In the drug business, exclusivity is everything. Once a branded drug gets generic competition, pricing power fades and sales slowly drain away, leaving drugmakers dependent on the next new thing. It's all very reasonable in theory, but when the drugs losing patent protection are the biggest in the business--and they're all falling off patent around the same time--even the most rational companies can get a bit panicky.
Welcome to the patent cliff, the most influential feature of today's pharma landscape. Here, so many drugs are falling off patent that the path forward has twisted, and the entire industry is looking to find its way. Some companies, such as Pfizer and Merck, have merged with major rivals. Others have snapped up acquisitions in ancillary businesses, such as generics and over-the-counter medicines, and expanded into countries they previously ignored. Still others have forged ahead, betting that they'd manage to develop enough new products to make up the difference.
Welcome to the patent cliff, the most influential feature of today's pharma landscape. Here, so many drugs are falling off patent that the path forward has twisted, and the entire industry is looking to find its way. Some companies, such as Pfizer and Merck, have merged with major rivals. Others have snapped up acquisitions in ancillary businesses, such as generics and over-the-counter medicines, and expanded into countries they previously ignored. Still others have forged ahead, betting that they'd manage to develop enough new products to make up the difference.
Although a few major drugmakers have already suffered their biggest drops off said cliff, most are bracing for the fall. Here are the 10 biggest blockbusters that lose exclusive market rights in the U.S. over the next 12 months. They include some of the best-selling drugs ever, such as Pfizer's Lipitor and Bristol-Myers Squibb and Sanofi's Plavix. We ranked them not by U.S. sales volume,
but by their weight in each company's U.S. revenue stream.
|
1. Forest Laboratories -
Lexapro
2. Takeda Pharmaceutical - Actos 3. Bristol-Myers Squibb - Plavix 4. AstraZeneca - Seroquel 5. Eli Lilly - Zyprexa |
6. Pfizer - Lipitor
7. Merck - Singulair 8. Novartis - Diovan 9. Teva Pharmaceutical - Provigil 10. Abbott Laboratories - TriCor |
Drug: Lexapro
Company: Forest Laboratories
2010 U.S. sales: $2.316 billion
Impact: 52.63% of U.S. revenue
Exclusivity expires: March 2012
Company: Forest Laboratories
2010 U.S. sales: $2.316 billion
Impact: 52.63% of U.S. revenue
Exclusivity expires: March 2012
No wonder shareholder activist
Carl Icahn was worried about the impending loss of patent protection on
Forest's top-selling drug Lexapro. It accounts for more than half of the
company's revenue. Because it's sold under license from Denmark's Lundbeck,
Forest's Lexapro numbers all derive from the U.S. market. When the U.S. patent
expires, Forest won't have international markets to fall back on.
It's true Forest has made some preparations for filling the huge crater generic Lexapro versions are likely to make in the company's sales numbers beginning next year. It has launched 5 new drugs over the past few years, including the antidepressant Viibryd, which was gained through the acquisition of Clinical Data. None of these drugs has yet to break $300 million in sales, and most of them are in still in the double digits. The company is leaning heavily on hopes that growth in the overall antidepressant market, coupled with some price increases, can keep Lexapro sales at $2 billion for 2012.
It's true Forest has made some preparations for filling the huge crater generic Lexapro versions are likely to make in the company's sales numbers beginning next year. It has launched 5 new drugs over the past few years, including the antidepressant Viibryd, which was gained through the acquisition of Clinical Data. None of these drugs has yet to break $300 million in sales, and most of them are in still in the double digits. The company is leaning heavily on hopes that growth in the overall antidepressant market, coupled with some price increases, can keep Lexapro sales at $2 billion for 2012.
Company: Takeda Pharmaceutical
2010 U.S. sales: $3.35 billion/$4.3 billion global
Impact: 51.82% of U.S. revenue
Patent expires: August 2012
2010 U.S. sales: $3.35 billion/$4.3 billion global
Impact: 51.82% of U.S. revenue
Patent expires: August 2012
It's
a good thing Takeda is the biggest drugmaker in Japan. When it loses U.S.
patent coverage for its top-selling drug Actos, it faces a drain on half its
sales here. But Actos' $3.35 billion in U.S. revenue is only 18% of the
company's global sales. That's no easy hole to fill, but it's a lot easier to
face than 51%.
