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On Wednesday, UBS shared insights from its Virtual Generics & Biosimilars Day, focusing on the current challenges faced by the US generic and biosimilar drug markets. The discussion highlighted the potential effects of tariffs, the constraints on US generic drug companies in passing through costs, and the vague nature of recent executive orders aimed at promoting biosimilars.
UBS analysts pointed out that the diversity within the US generic drug market often restricts companies from passing on costs, except in cases of complex generics where demand is high and competition is low. Biosimilars, on the other hand, might possess slightly more leeway in terms of pricing. However, the recent executive orders, despite their intent to endorse biosimilars, lack the specifics required to make a significant impact on the sector. Want deeper insights into the generics market? InvestingPro subscribers get access to comprehensive research reports covering 1,400+ US stocks, including detailed analysis of market dynamics and company valuations.
The note also addressed the challenges of onshoring the manufacturing of finished goods or Active Pharmaceutical (TADAWUL:2070) Ingredients (APIs), which are predominantly produced overseas. Currently, only about 8% of these are supplied domestically. The economic rationale for manufacturing in the US is undermined by higher costs and uncertain returns on investment. Furthermore, to avoid tariff risks from China, which escalated following policy changes in 2018, many manufacturers have already relocated production to India.
In the generics market, which is highly commoditized, further price compression seems unlikely as prices are already at what could be considered subsistence levels. This observation suggests that the market is already tightly squeezed, leaving little room for additional cost efficiencies.
The Association for Accessible Medicines (AAM), along with other trade associations like BIO and PhRMA, continues to advocate for the US generic and biosimilar sectors. They emphasize the importance of sustaining a supply chain that can support the industry effectively. Industry leaders have shown remarkable revenue growth, with some companies achieving over 400% growth in the last twelve months, according to InvestingPro analysis, demonstrating the sector’s resilience despite ongoing challenges.
In other recent news, Alvotech reported first-quarter earnings and revenue that exceeded analyst expectations. The company posted adjusted earnings per share of $0.35, significantly beating the consensus estimate of $0.03. Revenue surged 786% year-over-year to $109.9 million, surpassing analyst projections of $103.7 million. This impressive growth was driven by strong product launches and manufacturing efficiencies, with product revenue skyrocketing from $12.4 million in the same quarter last year. Alvotech’s biosimilars, including AVT02 and AVT04, contributed to this growth, notably with the U.S. launch of SELARSDI, its Stelara biosimilar. The company also raised its full-year 2025 guidance, now expecting revenue between $600-$700 million and adjusted EBITDA of $200-$280 million. This adjustment follows Alvotech’s acquisition of rights to a proposed Cimzia biosimilar. Additionally, Alvotech reported an operating profit of $10.6 million for the quarter, contrasting with a $48.4 million loss in the prior year period. The company concluded the quarter with $39.5 million in cash and cash equivalents.
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