Some Brand-Name Patents: Going, Going, Gone in 2010

The major patent cliff for pharmaceutical companies will hit in 2011 when Pfizer's (NYSE: PFE  ) Lipitor and sanofi-aventis (NYSE: SNY  ) and Bristol-Myers Squibb's (NYSE: BMY  ) Plavix start to see generic competition, but a few unlucky companies will see generic competition for their drugs next year.

It's important for investors to remember that the patent expiration date isn't always the date that the branded drug will see generic competition. For instance, Johnson & Johnson's (NYSE: JNJ  ) Levaquin was set to expire in December of next year, but a six month extension for testing the drug in children extended the exclusivity period to June 2011. On the other side, branded-drug makers sometimes strike deals with generic-drug makers to sell generics before their patents expire to avoid a loss in court. Companies that have drug exclusivity windows closing in 2010 include:

Drug

Company

Exclusivity ends

Cozaar/ Hyzaar

Merck (NYSE: MRK  )

April 2010

Arimidex

AstraZeneca

June 2010

Effexor XR

Pfizer

July 2010

Aricept

Eisai and Pfizer

Nov 2010

Source: FDA Orange Book and company SEC documents.

Some added pressure on the merger
Merck expects hypertension treatments Cozaar and Hyzaar to bring in sales of $3.4 billion to $3.7 billion combined this year. That's about 15% of expected sales before the acquisition of Schering-Plough. Merck's larger size should deaden the April blow a little and Schering-Plough has a nice pipeline that should help get sales growing in the medium future, but the loss of a blockbuster that large is still going to hurt. Fortunately Merck has been through it before with the loss of Zocor and more recently Fosamax.

AstraZeneca's breast cancer treatment Arimidex isn't quite as big a seller as Cozaar and Hyzaar, but it's still a blockbuster bringing in $1.4 billion through the first nine months of the year. Will the loss of Arimidex and blockbusters Seroquel and Symbicort in subsequent years put pressure on AstraZeneca to follow Merck and Pfizer down the megamerger pathway?

The disappearing-reappearing patents
Wyeth -- now part of Pfizer -- has tried to get around the loss of Effexor XR by developing a follow on drug called Pristiq, which is just the compound that Effexor becomes after it's broken down by the body. Unfortunately Pristiq doesn't seem to have any major benefit over Effexor, and Wyeth has had trouble getting patients to switch over. In the first half of the year, Pristiq had sales of $111 million compared with over $1.5 billion for its older brother. Once Teva Pharmaceuticals (Nasdaq: TEVA  ) launches a generic version of Effexor XR in July, Pfizer is going to have an even tougher time converting patients.

Forget the patent
Eisai and Pfizer's Alzheimer's drug Aricept will lose patent protection in November, but it shouldn't be a major loss for Pfizer. Despite the rather large Alzheimer's market, Aricept brought in just $311 million in revenue during the first three quarters of this year because Pfizer has to share revenue with Eisai, not to mention that the drug isn't particularly good at stopping the progression of Alzheimer's.

Pfizer's best hope for replacing Aricept lies in bapineuzumab, a phase 3 compound that it now owns -- thanks to Wyeth -- along with Elan (NYSE: ELN  ) and Johnson & Johnson. Results from the phase 3 trials are expected in the latter half of 2010. Perfect timing if they come out positive.

Investment's not on the list? Think you're safe? Think again.
Not too many readers probably own stock in Boehringer-Ingelheim or Astellas Pharma -- neither is available on the U.S. exchanges -- but that doesn't mean you can ignore the generic competition for their urinary disorders drug, Flomax, next year. Indirect generic competition for one branded drug can have a major effect on all the branded drugs that treat the same disease. For generic Flomax, that could mean lost sales for Pfizer's Cardura XL.

Investors would be smart to take a second look at the table above and see if they own drug companies that sell drugs that compete with those expected to experience generic competition this year. Doctors trying to save their patients some money might cost your companies some sales.

Elan is a Motley Fool Rule Breakers recommendation. Pfizer is a Motley Fool Inside Value selection. Johnson & Johnson is a Motley Fool Income Investor recommendation. Try any of our Foolish newsletters today, free for 30 days.

Fool contributor Brian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. The Fool has a disclosure policy.


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