For pharmaceutical companies, the old adage “live by the sword, die by the sword” is all too true. While a new blockbuster drug can be a huge boost to the bottom line for several years, the risk is that companies fail to keep up the development pipeline – and see sales of their main product dwindle when the drugs patent protection expires.
Needless to say, falling off that drug-patent “cliff” represents a big potential downside for many drugmakers, as well as opportunity for producers of equivalent generic drugs to rush in and eat up market share.
And we’re talking real money here – as FiercePharma.com notes, it’s estimated that about $290 billion of sales are at risk from patent expirations between this year and 2018.
This dynamic is behind the Drug-Patent Cliffs motif, a stock portfolio of 11 industry-leading generic drugmakers. The motif has risen 3.6% in the past month.
In 2013 alone, the research firm EvaluatePharma projects that patents will expire on drugs that currently have sales of $29 billion, with more than 70% of that total lost to generics.
What can’t be predicted is what these expirations will mean – for either the companies losing a patent or for the generic drugmakers entering the market. As just one example, EvaluatePharma researcher Anthony Raeside points out that drug makers often “blow it” by trying to protect their stock prices by taking excess cash from these aging cash-cow drugs and “overindulging in risky, late-stage, in-process R&D assets in seemingly high-priced and speculative in-licensing deals and company acquisitions.”
Other companies, Raeside says, may be liberated from the mega-blockbuster curse of replacing older cash-flow streams.
However it plays out, the drugs losing patent protection in 2013 will represent gained revenue for some and lost revenue for others.
Here, as described by FiercePharma, are the top 4 drugs losing patent expiration in 2013:
1. Cymbalta (estimated 2012 sales: $4.9 billion): Drugmaker Eli Lilly (LLY) received a recent patent reprieve for its antidepressant drug, winning a stay of execution until Dec. 13, 2013 (It had originally been scheduled for June). However, analysts have been concerned about the company’s fortunes in a post-Cymbalta world, fretting that the company’s sales could slide 8% a year. And this is on the heels of the company having lost protection for its Zyprexa antipsychotic. A test with Cymbalta in adolescents did not produce positive results.
2. Avonex (estimated 2012 sales: $2.9 billion): Biogen Idec (BIIB) contends that it has extended the key patent for its multiple sclerosis drug for another 13 years, but Evaluate Pharma is less sure. That extension is being challenged, the research firm says, and it’s likely that 2013 will be the tipping point for the drug, with sales declining as new drugs enter the market. However, Biogen is expected to answer with a new MS drug slated for FDA approval in the near future.
3. Humalog (estimated 2012 sales: $2.5 billion): Not a list you want to end up on twice, but here’s Eli Lilly again. However, the company’s issues with its diabetes drug aren’t on hold until 2013. The drug’s sales already fell in the third quarter, surprising analysts, as third-party payers are demanding discounts and new drugs like Tradjenta (co-marketed in the US by Lilly and Boehringer Ingelheim) eat into market share.
4. OxyContin (estimated 2012 sales: $2.4 billion): Privately held Purdue Pharma stepped into it by mounting a clinical trial of its chronic pain drug in 6-to-16-year-olds, sparking a controversy as to the wisdom of exposing children to one of the most addictive medications there is. Hundreds of millions in fines later for misleading patients on the drug’s addictive nature, the company will now watch Watson Pharmaceuticals (WPI) introduce a copy at the end of August.
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