News that AstraZeneca and Teva have settled their patent dispute over Crohn’s disease drug Entocort EC, delaying a US generic launch until February 2012, is only mildly positive for the UK pharma giant. The product made US sales last year of $204m, resulting in revenues to Astra of just $100m when compared to overall annual pharmaceutical sales of $32bn.
Yet for Prometheus Laboratories this is a potentially defining event that could influence its strategic direction over the next few years. The private California company has been selling Entocort EC in the US on Astra’s behalf for the last five years, but the license is set to expire by the end of 2010. Meanwhile, Prometheus has been seeking an IPO since 2007, but until firm resolution is reached on Entocort’s license and patent life, an IPO appears highly unlikely given the drug accounts for 60% of the company’s revenues. The question therefore is how the Astra-Teva settlement impacts Prometheus’ prospects.
Patent situation encouraging
Barr Pharmaceuticals, since acquired by Teva, and Mylan filed ANDAs against Entocort EC in the first half of 2008, whereupon Astra filed patent infringement lawsuits.
Entocort EC is currently protected by two FDA Orange Book listed patents which expire in May 2011 and January 2015. The deal with Teva to allow it to launch its generic version, which is also expected to hold first-to-file status, on February 15, 2012, is therefore a compromise of sorts on the validity of these patents.
Having settled with Teva all eyes now turn to Astra striking a similar deal with Mylan, as is often the case in these situations; witness the recent patent litigation settlements involving multiple generic companies over Takeda’s Actos and Sanofi-Aventis’ Eloxatin.
The automatic 30-month stay before the FDA can approve Mylan’s generic version will expire in December 2010 but it appears Astra is in settlement mode and a compromise deal can be expected well before then.
As such, the length of Entocort EC’s patent life in the US could soon become a lot clearer. This is massively important for Prometheus and will undoubtedly help to determine the value and terms of any deal extension with Astra.
As for the deal itself, Prometheus licensed Entocort EC from Astra in 2004, to commercialise the product in the US for a fixed period of six years. Prometheus paid just $2m upfront to gain these rights but also pays out a variable royalty to Astra depending on the level of net sales of the product.
Entocort EC is an encapsulated formulation of budesonide, the corticosteroid discovered by Astra and used in its blockbuster asthma inhaler product, Symbicort. Taken as an oral pill, the formulation means that budesonide can impart its anti-inflammatory affect directly in the ileum and/or the ascending colon while as little as 10% of the drug enters the bloodstream, reducing common corticosteroid-related side effects.
Prometheus is clearly very proud of the work it has done on carving out a decent niche for Entocort EC within the ultra-competitive landscape of products used to treat multiple forms of Crohn’s disease. Sales of $46m in 2005, Prometheus’ first full year promoting the product, have certainly shown impressive growth to reach $204m last year.
Prometheus claims this sales growth has been achieved against the backdrop of a largely flat overall market and that the relative market share for Entocort EC has almost doubled, from 6.1% in January 2005 to 10.6% by December 2009.
The fact that the generic powerhouses of Teva and Mylan are seeking to capitalise on Entocort EC’s market opportunity is probably further testimony to the work that Prometheus has put into developing the product.
Will Astra want it back?
Although the commercial opportunity of Entocort EC is relatively tiny to Astra and regaining the rights would only provide an extra 14 months of improved financial return until generics enter the fray, it could still be a tempting option and probably one that Astra would not rule out without careful thought.
However, the stakes for Prometheus are infinitely higher and it can be assumed the company will be fighting tooth and nail to secure a decent extension to the license. Under terms of the original deal, Prometheus holds first negotiation rights should Astra seek to sell or transfer US rights to the product at the end of their partnership.
Aside from Astra’s Nexium franchise, the UK pharma giant has largely turned its back on the gastro-intestinal sector, as witnessed by the spin out of its GI business into Albireo in 2008. As such it seems unlikely at this stage that regaining rights to Entocort EC is worth it for Astra. Maintaining the status quo of collecting decent returns on Prometheus’ hard work seems a more viable option, which is undoubtedly what Prometheus will be banking on in any licensing talks.
So far both Prometheus and Astra have declined to comment on the current status or prospects of any license extension discussions. The assumption must be that any discussions will have received a timely boost from the patent settlement with Teva.
Seen as a stand out IPO candidate for the next 12 months (Anthera listing confirms weak IPO market, March 5, 2010), Prometheus will be desperate to resolve these patent and license issues as soon as possible. As its IPO document reveals: “(the loss) of our right to promote Entocort EC will adversely affect our operating results and would cause our business to suffer.”