Eli Lilly (NYSE: LLY) will take a hit next year as its multibillion-dollar antidepressant drug Cymbalta loses patent protection. Meanwhile, in the absence of new therapies for depression, Alkermes (NASDAQ: ALKS) hopes its ALKS-5461 can win approval from the Food and Drug Administration and capture a significant share of the market.
Exiting on top
Lilly's Cymbalta is the fourth best-selling drug in America, racking up sales of $4.5 billion last year. The drug produced nearly $1.4 billion in sales the third quarter, suggesting an even faster run annual run rate this year.
That revenue stream is about to drop sharply in 2014, however, as that is when Cymbalta loses its patent protection.
The FDA approved the first generic competitors in December, including one from generic goliath Teva Pharmaceutical (NYSE: TEVA). Given that generics account for 85% of all antidepressant scripts written, it's likely Teva and its competitors will cut significantly into Cymbalta's revenue this coming year. Further out, Alkermes may have a bigger opportunity.
Filling the void
Every year roughly 7% of all adults in the U.S. (approximately 20 million people) experience clinical depression. Over a lifetime, 10% to 25% of women and 5% to 12% of men will suffer from severe depression at least once.
The widespread prevalence of major depressive disorder, or MDD, means that treating depression is a multibillion-dollar market. Despite the billions at stake and the significant need, however, treatment has fallen short.
The National Institute of Mental Health estimates that just half of those suffering receive treatment for their disease and more than a third of these are categorized as just receiving minimally adequate care.
This suggests a significant opportunity for Alkermes' up-and-coming ALKS-5461 drug for major depressive disorder, a condition so common that some refer to it as the "common cold" of mental health.
Competing for market share
The antidepressant category was the second fastest-growing in terms of scripts written in 2011 and the most prescribed of any drug class in 2011, according to IMS Health.
Still, a lack of new therapies and a host of long-in-the-tooth treatments losing patent protection have collapsed the amount spent on treatment. The amount spent on antidepressants fell nearly 6% to $11 billion in 2011, according to IMS Health.
One of the biggest players in treating the disease is Bristol-Myers (NYSE: BMY) and Japan's Otsuka Pharmaceutical, which co-market Ambilify. That drug was the second best-selling drug in the U.S. last year, generating $5.6 billion in sales for the companies. The drug is far from cutting edge, however, given that it won approval from the FDA in 2002.
AstraZeneca's Seroquel XR, a long-acting version of the former multi-billion dollar drug Seroquel, had sales of more than $1 billion in the U.S. last year. Seroquel XR won approval as a treatment for MDD in 2009. However, Seroquel XR is also far from a next-generation drug given that Seroquel itself has been around since 1997 and the XR version has been on the market as a treatment for schizophrenia since 2007. This means that AstraZeneca will lose patent protection for the XR version in 2017.
Succeeding in clinical trials
Alkermes thinks it can win prescriptions away from those competitors based on results from its phase 2 studies of ALKS 5461.
In phase 2 trials, the drug showed statistically significant reduction in depression over a four-week treatment period, as measured by two separate depression ratings scales: the Hamilton and Montgomery-Asberg scales.
"The improvements in depressive symptoms observed in patients treated with ALKS-5461 in this study were clinically meaningful and among the most robust I have seen in a Phase 2 study for depression in the past two decades. This promising candidate could provide a valuable new treatment approach for this serious and chronic disease," stated Maurizio Fava, M.D., director of the Depression Clinical and Research Program at Massachusetts General Hospital and Slater Family Professor of Psychiatry at Harvard Medical School.
Fool-worthy final thoughts
Lilly's loss will be Teva and its generic counterparts' gain this coming year. A bit further out, however, an absence of new therapies and the eventual loss of patent protection for Seroquel XR could clear the way for Alkermes ALKS-5461 to become a big seller.
Alkermes will advance the drug into phase 3 trials, and if that study is as successful as phase 2 then a filing with the FDA should follow quickly since the FDA awarded the drug fast-track status in October.
Another high-growth stock opportunity
Opportunities to get wealthy from a single investment don't come around often, but they do exist, and our chief technology officer believes he's found one. In this free report, Jeremy Phillips shares the single company that he believes could transform not only your portfolio, but your entire life. To learn the identity of this stock for free and see why Jeremy is putting more than $100,000 of his own money into it, all you have to do is click here now.