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Drug Roundup - January 10, 2012
The loss of a blockbuster patent can often have a substantial impact on a pharmaceutical company. As previously recognized revenues erode with the emergence of generic competition, drugmakers must rely on the successful marketing of existing products, as well as the development of pipeline prospects in order to lighten the blow to profits. As we begin a new year, several companies are preparing for a brand new wave of big-name losses, including Bristol-Myers Squibb (BMY), GlaxoSmithKline (GSK), Merck & Co. (MRK - Free Merck Stock Report), and Forest Laboratories (FRX).
Big-Time Drugs Losing Patent Protection in 2012
While 2011 was undoubtedly a challenging year for the branded pharmaceutical industry in regard to patent losses, 2012’s roster is no picnic either. Last year, large pharma lost billions upon billions of dollars in annual revenue when several blockbuster drugs, including Lipitor, lost patent protection and faced generic competition. Although top-line losses in the year ahead are not expected to exceed 2011’s tally, the group is scheduled to face the expirations of big-time names such as Plavix, Advair, Singulair, and Lexapro in 2012.
Bristol-Myers Squibb and Plavix
Plavix was a key top-line component for Bristol-Myers Squibb in 2011, accounting for roughly 35% of total sales ($7 billion). The drug has been widely successful in preventing blood clots in patients that have suffered heart attacks, stroke, or peripheral artery disease, but is scheduled to lose exclusivity in the United States this May. The company will be relying on several pipeline prospects, including Apixaban, to help lighten the blow on revenues.
GlaxoSmithKline and Advair
This situation with GlaxoSmithKline’s blockbuster asthma treatment is unique because, although Advair is scheduled to lose its patent this year, generic drug manufacturers are having a difficult time replicating the product. Companies such as Teva Pharmaceuticals and Sandoz (Novartis) have both experienced setbacks in the process and, as a result, GlaxoSmithKline may be able to hold onto Advair revenues longer than initially anticipated. Sales of Advair are expected to exceed $8 billion in 2011, or about 20% of GSK’s total revenue.
Merck and Singulair
Singulair has certainly been a big contributor for Merck in recent years, with annual sales in the vicinity of $5 billion, but it too will be facing generic competition in the year ahead. While this is certainly a notable concern on any company’s income statement, we believe Merck is well-positioned to absorb the impact given its sheer size and strong position in most markets. Singulair only accounts for about 10% of Merck’s total sales, making it a more manageable loss relative to the other drugs discussed in this article. Moreover, unlike some of its industry peers, Merck has not reduced research & development costs in light of the struggling economic landscape, which should support the emergence of new drugs in the coming years and better ensure long-term stability.
Forest Laboratories and Lexapro
The patent expiration of Lexapro in March 2012 will likely have the biggest impact on any pharmaceutical company this year. Forest is by far the smallest of the companies mentioned in this roundup and it’s blockbuster Lexapro drug accounts for a staggering 60% of the company’s total revenue. This will create the biggest top-line void in percentage terms. With limited pipeline visibility and a poorly diversified portfolio (two products make up more than 80% of sales), management at Forest Laboratories will have their hands full in the new year.
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.