The biggest obstacle to the long-term success of any pharmaceutical company is the always-looming threat of generic drug competition. One way companies stave off this problem is by getting approval of new or improved versions of drugs losing their patent protection.

Tuesday, one of my favorite mid-cap biopharmaceutical companies, Cephalon (NASDAQ:CEPH), announced that it has received final Food and Drug Administration approval to market a drug named Fentora to treat breakthrough pain (severe bursts of pain) associated with cancer.

Getting Fentora approved was not a simple task, though. Like most drugs, Fentora was put through the FDA wringer, originally receiving an approvable letter from the agency in June.

Fentora is so important for Cephalon's long-term success because the company is losing patent protection on a similar product named Actiq. Earlier this year, Cephalon signed an agreement with Barr Pharmaceuticals (NYSE:BRL) that will allow Barr to start selling a generic version of Actiq by the end of this year.

To highlight the importance of Actiq, and what Cephalon would face without the Fentora approval: In the first six months of this year, Actiq has accounted for 36% of Cephalon's total sales. The drug has been hugely successful, and it remains a source of rapidly growing sales for the company.

Worldwide Actiq Sales (in millions)

Year-Over-Year Change

Q2 2006

$172

47%

Q1 2006

$118

15%

Q4 2005

$118

36%

Q3 2005

$100

(2)%

Q2 2005

$92

7%


Cephalon isn't relying on simply getting Fentora approved to treat cancer pain. The company is running trials on the drug to treat other types of pain, in the hopes of expanding the drug's potential market.

Because of the oncoming generic competition with Actiq, Cephalon is wasting no time in getting Fentora out on the market. Sales of the drug will start next week. Investors would be wise to watch the weekly prescription trends for Fentora to ensure that doctors are switching to it from Actiq. Otherwise, Cephalon's overall sales could take a pretty large hit in the first quarter of 2007.

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Fool contributor Brian Lawler does not own shares of any company mentioned in this article. The Fool has a disclosure policy.