Background
Pliva is a Croatian pharmaceutical company headquartered in Zagreb. In the late 1970s, a team of Pliva’s researchers discovered an antibiotic named Azithromycin. From early trials, Azithromycin proved to be extremely efficient and capable of remaining in the body tissue of animals longer than other similar antibiotics.
Many years of research led Pliva to the development of a valuable drug with huge therapeutic and business potential. At the time, however, Pliva was a small player relative to the leading global pharmaceutical firms and lacked the necessary capital to commercialize the product internationally and reap the full benefit of its successful research.
Azithromycin is a world best-selling antibiotic
Patents and Licensing
In 1981, Pliva filed a patent application for Azithromycin in the former Yugoslavia and subsequently patented it worldwide, including in the United States when the drug was still undergoing trials before its final approval by the relevant health authorities.
Patenting proved to be the key to the commercial success of Azithromycin: scientists from pharmaceutical multinational Pfizer Inc. came across Pliva's patent while searching the database of the US Patent and Trademark Office (USPTO) and realized the enormous potential of the antibiotic. As one of the largest drug makers in America with sales representatives worldwide, Pfizer was able to offer Pliva an ideal channel to commercialize its antibiotic.
In 1986, the talks between the Pliva and Pfizer eventually led to a licensing agreement through which both companies, as well as the general public, could benefit from the commercialization of the powerful antibiotic. Under the agreement, Pfizer acquired the right to sell Azithromycin worldwide. Pliva, however, maintained the right to sell the product in Central and Eastern Europe and would earn royalties on Pfizer’s sales.
Trademarks
In 1988, Pliva launched Azithromycin in Central and Eastern Europe under its own internationally registered brand name Sumamed®. Having realized the benefits of registering the Sumamed trademark at an international level, Pliva has gone on to register over 20 more trademarks for other products through the Madrid system.
Business Results
Zithromax - Pfizer's branded version of Azithromycin - was one of the best selling branded antibiotics in the United States and worldwide, with total sales peaking at US$ 2 billion in 2005 before starting to decline with the loss of patent protection in 2006 and resulting generics competition. However, the strong and proven Zithromax brand name has helped keep market share losses in check.
For Pliva, a pharmaceutical company of small proportions in comparison to its licensee Pfizer, the licensing agreement meant a huge breakthrough in terms of annual revenues and allowed it to fund expansion in Europe and the United States.
Pliva has become the largest pharmaceutical company in Croatia as well as one of the largest, in terms of sales, in Central and Eastern Europe. In 2006, Pliva exited its proprietary business and became the European generics arm of Barr Pharmaceuticals Inc. creating a leading global speciality pharmaceuticals company. At the end of 2008, Pliva became part of Teva Pharmaceutical Industries Ltd.
Patent Protection as a Gateway to Licensing and International Commercialization
This case clearly shows how even relatively small pharmaceutical companies can benefit from strong patent protection in conjunction with a sound business policy. Companies investing significantly in research and development find in the intellectual property system an important tool for commercializing the results of their research, opening the way to distant markets which would otherwise seem inaccessible.