Douglas Pharmaceuticals lifts US sales

Sir Graeme Douglas with his son Jeff in a labs at Douglas Pharmaceuticals in Henderson. Photo / Greg Bowker

Local drugmaker targets America as it aims for $244m in annual revenue

Douglas Pharmaceuticals, New Zealand's largest drugs developer and manufacturer, expects the US market to become its biggest, overtaking the European Union in the near future as new drugs it has under development come to market.

The Auckland-based company was founded in 1967 by the late Sir Graeme Douglas, who died last week at the age of 87. He started the business in the back of his Te Atatu chemist shop when he made a cough syrup called Kofsin that he sold himself and through other pharmacists.

The company set up its first manufacturing site in 1980 making generic medication, but moved into exporting in a big way in the early 1990s when the advent of government drug-buying agency Pharmac dramatically lowered prices on the domestic market and threatened its survival.

Chief executive Jeff Douglas told the NZBio conference in Auckland yesterday that the company had a $35million turnover in the US, where prices were particularly attractive and it was expecting that to grow to become its largest market.

It has nine or 10 active development products in various stages of lab testing and three or four more on regulatory review with the Food and Drug Administration in the US.

The commercial model is quite different in the US where it attracts better margins by partnering with a big pharmaceutical company, going 50:50 on drug development, marketing costs and with profits.

Under European rules it must sell the intellectual property for each drug and enter into a five-year exclusive supply deal which means it is vulnerable to being replaced at contract renewal time, although Douglas said that hadn't happened yet.

Douglas Pharmaceuticals has been focused on diversification and getting into higher risk/reward novel drug development in a bid to meet its target of growing annual revenue to $244m by 2020. Douglas said total sales are expected to be $185m this financial year, of which $120m will come from export. It employs 470 staff and exports to 35 countries.

It has struggled to get a foothold in China, where Douglas said protectionist policies meant two breast cancer products it had submitted for approval seven years ago are yet to come even close to being signed off, while in India it can't compete against tariffs and low-cost domestic manufacturers.

We have in-house experience but if there is a market or project being talked about, we'd be delighted to listen.

The company has four divisions: contract manufacturing for other drug developers which is expected to keep growing; compliance packaging; over-the-counter consumer products ranging from cough medicine to hair care, where it acts as an agent for other brands and sells its own; and developing and making novel and generic drugs, including taking an existing molecule or drug and changing its form for new uses.

It is working with the University of Otago on a new drug for severe depression, which Douglas said is "well advanced", and with the University of Manchester for a drug to treat cervical cancer.

It is also doing its first foray into biologics (derived from living organisms) which have revolutionised the treatment of chronic diseases such as rheumatoid arthritis and Crohn's disease and are used in treating a variety of cancers.

That's with a "customer from Wellington", Douglas said, and it would like to do more.

"We have in-house experience but if there is a market or project being talked about, we'd be delighted to listen," he said. "We don't want to be left behind in this industry."

A move two years ago to import robots from Japan, which it on-sells to pharmacies and rest-homes to fill Medico blister packs rather than doing them by hand, has paid off. Douglas said the company was now exercising its exclusive licence rights to sell them into Australia.

Douglas Pharmaceuticals:

• $185m total sales expected this financial year.

• $120m will come from export.

• 470 staff and exports to 35 countries.

• Four divisions: contract manufacturing; compliance packaging; over-the-counter consumer products; developing and manufacturing novel and generic drugs.