As patent storm peaks Lilly and Astra have furthest to fall

Lipitor might have already fallen off its infamous patent cliff but there are plenty of other huge franchises following the blockbuster statin over their own precipices (Patent storm hits in 2012, February 8, 2012). The loss of the likes of Seroquel, Singulair, Actos and Diovan in the coming months means some of the world’s biggest drug makers are facing big holes in their drug portfolios; their success at refilling them is another matter entirely.

Eli Lilly and AstraZeneca are the most exposed to generics – 71% of their respective 2011 pharma sales are at risk from cheap copycats over the next three years, EvaluatePharmadata show. But it is not just big pharma that is suffering – the loss of the anti-depressant Cipralex/Lexapro means partners Lundbeck and Forest Laboratories both face the loss of more than half of their drug sales this year alone (see tables).

Big pharma patent expiry risk over next 3 years (data based on FY 2011 estimates)
WW Pharma
Sales in 2011
expired sales
Patent expiry
within 3 years
% Portfolio at
risk within 3
Eli Lilly 21.5 7.2 8.0 71%
AstraZeneca 32.2 7.5 15.2 71%
Takeda 16.3 4.0 6.9 67%
Pfizer 54.7 24.6 11.7 66%
Bayer 18.6 9.5 2.3 63%
Johnson & Johnson 24.9 8.4 6.0 58%
Bristol-Myers Squibb 17.1 0.7 8.5 54%
GlaxoSmithKline 39.2 18.8 2.1 53%
Merck & Co 43.2 8.5 10.2 43%
Novartis 50.1 9.6 12.0 43%
Sanofi 45.6 8.4 7.3 34%
Abbott Laboratories 22.6 4.0 1.6 25%
Roche 36.7 3.9 2.4 17%

Long considered among the weakest of the big pharma pack due to exposure to generics and failure to refill the holes, Eli Lilly and AstraZeneca are both entering incredibly challenging times.

For Eli Lilly the loss of Zyprexa, Cymbalta, Gemzar and Evista leave a void currently unfilled by pipeline projects. Blood thinner Effient is struggling to make headway; as such the big hope is that Alzheimer’s therapy solanezumab will prove successful when phase III data emerges later this year, but the chances are slim.

AstraZeneca meanwhile has been slashing costs ahead of the loss of Seroquel this year and Nexium in 2014. A string of pipeline setbacks has prompted speculation the company might have to resort to a big buy, but management has been quick to quash such speculation and some believe the company could itself become a target (AstraZeneca's shrinking act could increase its appeal, February 2, 2012).

Takeda, meanwhile, is facing the loss of diabetes drug Actos this year, while Pfizer is already a way down Lipitor’s cliff.

Looking beyond

For these companies the challenge has been to persuade investors to look beyond the patent cliff, and accelerating share prices at the end of last year suggested this was happening to a certain extent. Keeping that long-sighted focus will prove more of a challenge this year, as reality starts to bite.

Of course the easiest way to distract from a patent cliff is to deliver new products to replace the old – failure to do so is the biggest problem facing these companies, particularly for the likes of Astra and Lilly which are dealing with the biggest cliffs.

The exception here is Bristol-Myers Squibb, which has scored numerous pipeline goals and was the fastest rising big pharma share of 2011, despite more than half of its 2011 drug sales being at risk over the next three years (Big pharma stocks end year on a high note; BMS and Elan stand out, January 5, 2012).

Even Pfizer, in the midst of losing the biggest selling drug ever, has managed to rebuild some confidence with wins with apixaban – partnered with Bristol-Myers – and RA pill tofacitinib. Shares in the company touched a four-year high in January.

Those companies at the most immediate risk of patents expiring this year are listed in the table below. Because Zyprexa fell last year, Eli Lilly is excluded from the analysis.

Although not a big pharma name, Forest is particularly exposed – as well as losing Lexapro this year Namenda falls in 2015, taking another $1bn in sales with it. Denmark’s Lundbeck, which sells the anti-depressant as Cipralex in Europe, is even more exposed; neither has notable franchises building in its wake.

Companies at risk this year
Company Patent Risk (as a % 2011 WW Rx & OTC Sales) within 1 year
1 Lundbeck 65%
2 Forest Laboratories 50%
3 Bristol-Myers Squibb 47%
4 Takeda 38%
5 AstraZeneca 24%

All data sourced to EvaluatePharma.

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