Unfortunately, new safety questions won't help Takeda hang on to market share. Evidence about a potential link to bladder cancer prompted France and Germany to pull the drug briefly until European regulators called for updated warnings about the cancer risk. The FDA had already asked Takeda to strengthen cautionary language on Actos' U.S. label.
Takeda doesn't appear to be looking to the U.S. or Europe to help backfill its sales. The company recently bought the Swiss drugmaker Nycomed, largely for its distribution and expertise in emerging markets. It's scouting for small acquisitions in India. And it's building up its business in China. In the meantime, it's warning investors the next few years are likely to be lean.
Unfortunately, new safety questions won't help Takeda hang on to market share. Evidence about a potential link to bladder cancer prompted France and Germany to pull the drug briefly until European regulators called for updated warnings about the cancer risk. The FDA had already asked Takeda to strengthen cautionary language on Actos' U.S. label.
Takeda doesn't appear to be looking to the U.S. or Europe to help backfill its sales. The company recently bought the Swiss drugmaker Nycomed, largely for its distribution and expertise in emerging markets. It's scouting for small acquisitions in India. And it's building up its business in China. In the meantime, it's warning investors the next few years are likely to be lean.
Drug: Plavix
Company: Bristol-Myers Squibb, in a co-marketing deal with Sanofi
2010 U.S. sales: $6.154 billion, booked by BMS
Impact: 48.79% of U.S. revenue
Exclusivity expires: May 2012
Company: Bristol-Myers Squibb, in a co-marketing deal with Sanofi
2010 U.S. sales: $6.154 billion, booked by BMS
Impact: 48.79% of U.S. revenue
Exclusivity expires: May 2012
Bristol-Myers
Squibb has been staring down the barrel of Plavix's patent expiration for
years. Ever since Apotex briefly launched a generic version in 2006--wreaking
havoc on sales for months--the company has known firsthand how painful copycat
competition can be. But now that BMS has slimmed down to its prescription-drug
core, Plavix sales account for a bigger chunk of its revenue: almost half in
the U.S., about three-tenths worldwide.
That's not dampening CEO Lamberto Andreotti's (photo) enthusiasm, however. Andreotti simply wants people to look beyond the next few years, when the Plavix suffering will be its most intense. Rather than focusing on numbers, check out the company's new melanoma drug, Yervoy, which is performing well in the U.S. Or watch the promising data stack up for its blood thinner, Eliquis, which it's developing in partnership with Pfizer and hopes to get onto the U.S. market soon. BMS's growth after 2015 will be "better than anybody else can deliver," Andreotti promised at a recent conference.
That's not dampening CEO Lamberto Andreotti's (photo) enthusiasm, however. Andreotti simply wants people to look beyond the next few years, when the Plavix suffering will be its most intense. Rather than focusing on numbers, check out the company's new melanoma drug, Yervoy, which is performing well in the U.S. Or watch the promising data stack up for its blood thinner, Eliquis, which it's developing in partnership with Pfizer and hopes to get onto the U.S. market soon. BMS's growth after 2015 will be "better than anybody else can deliver," Andreotti promised at a recent conference.
Drug: Seroquel
Company: AstraZeneca
2010 U.S. sales: $3.107 billion/$4.148 billion global
Impact: 22.63% of U.S. sales
Exclusivity expires: March 2012
(XR versions expected to avoid generic rivals for now, thanks to patent settlements)
Company: AstraZeneca
2010 U.S. sales: $3.107 billion/$4.148 billion global
Impact: 22.63% of U.S. sales
Exclusivity expires: March 2012
(XR versions expected to avoid generic rivals for now, thanks to patent settlements)
Seroquel
wasn't the first atypical antipsychotic to hit the market, nor is it the
biggest-selling in its class today. But it and its extended-release partner
have racked up more indications than their sister drugs, including the most
recent nod as an add-on treatment for depression that was gained in 2009. The
patent shield was set to disappear on all of that next year--or so analysts
thought. A couple of new settlements with generics makers point the way to
longer-term exclusivity for Seroquel XR, which means AstraZeneca may not lose
its entire franchise all at once. It also means the company can try to convert
patients to the extended-release version to keep them in the branded-drug fold.
While AstraZeneca was racking up new uses for Seroquel and Seroquel XR, its marketing caught the eyes of federal prosecutors. The company agreed to pay $520 million in 2010 to settle allegations it promoted the brand for uses that weren't FDA-approved. It also faced more than 26,000 lawsuits filed by patients who claimed the company knew Seroquel could cause diabetes, but didn't do enough to warn about the risk. It has settled most of these cases for upward of $350 million, but 2,600 remained as of March 31. While the company apparently has a chance at continued exclusivity for Seroquel XR, it also has to deal with lingering litigation over the brand.
