million children aged 4-17 have been diagnosed with ADHD by a healthcare professional. As of 2003, the latest date for which figures were available, 2.5 million of those children were receiving medication for the disorder.

“The United States has the most prevalence of diagnosis of ADHD among children and the highest total dollar sales of prescriptions for medications to treat ADHD,” said Noven vice president of corporate affairs, Joseph Jones.

Noven, which posted profits of $9.9 million on revenues of $52.5 million in 2005, also claims that the patch causes fewer side effects than oral medications.

The Daytrana patch will be marketed through British pharmaceutical company Shire, which paid Noven $25 million in 2003 and another $50 million upon receipt of FDA approval. Shire is also slated to pay the Florida company $75 million after certain sales targets have been met. Noven has already said it expects to make a profit on the product.

“The FDA’s approval of Daytran offers an important new option in the treatment of ADHD in children,” said Robert Findling, a researcher involved in the patch and a psychiatry professor at Case Western University.

The patch also promises to solidify Noven’s niche in the pharmaceutical sector.

The 19-year-old company develops and manufactures transdermal patches, which are prescription products that deliver drugs through the skin directly into the blood stream. The company partners with larger multinational pharmaceutical firms for marketing and distribution of a range of patches designed to treat a range of medical problems, including hypertension, central nervous system disorders, female sexual dysfunction, and dental pain. Prior to Daytrana, the company was best known for its tiny Vivelle-Dot, the United States’ top-selling estrogen-replacement therapy patch for women experiencing symptoms of menopause.

Vivelle-Dot, was developed in partnership with Swiss-based Novartis Pharmaceuticals Corp. and is produced and marketed through Novogyne, a company that Noven owns jointly with Novartis. Vivelle-Dot prescriptions grew 11 percent in 2005, to give Noven nearly 45 percent of the estrogen-patch market. Vivelle-Dot is the top-selling estrogen patch in the United States.

“Our focus on transdermal drug delivery was determined early on, by our founder and chief technical officer, who were chemical engineers,” said Jones. The company’s founder, Steven Sablotsky, who left the helm of Noven in 2001, holds 11 patents linked to the development of transdermal drug delivery methods. The company holds more than 30 U.S. and 100 international patents.

In fact, Noven’s innovations in transdermal drug delivery technologies have made it a sought-after partner in the industry. Noven successfully develops patches for license to others, including Novartis and French-based pharmaceutical giant Sanofi-Aventis. It also develops products in collaboration with other companies, including pain-management specialist Endo Pharmaceuticals in Pennsylvania.

But the company also seeks out higher-margin projects that it can market itself.

Noven’s research and development teams evaluate and screen hundreds of compounds each year to identify drug candidates that are suitable for transdermal or transmucosal delivery. Transmucosal drugs are those that pass through mucous membrane, such as nasal sprays.

“We are always looking for other, larger applications where our transdermal and transmucosal drug-delivery systems may prove useful,” Jones explained.

Daytrana will be manufactured at Noven’s 15-acre in Kendall, where it employs about 340 workers. In January, Noven also became the direct employer of the more than 150 workers who made up the Novogyne sales force.

“The conversion of the sales force from contract to employee status reflects our commitment to the hormone therapy category and our confidence in a sales team that has taken Vivelle-Dot to the market leadership,” said CEO Strauss.

IVAX

Teva Pharmaceuticals in Israel wanted to return to its lofty position as the world’s largest generic drug maker. So it shelled out nearly $8 billion to acquire Miami-based IVAX Corp. and created a company with hundreds of generic products and $7 billion in global revenues annually.

Generic medicines are an attractive niche, especially as governments move into drug acquisition as a way to reduce health-care costs in their countries or, especially in the case of countries with AIDS epidemics, as a way to guarantee affordable treatment to as many patients as possible.

Teva had reigned as the world’s top generic maker until a unit of Novartis acquired two companies and took over the top spot.

The Israeli company’s acquisition turned the spotlight on IVAX, a company that manufactures both branded and generic drugs, including cancer drugs and a line of respiratory inhalants. Foremost among them is Ivax’s branded asthma inhaler, Easi-Breathe. When IVAX announced that it had agreed to the buyout, it was the world’s No.4 generic drug company. Among its generics are a copy of Pfizer’s popular anti-depressant Zoloft and a generic version of GlaxoSmithKline’s nasal spray Flonase.

