Patent storm gathering strength

Source EP Vantage
Company PfizerEli LillyBristol-Myers SquibbSanofiGlaxoSmithKlineTakedaRanbaxy LaboratoriesNovartisAstraZenecaAmgenRocheAbbott LaboratoriesMomenta PharmaceuticalsTeva Pharmaceutical IndustriesActavisJohnson & JohnsonCephalon 
Tags Analysis, Free Content, Company Strategy, Patent
Date January 28, 2011

With the big pharma reporting season in full swing more than one chief executive has been heard to warn of tough times ahead. The cautious tone is justified – the sector is facing a perfect storm of pricing pressure and a swathe of blockbuster patent expiries.  

However if this year looks bad, with huge drugs including Pfizer’s Lipitor and  Eli Lilly’s Zyprexa losing market exclusivity, next year is the stuff chief executives’ nightmares are made of. A staggering $33.2bn of sales will be exposed to low-cost generics in 2012 in the US alone, more than double this year’s figure, an analysis by  EP Vantage reveals; a true  annus horribilis.

The analysis below only looks at US sales, a region where the impact of patent expiry can be seen most clearly. The data, extracted from EvaluatePharma, illustrates the annual levels of sales at risk as a result of patent expiry. For example, for products going off-patent in 2011, the total annual sales from 2010 is shown, being the last full year of sales unaffected by generic erosion.

Product patent expires in:  Sales at risk ($bn; annual US sales in year prior to patent expiry) 
2006  12.7 
2007  13.6 
2008  13.1 
2009  17.4 
2010  14.8 
2011  15.8 
2012  33.2 
2013  19.9 
2014  24.6 
2015  24.2 
2016  15.3 

Reduced impact in 2011  

It has long been appreciated that 2011 and 2012 would be particularly painful years for big pharma and their blockbusters (Calm before 2011 patent storm, March 4, 2010). However some significant developments in the past 12 months mean the hit in 2011 has been dampened somewhat, with the bulk of the generic erosion pain now shifted into 2012.

Firstly, Bristol-Myers Squibb and  Sanofi-Aventis this week won a six-month paediatric extension to patent protection for Plavix, which shifts the blood thinner into the patent expiry class of 2012. Although the patent extension, from November 2011 to May 2012, was only granted by the FDA this week, a majority of analysts had expected this and have already modelled for generic erosion to start in the middle of 2012. 

Another important factor has been the removal of GlaxoSmithKline’s Advair from the ‘at-risk’ class in 2011. Although the combination asthma and COPD drug theoretically loses patent expiry this year in the US, few believe the FDA will approve a generic version any time soon.

The biggest generics players, Teva and  Sandoz, have all but given up on their efforts to develop a copycat of Advair (Glaxo's Advair looks increasingly bullet proof as Sandoz backs away from US, March 18, 2010). It now seems unlikely that a direct generic competitor will enter the US market before 2016 so Advair sales have been removed entirely from the picture of sales at risk.

Takeda’s diabetes blockbuster, Actos, has also shifted from 2011 into 2012, following a number of patent litigation settlements which have delayed generics for 19 months, a major boost for the Japanese pharma giant (Takeda to gain from Actos patent victories, April 29, 2010).

Indeed, the generic erosion impact in 2011 could yet be even lower given uncertainty that still surrounds the launch of copycat versions of Lipitor, the industry’s biggest-selling drug.

Lipitor’s patent expires in November 2011 and as it stands Ranbaxy Laboratories will launch its generic version with 180 days exclusivity. Watson Pharmaceuticals, as a result of its $1.75bn purchase of Arrow Group, will introduce an authorised generic at the same time.

However, there are question marks over Ranbaxy’s ability to launch given its manufacturing deficiencies, although the Indian company’s recent introduction of generic versions of Aricept suggest these concerns may be subsiding.

Nevertheless, the full impact of generic competition to Lipitor will only be felt in 2012. US sales of the cholesterol-lowering agent have been in gradual decline for a few years since a peak of $7.85bn in 2006, but once multiple generics enter the fray the damage will be severe – US sales in 2013 will be less than $150m.

