The financial update released today lays out the extent to which future products need to perform if the company is to meet its goal. Xopenex, an approved product, had sales of $202.6 million through the first nine months of 2004, which was only a 9% increase compared with the same period last year. While many small drug companies would love to have a product with those sales, this simply isn't enough for Sepracor, which posted a net loss of $261.9 million through the first three quarters. Given the modest growth rate, Xopenex doesn't have the ability to make up that deficit, and the company will rely on drug launches to deliver profits.
Fortunately, on the very near horizon are Estorra and Xopenex MDI, which should be on the market in early 2005. The market's expectation is that Estorra will be a very successful product for treating insomnia, though as I noted a few months back, the drug will face significant challenges in capturing market share. Most important are the anticipated launch of Indiplon from Pfizer
I don't really doubt that Estorra will be successful. Despite the competitive threats, the drug should be able to carve out meaningful market share. What I think is the interesting point is if the sales will be sufficient to drive Sepracor into profitability. Estorra sales probably need to at least break the $250 million mark to do that, depending on how well the other products are doing. By this time next year, we should know if Sepracor will hit its profitability time line and if it is heading toward "profits by a whisker" or to the plump bottom line that biotech investors adore.
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Fool contributor Charly Travers does not own shares of any company mentioned in this article.