The company also has Food and Drug Administration approval to sell a generic drug designed to prevent organ rejection among transplant recipients.

The company’s IVAX Diagnostics subsidiary, which employs 65 people, makes medical testing kits that are used in hospitals and clinics. It is moving its headquarters and manufacturing operations to Weston and put its Miami facilities up for sale.

Nabi Pharmaceuticals

Nabi Pharmaceuticals specializes in a field that is hot: vaccines. With funding from the National Institutes of Health, it’s nearly ready with anti-smoking vaccine. After a four-month hiatus brought on by poor clinical trial results, it announced in March that it had resumed work on a much-awaited staph vaccine to prevent the most dangerous strains of bacterial infection.

A month later, the Boca Raton company acquired from Fresenius Biotech the exclusive U.S. and Canadian sales and distributions for a drug that’s in late-stage development. Nabi paid $1 million with a promise of $4 million more after the Food and Drug Administration approves the medication, perhaps as early as 2009 for the rights to market the anti-rejection drug aimed for organ transplant recipients.

The Fresenius deal “is an important step forward in our strategy to become a leading provider of products that improve both the longevity and the quality of life of transplant patients,” said Nabi CEO Tom McLain.

In late 2005, Nabi competed construction of a $20 million manufacturing plant in Boca Raton that was to be used for its staph vaccine aimed principally at patients with kidney diseases.

Andrx

For a while, the news for generic-drug company Andrx Corp. had been discouraging. Competition in the generics market was tough. Andrx had been forced to unload money-losing divisions in a bid to boost revenues. Then the Food and Drug Administration gave a thumbs down to the Plantation-based company’s manufacturing processes.

But Andrx found something to celebrate in March when a California generic-drug specialist, Watson Pharmaceuticals, announced that it was buying the Florida company in a $1.9 billion cash deal that creates the third-largest generic drug maker in the United States. Watson will operate Andrx as a separate business unit. Andrx’s Davie manufacturing facility, which employs about 1,000 workers, will remain active.

“The combination of Andrx’s and Watson’s complementary assets and capabilities will create a unique global player in the specialty pharmaceutical industry,” said Andrx CEO Thomas Rice.

“Strategically, this acquisition is an excellent fit for Watson as it’s complementary in maximizing the strength of both organizations,” Watson CEO Allan Chao said in a telephone conference with analysts. “It strengthens our capabilities to sustain [controlled] release products It expands the breadth of Watson’s current product line.”

The Andrx deal is the second acquisition of a South Florida generic-drug manufacturer in less than a year. Miami’s IVAX was acquired by Teva Pharmaceutical Industries in Israel.

Founded in 1992, Andrx develops, manufactures, distributes and commercializes generic versions of brand-name pharmaceuticals, including birth control pills. It has set itself apart by focusing on controlled-release medications drugs designed so doses are released into a patient’s body at timed intervals. One of the most popular is a generic version of Claritin-D 24, which releases a decongestant and an antihistamine throughout a 24-hour period, giving extended relief to patients with cold or allergy symptoms.

Although Andrx started by focusing on medications that were patented, in recent years it has broadened its generic research. The company also attempted to develop and market its own brand-name drugs. It launched a separate unit for this purpose in 2003 but abandoned the effort in March 2005.

Andrx posted $62.5 million in profits on revenues of just more than $1 billion in 2005. generic drug maker in the United States. Even more profitable were Andrx’s drug-distribution businesses, Anda and VIP, which in the third quarter 2005, brought in $164 million, compared with $71 million from sales of Andrxmade medications. Anda and VIP together form the fourth-largest distributor of generic pharmaceuticals in the United States, purchasing Andrx’s own products and those made by other generic manufacturers and reselling them to independent pharmacies, pharmacy chains, buying groups and physicians’ offices.

The distribution arm of Andrx has more than 200 in-house sales representatives, two call centers that field some 80,000 inquiries per week and a national account team that works with major pharmacy chains.

Andrx currently sells more than 6,000 products in the United States.