While AstraZeneca was racking up new uses for Seroquel and Seroquel XR, its marketing caught the eyes of federal prosecutors. The company agreed to pay $520 million in 2010 to settle allegations it promoted the brand for uses that weren't FDA-approved. It also faced more than 26,000 lawsuits filed by patients who claimed the company knew Seroquel could cause diabetes, but didn't do enough to warn about the risk. It has settled most of these cases for upward of $350 million, but 2,600 remained as of March 31. While the company apparently has a chance at continued exclusivity for Seroquel XR, it also has to deal with lingering litigation over the brand.
Company: Eli Lilly
2010 U.S. sales: $2.495 billion/$5.026 billion global
Impact: 19.4% of U.S. sales
Exclusivity expires: October 2011
2010 U.S. sales: $2.495 billion/$5.026 billion global
Impact: 19.4% of U.S. sales
Exclusivity expires: October 2011
Due
to safety questions and highly publicized litigation--not to mention a $1.42
billion off-label marketing settlement--Zyprexa sales have flattened out over
the last two years. The drug re-mains Lilly's biggest worldwide seller, and
that fact has analysts and investors worried. Lilly admits the post-Zyprexa era
will be tough. It even has a code name for that period: Years YZ.
CEO John Lechleiter (photo) faces the question regularly: What's going to take Zyprexa's place? He has fought off the notion Lilly needs to make a convenient marriage once Zyprexa goes off patent. The words "no megamergers" have passed his lips so often, they're almost a mantra. He has reminded the world that Lilly dealt with losing protection on a major CNS drug before: Prozac. Still, with Cymbalta's patent expiration looming, the
company will soon have another multibillion-dollar gap to fill.
CEO John Lechleiter (photo) faces the question regularly: What's going to take Zyprexa's place? He has fought off the notion Lilly needs to make a convenient marriage once Zyprexa goes off patent. The words "no megamergers" have passed his lips so often, they're almost a mantra. He has reminded the world that Lilly dealt with losing protection on a major CNS drug before: Prozac. Still, with Cymbalta's patent expiration looming, the
company will soon have another multibillion-dollar gap to fill.
6. Pfizer - Lipitor
Drug: Lipitor
Company: Pfizer
2010 U.S. sales: $5.329 billion/$10.133 billion global
Impact: 18.35% of U.S. sales
Exclusivity expires: November 2011
Company: Pfizer
2010 U.S. sales: $5.329 billion/$10.133 billion global
Impact: 18.35% of U.S. sales
Exclusivity expires: November 2011
Lipitor
is the behemoth drug everyone points to when discussing the long shadow of
generic competition. And there's no question Lipitor exemplifies the
mega-blockbuster era. A mass-market drug, marketed by legions of primary-care
sales reps, that quickly became its company's top seller--and then, perhaps,
its crutch.
With
$10 billion in global revenue, Lipitor financed many R&D projects and paid
the year-end bonus of many executives. Without it, Pfizer has to become an
entirely different company, CEO Ian Read (photo) says.
It will certainly be much smaller, especially after more than 55,000 job cuts,
dozens of shuttered facilities and sales or spinoffs of at least two big
business units, i.e., animal health and nutritionals. New drugs--such as
the targeted cancer therapy Xalkori and the anti-coagulant Eliquis--may grow to
blockbuster status, but they're not likely to reach Lipitor's sales
heights. Mega drugs for large populations are no longer Big Pharma's
target, and Pfizer is the biggest pharma in the world these days.
That's
not to say Pfizer plans to let Lipitor go gently into the good night. The
company is said to be weighing an application for an over-the-counter version
of the drug. And it's supplying an authorized generic to Watson Pharmaceuticals
beginning next month to capture a share of the market for Lipitor copies. Armed
with pediatric studies and a new children's version, it's asking for 6 months
of additional Lipitor exclusivity in Europe. That's an extension that could be
worth almost $800 million.
7. Merck - Singulair
Drug: Singulair
Company: Merck
2010 U.S. sales: $3.224 billion/$4.987 billion global
Impact: 15.96% of U.S. sales
Exclusivity expires: August 2012
Company: Merck
2010 U.S. sales: $3.224 billion/$4.987 billion global
Impact: 15.96% of U.S. sales
Exclusivity expires: August 2012
Singulair
is another drug topping its maker's sales list. And Merck is aware of the
danger. In fact, it anticipates "within the two years following
patent expiration, it will lose substantially all U.S. sales of Singulair, with
most of those declines coming in the first full year following patent expiration,"
the company says in its annual filing with the SEC.
