Glaxo SmithKline (NYSE: GSK ) may have good reason to be down in the dumps. Late Monday, Canadian drugmaker Apotex said it has begun selling its generic version of Paxil in the U.S., despite the fact that the two companies are still wrangling in court over the patent.
Paxil, or paroxetine hydrochloride, is one of the most popular and well known of antidepressants, used to treat a disease that impacts millions of Americans. According to the National Institute of Mental Health, 9.5% of the U.S. population suffers from depression in a given one-year period.
Further, the drug is used to treat a variety of other disorders, including anxiety and panic attacks, which boosts its market potential as well. It seems you can't throw a roll of duct tape or newspaper employment section without accidentally hitting someone who has been prescribed Paxil for anything from depression to panic attacks to situational anxiety.
Regardless of whether you or a friend has been offered Paxil for those moody blues, proof that this is one strong product is in the numbers -- Paxil sales made up about $2.34 billion of Glaxo's revenues in 2002.
Of course, Glaxo prepared for this contingency by launching Paxil CR, an immediate-release form of the drug, complete with new patent protection. It's common practice for pharmaceutical companies to market enhanced versions of their blockbuster drugs in order to woo their customers away from generics. So far, Glaxo says that Paxil CR makes up 40% of new Paxil prescriptions in the U.S.
Although Glaxo lifted its guidance in July despite the pending threats to Paxil, when insurance companies and customers push for the cheaper alternative, the medication's sales are expected to suffer.
Even before the threat of generic encroachment, Paxil was up against well-known antidepressants, such as fluoxetine, the generic version of Eli Lilly's (NYSE: LLY ) Prozac, Pfizer's (NYSE: PFE ) Zoloft, and Forest Laboratories' (NYSE: FRX ) Celexa.
While the Fool has opined the strengths of pharmaceutical companies in the past, research and awareness of common pitfalls remains key. Intense competition and low-priced generic versions of a flagship product are very good reasons for some anxiety. The best medicine for Glaxo will be a reassurance of a strong new product pipeline to assuage investors' fears and replace any lost sales.
Speaking of new products, Glaxo's upcoming launches include that of Levitra, a drug for erectile dysfunction, poised to challenge Pfizer's Viagra. Whether this move will help make up for any lost sales due to Paxil copycats remains to be seen.
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