Andrx also uses its patented controlled-released technologies to produce drugs for other companies, including Israeli giant Teva and Takeda, Japan’s largest drug company.

Last year, after an inspection of Andrx’s plant in Davie, the FDA issued a 24-page report that cited the company for problems ranging from a failure to monitor “objectionable microorganisms” to laxness in recording manufacturing problems. As a result, the FDA suspended its review of the 30 drug applications Andrx had submitted for approval.

It was one of the most serious actions ever taken against a company by the FDA’s Center for Drug Research and Evaluation. Andrx has responded with more than 1,000 pages of written responses to the accusations.

The FDA also found deficiencies at the company in both 2000 and 2004.

Andrx has said it is working with the FDA so it can launch new drugs on the market. In addition to its Plantation offices and the Davie plant, Andrx has a distribution facility in Weston.

Dor BioPharma

When Homeland Security officials talk about developing medical defenses against bioterrorism, they are discussing a subject well known to researchers at Dor BioPharma.

The Miami Beach biotechnology company focuses on two areas of research: drugs that address the side effects of cancer and gastrointestinal diseases and vaccines that could protect against the deadly effects of ricin toxin, muscle-paralyzing botulinum toxin or other bioterrorism threats. Among other things, Dor is looking into anti-toxin vaccines that could be administered through nasal sprays rather than injections.

In April, Dor announced that it would sell shares of the company to private investors in a deal that was expected to give the pharmaceutical firm a $3.65 million infusion. The money was earmarked for ongoing research into its biodefense programs for ricin and other toxins and to push ahead with its drug orBec, an oral corticosteroid used to treat a complication linked to bone marrow transplants in cancer patients.

The company, which has been dependent on government research grants, lost $4.7 million in 2005. That was an improvement over the year before, when it posted losses of $6.3 million.

AstraZeneca

Think of the well-known brand names Nexium for gastrointestinal problems, Arimidex for breast cancer or Seroquel for schizophrenia. These have one thing in common: AstraZeneca.

With headquarters in London and research facilities in six other countries, AstraZeneca is one of the world’s leading supplier of drugs to treat cancer, gastrointestinal problems, heart disease and respiratory problems. The company, also a top producer of anesthesia, had sales of more than $24 billion in 2005.

AstraZeneca was formed in 1999 through the merger of Astra AB of Sweden and England’s Zeneca Group. The company uses it Coral Gables office as a gateway to both the U.S. Hispanic market and Latin America.

Recently, a Miami-based study of cholesterol levels among Hispanics focused on the effectiveness of AstraZeneca’s drug Crestor as a treament.

AstraZeneca also has launched a multi-year research collaboration with the University of Miami’s medical school and health-insurance company Humana Innovation Enterprise to study ways to make sure that patients follow their doctor’s instructions regarding medication.

The study will look at ways to identify patients who are likely to have trouble sticking to their medication regime and how both doctors and technology can be used to remedy the problem.

Pharmed

Forty-five years ago, Carlos and Jorge de Cespedes were told that they were going to the United States to study English for the summer. When they reached Miami, they learned the truth: They were part of the so-called Peter Pan exodus of children from communist Cuba and were never returning home.

They learned English sure enough. But while growing up in the United States the brothers also developed a business savvy. Once they spotted a niche-market opportunity in Latin America, they founded Pharmed Group, now the United States’ largest independent distributor of a full line of medical, surgical and pharmaceutical supplies.

“Jorge and I were working for Smith Kline Beecham. I was a regional manager and Jorge was a hospital manager,” Carlos recalled. “We would get product requests from physicians from Latin America who were in the United States for specialty training.

“These doctors could not get certain products in Latin America that we had here, either because the products were hard to come by or were simply unavailable. They had become familiar with the products when they were training in the U.S., knew of their high quality and efficacy and wanted them for their patients and hospitals back home,” he added.

Pharmed’s shipments included lifesaving antibiotics like ticarcillin, which was in short supply in Latin America, as well as items such as surgical sutures and endoscopy supplies. Eventually the company discovered that Latin America wasn’t the only spot with unmet demand: U.S. supplies were spotty, too. So the company began to supply the domestic market.