The company bought Schering-Plough to help cushion the blow, gaining full rights to cholesterol drugs Vytorin and Zetia, as well as its current No. 2 seller, Remicade. Merck is shedding costs, too, aiming to align its spending with a post-Singulair environment. The company recently announced it would cut another 13,000 jobs, or 14% of its current workforce, in addition to the 17,000 cuts already planned. When the cost-cutting push is finished, Merck aims to have an annual cost base that's almost $5 billion less; its workforce will be about 30% smaller.
CEO Kenneth Frazier (photo), who took over for the retiring Richard Clark (photo) in January, has tried to spare R&D as much as possible. Even when the latest round of cost cuts was announced, word was the administrative, sales and other headquarters layoffs would help keep Merck's R&D in the money.
In announcing early this year his company would toss its earnings guidance for 2013, Frazier said he wanted the company to focus on developing new drugs that will pay off, earnings-wise, down the line. Sticking to shorter-term EPS targets would require the kind of cost-cutting that Merck would regret later, he said at the time. And 2013, of course, will be the company's first full year without Singulair.
The company bought Schering-Plough to help cushion the blow, gaining full rights to cholesterol drugs Vytorin and Zetia, as well as its current No. 2 seller, Remicade. Merck is shedding costs, too, aiming to align its spending with a post-Singulair environment. The company recently announced it would cut another 13,000 jobs, or 14% of its current workforce, in addition to the 17,000 cuts already planned. When the cost-cutting push is finished, Merck aims to have an annual cost base that's almost $5 billion less; its workforce will be about 30% smaller.
CEO Kenneth Frazier (photo), who took over for the retiring Richard Clark (photo) in January, has tried to spare R&D as much as possible. Even when the latest round of cost cuts was announced, word was the administrative, sales and other headquarters layoffs would help keep Merck's R&D in the money.
In announcing early this year his company would toss its earnings guidance for 2013, Frazier said he wanted the company to focus on developing new drugs that will pay off, earnings-wise, down the line. Sticking to shorter-term EPS targets would require the kind of cost-cutting that Merck would regret later, he said at the time. And 2013, of course, will be the company's first full year without Singulair.
Drug: Diovan
Company: Novartis
2010 U.S. sales: $2.520 billion/$6.053 billion global
Impact: 15.89% of U.S. sales
Exclusivity expires: September 2012
Company: Novartis
2010 U.S. sales: $2.520 billion/$6.053 billion global
Impact: 15.89% of U.S. sales
Exclusivity expires: September 2012
Novartis
is one of the drugmakers taking a more-is-better approach to withstanding the
loss of its biggest-selling drug. The Swiss company shelled out $51.6 billion
to buy eye-care company Alcon, pumping up its own ophthalmic division,
CibaVision, by a factor of four, if the company's second-quarter results are
any indication. The company had already beefed up its generics unit Sandoz, as
well as its vaccines business. The "focused diversification"
touted by now-Chairman Daniel Vasella (photo) means Novartis has more
businesses to keep revenues coming when Diovan's numbers begin to erode.
More efficiency matters, too. CEO Joe Jimenez (photo) has been streamlining operations since he joined the company as COO, applying metrics from outside the industry to wring costs from its supply chain and financial management. Novartis announced late last month that it would amp up its cost-cutting measures to take more than $1.9 billion out of its annual cost structure this year, on top of last year's $1.9 billion. The latest cuts include 2,400 jobs. Jimenez says the more efficient operations are, the more Novartis can invest into R&D, which has recently delivered some promising new drugs expected to help take up the Diovan slack, including the oral multiple sclerosis treatment Gilenya.
Jimenez has plans to hang onto Diovan sales by focusing promotional efforts on emerging markets. By marketing to doctors in Latin America and Asia, where the Novartis name allows Diovan to command a premium over currently available generics, Jimenez figures the company can keep global sales at $2 billion.
