Watch stocks you care about
The single, easiest way to keep track of all the stocks that matter...
Your own personalized stock watchlist!
It's a 100% FREE Motley Fool service...
The patent cliff has hit big pharma hard over the past year, resulting in falling sales across the industry over past quarters. Unfortunately, the worst isn't over yet for drugmakers in 2013. Several leading health care companies, from Eli Lilly (NYSE: LLY ) to Amgen (NASDAQ: AMGN ) , will have to face huge patent expirations for blockbuster drugs in the final two months of this year, but one company's loss can be another's big opportunity.
What should you watch for? Here are three huge drug expirations still to come in 2013 that you need to keep on your radar.
Neupogen's U.S. exclusivity dries up
Amgen's white blood cell booster Neupogen will lose its patent protection in December in the U.S., but this drug has already seen competition strike abroad. Generics giant Teva Pharmaceuticals (NYSE: TEVA ) rolled out a biosimilar for the drug, Tevagrastim, in Europe earlier. Teva has also won FDA approval for Tevagrastim, and the generics firm came to an agreement with Amgen earlier that will allow sales of the biosimilar in the U.S. to begin in November.
Is Amgen set for a big blow? So far, Neupogen's shown no indication of a big drop-off on the way. The blockbuster drug pulled in nearly $1.1 billion in revenue through the first nine months of 2013, including fantastic 21% year-over-year sales growth in America, its largest market by far. Considering that drugs such as Neulasta and Enbrel, two of Amgen's other big players, have recorded sales growth in the upper single-digit percentages through the first nine months of the year, Amgen can afford to take a hit to Neupogen's performance and continue pleasing investors.
Nonetheless, expect Neupogen to take some kind of a downturn. The drug's sales abroad have already declined sharply, falling 11% year-over-year through the first nine months of 2013. Hospira's (NYSE: HSP ) Nivestim, a biosimilar also designed to treat neutropenia in the same vein as Neupogen, has been approved in Europe . Expect Hospira and Teva to cut down Neupogen's sales growth in 2014, but Amgen should overcome this patent expiration without a hitch.
Rebif: A long-standing MS drug reaches the end
The next big drug on our list comes from German drugmaker Merck KGaA. Merck KGaA's standout multiple sclerosis drug Rebif, which it markets in a co-promotion agreement with Pfizer (NYSE: PFE ) , will lose patent protection at the end of December. Rebif pulled in around $2.5 billion last year at 7.5% sales growth for Merck KGaA, and it wouldn't be surprising if the drug continued on its strong course this year. Rebif has long been an industry standard for MS drugs to match up against.
Rebif's patent loss will certainly hit Merck KGaA hard. Don't expect too much of a drop for Pfizer's stake in Rebif, however. Pfizer links Rebif's revenue in with several other drugs it pulls in revenue from through alliances and partnerships, but the sales from such agreements totaled up to less than $1.6 billion through the first half of the year -- less than the sales of each of Pfizer's top three drugs.
Rebif's fall is also a turning point in the MS market. The drug is one of the old guard of injectable MS therapies, and new oral MS medications such as Novartis's (NYSE: NVS ) stellar blockbuster Gilenya has taken this market by storm. Gilenya, only approved in 2010, roared to sales of $518 million in the third quarter of 2013 alone, and if Novartis' drug stays on course, it'll easily exceed earlier analyst projections of around $2 billion in peak annual sales. Rebif's loss of patent protection might signal a loss for Merck KGaA and other companies involved in this fading market, but it's a huge opportunity for Novartis and other oral MS therapy makers to lead this market's future.
Cymbalta's loss drives a hole in Eli Lilly's future
Here's the big hit coming at the end of 2013. Eli Lilly's powerhouse antidepressant drug Cymbalta, a drug that racked up more than $4.2 billion in sales at 18% year-over-year growth through 2013's first nine months, will lose patent protection in December.
How apocalyptic is this for Eli Lilly? Cymbalta accounts for nearly a quarter of the company's total revenue. The drug's sales alone more than double those of Eli Lilly's next highest-selling drug, Alimta. Cymbalta has already seen cracks in its armor form, as volume of the drug fell in the third quarter despite an 11% sales gain.
Eli Lilly's facing patent expirations on more drugs to come as well, and the patent cliff already slammed antipsychotic medication Zyprexa back in 2011, and it has seen sales slip 26% through the first nine months of the year in ongoing fallout. Cymbalta is a huge part of Eli Lilly's present financial health, and investors should expect a giant hit to Eli Lilly's sales all throughout next year if it follows Zyprexa's quick fall from grace.
The patent cliff isn't the end for investors
Eli Lilly's in the most danger of the patent cliff in the final months of 2013, but big pharma companies across the health care sector are reeling from falling revenues due to patent expirations. Rebif, Neupogen, and Cymbalta will all take their toll before 2014 kicks off.
For investors, however, those patent expirations and subsequent sales drops can be a huge opportunity. Oral MS drug Gilenya and Novartis is just one example of a company capitalizing on a changing market-the fading lights of Rebif and other injectable MS therapies -- to the delight of investors. Where Eli Lilly and Amgen will feel the pain of Cymbalta and Neupogen's drop-off, other companies like Teva Pharmaceuticals will welcome gains. Don't just keep your eyes open for these patent losses: Stay aware of big pharma's next big opportunity.
How your portfolio can beat the patent cliff blues
The patent cliff might slam big pharma's best, but it doesn't have to hurt your investing outlook. After all, it's not the short term that matters so much: The best investing approach is to choose great companies and stick with them for the long term. The Motley Fool's free report "3 Stocks That Will Help You Retire Rich" names stocks that could help you build long-term wealth and retire well, along with some winning wealth-building strategies that every investor should be aware of. Click here now to keep reading.