With Carlos as chairman and CEO and Jorge as president and COO, Pharmed grew. It now sends more than 25,000 products to hospitals and medical clinics in the United States, Latin America and the Caribbean.

Recently, the company moved beyond distribution and began its own production. In June 2005, Pharmed opened through its wholly owned company, Pan American Laboratories (PAL) a $20 million state-of-the-art manufacturing facility in the Doral area of Miami.

The plant was designed to produce nutritional supplements and over-the-counter drugs, but it has broadened beyond its original scope and now also produces PAL’s generic versions of cancer drugs, heart medications and drugs to treat HIV, the virus that causes AIDS. The factory may also begin contract manufacturing for other pharmaceutical companies and chain stores that want to produce medications under their own labels.

“The current production capacity is 5 billion tablets per year,” said Carlos. “But if the demand is there, we can make a one-day modification that will triple our capacity to 15 billion tablets.”

Planning for growth is one of the de Cespedes’ strengths. After all, they’ve been doing it nonstop since the company started.

Once it became evident that there was a need in Latin America for high-quality U.S.made medical products, Pharmed’s international division began targeting health care markets in the Caribbean, Central American, and South America. The payoff? The Miami firm represents companies such as Kimberly-Clark, medical supply producer Rusch and high-tech device maker Atrium Medical Corp. as well as its own products as it supplies Brazil, Mexico, Colombia, Costa Rica, Guatemala and Panama.

Pharmed’s recent growth burst has come with a shift in its business strategy. It went to the U.S. Department of Commerce for help in expanding its exports to government-owned hospitals and medical facilities in Latin America.

“For as long as we’ve been in business, we’ve concentrated on the private sector. That’s been our strength. But in Central and South America, where 85 percent of health care is operated by the government, we looked to our government to help us open up this new avenue,” Carlos said.

In Brazil, the company has since signed a contract with a medical supply distributor and cut a deal with a major drug store chain.

The de Cespedes brothers credit their employees, many of whom have been with the company for years, as a key to their success. “We maintain a family atmosphere and try to keep our employees happy and help people out,” said Carlos.

The practice of “keeping the employees first, clients second, society at large next and shareholders last” continues to pay off for Pharmed: The brothers are counting on double-digit growth for the company in the near future.

“There’s certainly room for growth,” Carlos predicted. “There are still many opportunities out there. We can easily double our size and continue to be a premier supplier without driving anyone else out of business.”

SoLapharm

SoLapharm, a small Plantation company that has been pushing into the drug market, finally got its breakthrough. It came in the form of a technology that makes pills easy to break.

In a twist particular to the pharmaceutical industry, 40-milligram pills of certain medications will carry the same price tag as 20-milligram ones. That means savvy consumers can get their medication for half the price if they’re willing to cut the pills in half. However, federal regulators bar generic pills from carrying scores or easyto- break lines if the original patented versions do not.

SoLapharm says it has come up with a technology that it says allows easy and accurate splitting of generic pills. In connection, it has filed 12 U.S. patent applications.

“We believe we have made a fundamental breakthrough,” said Lawrence Solomon, a physician who co-developed the technology. “Our tablets are made to be broken.”

He noted that drugs that are subject to dosage changes at intervals, such as the generic version of blood-thinner Coumadin, would be good candidates or the splittable format.

SoLapharm President Elliot Hahn said the 5-year-old South Florida company is close to finalizing a joint venture with a company in Asia to develop and manufacture generic drugs using the so-called Accu-Break technology. Officials say the drugs’ ingredients are arranged in a way that makes the pills break naturally where desired.

He also said SoLapharm does not plan to build a production facility but will team up with a company that already has a pharmaceutical manufacturing plant.

Kos Pharmaceuticals

Cholesterol-lowering medicines have been the strength of Kos Pharmaceuticals, which moved its corporate headquarters to New Jersey in late 2004 but still has facilities in Miami-Dade County.

The company, dubbed by Forbes magazine in 2005 as one of the fastest-growing companies in the United States, manufactures the brand-name drugs Niaspan and Advicor. The success of those prescription medications helped lead the drug company to revenues of nearly $752 million, a hefty 51 percent jump from 2004 results.

Kos develops, manufactures and markets proprietary prescription drugs for chronic diseases, including high blood pressure, asthma and angina.