More efficiency matters, too. CEO Joe Jimenez (photo) has been streamlining operations since he joined the company as COO, applying metrics from outside the industry to wring costs from its supply chain and financial management. Novartis announced late last month that it would amp up its cost-cutting measures to take more than $1.9 billion out of its annual cost structure this year, on top of last year's $1.9 billion. The latest cuts include 2,400 jobs. Jimenez says the more efficient operations are, the more Novartis can invest into R&D, which has recently delivered some promising new drugs expected to help take up the Diovan slack, including the oral multiple sclerosis treatment Gilenya.
Jimenez has plans to hang onto Diovan sales by focusing promotional efforts on emerging markets. By marketing to doctors in Latin America and Asia, where the Novartis name allows Diovan to command a premium over currently available generics, Jimenez figures the company can keep global sales at $2 billion.
9. Teva Pharmaceutical - Provigil
Drug: Provigil
Company: Teva Pharmaceutical Industries (via Cephalon buyout)
2010 U.S. sales: $1.059 billion/$1.120 billion global
Impact: 10.6% of Teva's U.S. sales, 49.4% of Cephalon's
Exclusivity expires: April 2012
Company: Teva Pharmaceutical Industries (via Cephalon buyout)
2010 U.S. sales: $1.059 billion/$1.120 billion global
Impact: 10.6% of Teva's U.S. sales, 49.4% of Cephalon's
Exclusivity expires: April 2012
You
might say Cephalon dodged a bullet on its Provigil patent loss. The
company was set to lose almost half of its U.S. sales when the blockbuster
narcolepsy drug lost exclusivity. Provigil amounted to almost 40% of Cephalon's
worldwide revenues, too. Although Cephalon had a follow-up drug, Nuvigil,
already on the market, the company knew its numbers would take a big hit.
Cephalon raised Provigil's price to capitalize on the brand as much as possible--and inspire patients to convert to Nuvigil instead. It struck deals with generics makers, some of which attracted scrutiny from antitrust regulators. It sought new indications for the wakefulness drugs--and found itself under investigation by the Justice Department for potential off-label marketing violations.
Now, Cephalon is part of Teva Pharmaceutical Industries. Suddenly, the loss of Provigil exclusivity isn't as big of a problem. The drug's $1 billion-plus sales do amount to 10% of Teva's North American revenues, but the company has other big growth plans to compensate. In fact, Teva agreed to divest its generic version of Provigil in Europe--and to sell one-year generic rights in the U.S. to Par Pharmaceutical. No, Teva's biggest patent worry isn't Provigil. It's Copaxone, but that's not until 2014.
Cephalon raised Provigil's price to capitalize on the brand as much as possible--and inspire patients to convert to Nuvigil instead. It struck deals with generics makers, some of which attracted scrutiny from antitrust regulators. It sought new indications for the wakefulness drugs--and found itself under investigation by the Justice Department for potential off-label marketing violations.
Now, Cephalon is part of Teva Pharmaceutical Industries. Suddenly, the loss of Provigil exclusivity isn't as big of a problem. The drug's $1 billion-plus sales do amount to 10% of Teva's North American revenues, but the company has other big growth plans to compensate. In fact, Teva agreed to divest its generic version of Provigil in Europe--and to sell one-year generic rights in the U.S. to Par Pharmaceutical. No, Teva's biggest patent worry isn't Provigil. It's Copaxone, but that's not until 2014.
10. Abbott Laboratories - TriCor
Drug: TriCor
Company: Abbott Laboratories
2010 U.S. sales: $1.015 billion/$1.582 global (includes TriLipix)
Impact: 6.68% of U.S. sales
Patent expires: July 2012
When Abbott Laboratories finally loses patent protection on TriCor, the drug may have set the record for exclusivity. It has been covered by one patent or another for more than 35 years, thanks to some formulation shifts and other changes Abbott made. In one case, Abbott avoided a patent challenge from Teva by converting TriCor to a tablet from a capsule, making the Israeli company's copycat form no longer bioequivalent.
The company was so successful at keeping TriCor's sales protected, it drew the spotlight from state and federal antitrust regulators, not to mention cornering-the-market allegations from Teva. Abbott agreed to pay $184 million to settle antitrust allegations, but denied any wrongdoing.
TriCor's patent life now is coming to an end. Luckily for Abbott, it has a successor drug, TriLipix, a delayed-release form analysts believe will siphon off about half of TriCor's patients by the time exclusivity ends. The only trouble is that some recent data suggest these two fenofibrate drugs aren't better at protecting diabetics against heart attack or stroke than generic simvastatin on its own. An FDA panel recommended the data be added to TriLipix's label, but it's unclear whether the study will have any impact on sales.
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