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No rest for the weary as patent cliff II approaches

Date January 31, 2013

Anyone who thought the industry was over the worst of the patent cliff might want to think again. The $33.5bn in sales at risk from patent expiries in 2015 nearly equal that of the $35.1bn in 2012, the year thought to be the nadir of big pharma innovation, according to an EP Vantage analysis (see tables).

How well drugmakers weather the new patent storm will come largely down to R&D and whether they can meet building expectations for slowly filling pipelines. After a bumper year for drug approvals, the industry needs to hope that success is not fleeting (Friendly FDA ups number of NMEs, January 10, 2013). For companies whose success rate is in doubt, the alternative might be to dismember themselves into cash-generating established-products entities and more speculative drug-discovery units, as has happened with Abbott Laboratories and might be on the horizon for Pfizer.

Absorbing the blow

This analysis includes only sales in the US, where the impact of patent expiry can be seen most clearly. It shows the previous year’s revenues at risk from patent expiry, so for 2015 the table lists the sales from 2014, the last full year unaffected by generic erosion,

What probably set 2012 apart was the number of blockbusters coming off patent and the amount of sales ascribed to them – nine products that exceeded $1bn or more in US sales, seven of which were in the $2bn-and-up club (Patent storm hits in 2012, February 8, 2012). To be sure, 2012 was unprecedented in that worldwide prescription sales were actually set to decline from $723.5bn in 2011 to $711.6bn, according to EvaluatePharma forecasts, as generics eroded top lines.

Loss of intellectual property is, of course, an event for which companies in innovative industries can plan and indeed endure by building that conveyor belt of product launches. But 2012 also followed a period in which R&D was moribund and both the number and value of new products was disappointing.

If the recent trends in drug approvals are any hint, patent cliff II might not be as demoralising as 2012. And with a big proportion of biologics, sales of many of these products will not immediately fall off a cliff, unlike their small-molecule cousins. Indeed, analysts are forecasting worldwide prescription drug sales growth of 8% from $753.1bn in 2014 to $786.5bn in 2015, hardly the picture of an industry in decline – although it would take the failure of only a couple of long-anticipated products to change that picture of robust growth.

But there can be no doubt that the companies with big sellers subject to generic competition will rue the losses and hope that their new products can successfully take up the slack.

Busting the blockbuster

The 2015 list contains seven products with blockbuster US sales, six of which crack the $2bn barrier, so they have considerable importance within their owners’ portfolios.

Top products going off-patent in 2015* 
Rank  Product  Company  US annual sales ($m) in 2014 (year before patent expiry)  
Lantus  Sanofi  4,791 
Abilify  Otsuka Holdings  3,876 
Rituxan  Roche  3,610 
Neulasta  Amgen  3,441 
Copaxone  Teva Pharmaceutical Industries  2,678 
Gleevec  Novartis  2,002 
Namenda  Forest Laboratories  1,575 
Lovaza  GlaxoSmithKline  882 
Treanda  Teva Pharmaceutical Industries  746 
10  Combivent  Boehringer Ingelheim  694 
    Other  9,230 
    Total   33,524  
* Data sourced to EvaluatePharma  

Sanofi might not feel the loss of Lantus’s market exclusivity as keenly as many of the others on the 2015 list. As a biological, the long-acting insulin has greater protection from generic erosion than small-molecule products, and it is currently forecast to remain as the French group’s biggest seller in 2018.

Still, with Eli Lilly and Boehringer Ingelheim working on a biosimilar Lantus that is due to report phase III data any day, that picture could yet change (Event – Lantus biosimilar’s success could affirm Lilly R&D strategy, August 15, 2012). Copycats are already on the market in many countries, providing yet another source of erosion should competitors want to navigate the as-yet untested FDA biosimilar pathway.

On the other hand, Abilify’s patent expiry will hurt Otsuka more severely. Sales of the antipsychotic are forecast to drop like a stone, from $5.09bn in 2015 to $1.3bn in 2016. A one-month depot formulation is due an FDA decision next month, an event that could help offset some of the losses, but will not fully replace them (Event – Abilify Depot long-acting in more ways than one, February 28, 2013).

Top products that went off-patent in 2012* 
Rank  Product  Company  US annual sales ($m) in 2011 (year before patent expiry)  
Plavix  Bristol-Myers Squibb  6,622 
Singulair  Merck & Co  3,536 
Seroquel  AstraZeneca  3,344 
Actos  Takeda  3,098 
Diovan  Novartis  2,333 
Lexapro  Forest Laboratories  2,131 
Epogen  Amgen  2,040 
TriCor  Abbott Laboratories  1,372 
Eloxatin  Sanofi  1,122 
10  Geodon  Pfizer  859 
    Other  8,644 
    Total   35,101  
* Data sourced to EvaluatePharma  

No replacements

As with Eli Lilly in 2013, Teva Pharmaceuticals Industries is set to have an unfortunate twofer in 2015 as both its biggest-selling branded drug, the MS-therapy Copaxone, and chemotherapy agent Treanda hit the wall. The Israeli group has struggled mightily to come up with a replacement MS product in laquinimod, but clinical stumbles and the looming launch of Biogen Idec’s Tecfidera (BG-12) have stolen much of its momentum.

Unlike its fellow biological, Lantus, Copaxone might be subject to more immediate and explicit generic competition as Teva has been in court to defend its patents (Teva’s Copaxone headache gets two-year reprieve, June 25, 2012).

The expiry of Novartis’s Gleevec will signify the end of an era of sorts. The first kinase inhibitor has sold more than $30bn for Novartis since its launch in 2001; its decline will be swift, dropping to just $129m in US sales in 2018.

Namenda is the final blockbuster on the list, with US sales seen dropping by more than half following its January 2015 patent expiry. As the intellectual property estate has already been extended through the launch of a long-acting dosage of the pill, it appears all protection for the molecule lapses in mid-2015, leaving it vulnerable to generic erosion.

The years after 2015 are looking more benign, with the sales sacrificed to patent expiries at a comparative ebb through 2018 – 2017 being notable for having just three one-time US $1bn-sellers on the expiry list. With a shifting focus toward developing drugs for rare diseases, the industry has sought to protect itself from such major inflections as was seen last year and will be seen again in 2015 (Orphan drugs can be a route to success, but pricing is a future problem, October 16, 2012).

Regulators and payers are getting wise, however. With cost-control pressure rising for orphan drugs, big pharma could face a new shock that plays out quite differently than the patent cliff of 2012.

To contact the writers of this story email Jonathan Gardner or Joanne Fagg at jonathang@epvantage.com or follow @JonEPVantage or @JoEPVantage on Twitter

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