Tick-tock, tick-tock, tick-tock ...
It was only a matter of time before Plavix, Bristol-Myers Squibb's
Plavix, a drug so commonly prescribed that I'd describe it as the apple pie of the pharmaceutical industry, is set to face fierce competition from seven generic-drug producers, including Dr. Reddy's Laboratories
According to statements made by Bristol's management team, Plavix sales are expected to decline by 60% in the year following its patent expiration. Considering that U.S. sales of Plavix totaled $6.6 billion last year, the company is facing an immediate haircut of about $4 billion annually. Based on the historical trend of generic drugs, it's extremely likely that Plavix's sales will fall for many years to come.
The time has come for Bristol-Myers to innovate. The question then becomes: Is the company ready?
"Maybe" would be my answer. The key to Bristol-Myers' success hinges on three key developments.
First, the success of melanoma cancer treatment Yervoy is imperative to kick-starting Bristol's growth. At a price of $120,000, the four-course treatment spread over three months clocks in as one of the most expensive drug treatments on the market. However, this is also the first melanoma treatment the FDA has approved since 1998, so it can rightfully command a high price. The key will be in whether physicians can be persuaded to prescribe such a high-priced but statistically effective drug. Yervoy contributed $154 million in worldwide sales in the recently ended quarter.
Second, Bristol-Myers, its partner Pfizer, and investors have bet the boat on the success of Eliquis, an experimental treatment targeting strokes and embolisms brought on by atrial fibrillation. The drug is currently being reviewed by the FDA, with a PDUFA target date of June 28 -- in short, a decision is coming very soon on whether the FDA will approve it. If approved, Eliquis offers multibillion-dollar revenue potential and could be the next drug to fill Plavix's void.
Finally, Bristol-Myers' spending spree has it diving headfirst into the hepatitis-C race. Earlier this year, Bristol ponied up $2.5 billion for Inhibitex and its experimental hepatitis-C compound INX-189, which is currently in phase 2 trials. This particular purchase I had a very hard time wrapping my head around, given that INX-189 was hardly out of phase 1 clinical trials and the sector is already very crowded. Gilead Sciences'
Bristol's future is very much uncertain, but what I can tell you is it can no longer rely on the safety net of Plavix to carry its pipeline. Much of its current rally assumes the approval of Eliquis in the coming weeks. If that doesn't happen, let's just say that I wouldn't want to be a Bristol-Myers shareholder.
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Fool contributor Sean Williams has no material interest in any of the companies mentioned in this article, although he suddenly has a craving for apple pie. You can follow him on Motley Fool CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
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