Mylan punctures Sciele's false sense of security


Mylan’s launch yesterday of the first generic version in the US to Sciele Pharma’s biggest-selling drug Sular, an anti-hypertension agent, sent shares in the company down 17% to a two-and-a-half year low of $17.15.

Whilst some investors and analysts had been encouraged by the lack of a generic since Sular’s main patent expired on June 8, providing the company with valuable time in which to switch patients to a new patented formulation, Mylan appears to have spoilt the party. Latest estimates of a 60% conversion rate fall well short of the company’s own 80-85% switch rate target upon generic exposure.

Critical switch rates

Since receiving FDA approval in January, Sciele has been desperately trying to switch patients onto the new formulation of Sular, which applies SkyePharma's Geomatrix technology to enable delivery of lower doses of active ingredient nisoldipine, providing a safer alternative to similar doses of the old form.

The latest and most accurate switch rates for Sular are likely to be revealed in Sciele’s second-quarter results tomorrow, but yesterday’s share price fall probably reflects the market’s scepticism that the company managed to achieve its target.

Return on investment

Mylan estimates that the three doses, 20m, 30mg and 40mg, it has launched generated $94m in sales for the 12 months ending March 31, 2008. This probably represents 85%-90% of total Sular sales over the same period.

Although this sales split does not include the more critical previous four months in which the new formulation has been heavily promoted, current analyst forecasts for steady sales over the next five years to $111m by 2012 look set to be revised downwards in the coming months.

Whilst the extent of the downgrade is yet to be determined, the company may now struggle to provide any real return on the $185m it handed over to AstraZeneca in 2002 for full rights to the drug.

With accumulated Sular sales between 2002 and 2007 of $384m and an estimated 35% profit margin, the company has probably only earned around $135m to date. Although EvaluatePharma’s NPV Analyzer currently values the new formulation of Sular at $171m, Mylan’s generic launch is likely to significantly reduce the drug’s sales and therefore profit to the company.

Catalysts for recovery

Investors seeking a recovery in Sciele’s shares would be wise to await full details of Sular’s switch rate at tomorrow’s quarterly results.

If the outlook is as bleak as the market appears to be expecting, the only significant catalysts expected this year are phase III results for Clonicel for the treatment of ADHD and an FDA ruling on its application to market another anti-hypertensive drug, CloniBID, due by December 19.

EvaluatePharma's Calendar of Events: Sciele Pharma (next 12 months)
Event Status Product NPV ($m) NPV as % of Mkt Cap Event Type Event Start Date End Date
In-Play (15%) Clonicel 63 11% Phase III Trial Results Phase III Trial Results for Clonicel for ADHD 01 Jul 2008 31 Dec 2008
In-Play (25%) Robinul - line extension 20 3% US Product Filing Expect US Filing for Glycopyrrolate (liquid formulation) to Treat Chronic, Moderate-to-Severe Drooling in Paediatric Patients 08 Jul 2008 30 Sep 2008
In-Play (48%) Fenofibrate & Pravastatin 12 2% Phase III Trial Results Phase III Trial Results for Fenofibrate & Pravastatin for Dyslipidaemia 01 Jun 2008 30 Sep 2008
Starts in 64 days PSD502 15 2% Phase III Trial Results Phase III Trial Results for PSD502 for Premature Ejaculation 01 Oct 2008 31 Dec 2008
Starts in 143 days CloniBID 58 10% US Product Approval (PDUFA) FDA Decision Date (PDUFA) on CloniBID for the Treatment of Hypertension 19 Dec 2008 19 Dec 2008

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