Pain in 2012

While five blockbuster drugs, based on US sales alone, will lose patent protection at some point this year, ten products around or above the billion dollar mark will lose market exclusivity in 2012.

Top products going off-patent in 2011 and 2012   USA annual sales ($m) 
Year  Rank  Product  Company  2010  2011  2012  2013  2014  2015  2016 
                     
2011   Lipitor   Pfizer  5,329  4,528  492  146  73  45  42 
   Zyprexa   Eli Lilly  2,496  1,949  339  218  188  172  157 
   Levaquin   Johnson & Johnson  1,312  734  155  62  43  30  17 
   Concerta   Johnson & Johnson  929  587  306  221  189  150  111 
   Protonix   Pfizer  690   279  172  96  64  41  17 
                     
2012   Plavix   Bristol-Myers Squibb  6,154  6,315  3,014  382  113  61  28 
   Seroquel   AstraZeneca  3,747  3,771  1,669  985  861  792  732 
   Singulair   Merck & Co  3,224  3,356  2,178  364  125  53  21 
   Actos   Takeda  3,351  3,275  1,360  582  511  462  413 
   Enbrel   Amgen  3,304  3,258  3,218  3,157  3,097  3,024  2,967 
   Lexapro   Forest Laboratories  2,264  2,122  188  66  50  43  39 
   Diovan   Novartis  2,520  2,093  1,540  394  333  279  246 
   Viagra   Pfizer  992   1,007  328  75  59  54  46 
   Provigil   Cephalon  1,027  916  403  87  38  28  17 
  10   Geodon   Pfizer  864  907  539  120  35  28  22 

The fact that a drug as hugely important to Novartis as  Diovan does not make it into the top five illustrates just how many huge drugs will start to fade in 2012. Loss of the hypertension pill is already hurting  Novartis, due to the appearance of generic versions of drugs in the same class; analysts believe sales probably peaked last year at $2.5bn. 

The reason Seroquel appears to be holding up is mainly down to franchise extension with  Seroquel XR.  AstraZeneca revealed this week the extended release version of the anti-psychotic became a billion dollar product in its own right last year, based on worldwide sales; its patent runs to 2017.

Likewise, generic erosion of Amgen’s biological arthritis blockbuster Enbrel is not expected for a few years yet. Technically its main patent expires in 2012, although uncertainties over the regulatory pathway for biosimilars in the US and the developmental period required suggests one of  Amgen’s biggest selling products is safe for the immediate future.

On a similar theme, it is worth pointing out that patent expiries for a number of biological blockbusters are included in the analysis for future years, such as Roche’s Rituxan in 2014,  Sanofi-Aventis’ Lantus in 2015 and  Abbott Laboratories’ Humira in 2016. Whether biosimilars of these products reach the market in these years is questionable but cannot be ruled out at this stage.

Not that it will be plain sailing after 2012; the rate of erosion of branded sales is set to remain incredibly high until 2015. Annual exposure rates over the next five years are expected to be higher than any of the last five years.

Of course further patent litigation settlements or losses could significantly change the picture in any given year – for example, Momenta Pharmaceuticals’ breakthrough in 2010 with generic versions of Sanofi-Aventis’ Lovenox came two years earlier than expected. Likewise, the market exclusivity for  Teva’s MS drug Copaxone, currently predicted to last until 2014, is uncertain.

Nevertheless, the big picture is one of painful losses to sales and earnings, the scale of which the industry has never seen before.

This content is written, edited and published by EP Vantage and is distributed by Evaluate Ltd. All queries regarding the content should be directed to: news@epvantage.com

EP Vantage is a unique, forward-looking, news analysis service tailored to the needs of pharma and finance professionals. EP Vantage focuses on the events that will define the future of companies, products and therapy areas, with detailed financial analysis of events in real-time, including regulatory decisions, product approvals, licensing deals, patent decisions, M&A.

Drawing on Evaluate, an industry-leading database of actual and forecast product sales and financials, EP Vantage gives readers the insight to make value-enhancing decisions.

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