Pfizer, Merck, Sanofi, and AstraZeneca Facing the Generic-Drug Squeeze

Generic-drug incursion and resulting declines in revenues continue to be major issues for the large pharmaceutical companies. An analysis of second-quarter and first-half results in 2013 of some of the leading companies reflect this issue as companies seek to continue to build their pipelines through acquisitions and organic growth.

Pfizer. Pfizer reported pharmaceutical/biopharmaceutical revenues of $23.66 billion for the first half of 2013, a 10% drop compared to revenues in the first half of 2012. A primary contributor to the decline was reduced sales for the company’s anticholesterol drug Lipitor (atorvastatin calcium), which continued to experience sales erosion due to generic-drug competition. Lipitor lost exclusivity in the United States in November 2011 and various other major markets in 2011 and 2012. This loss of exclusivity reduced branded worldwide revenues by $657 million in the second quarter of 2013, in comparison with the second quarter of 2012. The decline in Lipitor’s sales reflected the losses of exclusivity of the drug in developed Europe in the second-quarter 2012 as well as the impact of multisource generic competition in the US beginning in late-May 2012. First-half 2013 sales of Lipitor declined 55% year over year from $2.62 billion in the first half of 2012 to $1.17 billion in the first half of 2013.

Additionally, Pfizer’s second-quarter revenues were negatively impacted by other product losses of exclusivity, government purchasing patterns for Prevnar/Prevenar, a pneumococcal conjugate vaccine, in various markets, and certain other events, primarily within the company’s emerging markets unit. In emerging markets, for the second-quarter of 2014, Pfizer’s revenues grew 4% operationally, primarily due to strong volume growth in China, most notably for Lipitor and Prevenar, which was partially offset by the impact of the transfer of certain product rights to the Pfizer–Hisun joint venture in the first-quarter 2013 and the timing of government purchases of Enbrel (etanercept), a drug to treat psoriasis, psoriatic arthritis, and rheumatoid arthritis, and Prevenar in certain other emerging markets. Pfizer expects operational revenue growth in emerging markets to accelerate in the second half of the year to a high-single-digit percentage, with the full-year 2013 operational revenue growth expected to be a mid-single-digit percentage.

In key pipeline and other business developments thus far in 2013, Pfizer received breakthrough-therapy designation by FDA for palbociclib, a drug to treat breast cancer. A Phase III study, evaluating the safety and efficacy of inotuzumab ozogamicin in patients with relapsed or refractory CD22+ aggressive non-Hodgkin lymphoma who are not candidates for intensive high-dose chemotherapy, was discontinued due to futility. This compound continues to be studied in adult acute lymphoblastic leukemia and other hematological malignancies.

In other business developments, Pfizer gained $10.5 billion (pretax) for the sale of its 80.2% remaining stake in its animal-health business, Zoetis. In June 24, 2013, Pfizer completed the full disposition of Zoetis, which was achieved through a series of steps, including the formation of Zoetis as a separate company to which Pfizer transferred substantially all of its animal-health assets and liabilities, an initial public offering of a 19.8% interest in Zoetis, and a subsequent exchange offer for the company’s remaining 80.2% interest. Pfizer also entered into a worldwide (except Japan) collaboration agreement with Merck & Co. to develop and commercialize ertugliflozin and ertugliflozin-containing fixed-dose combinations with metformin and Januvia® (sitagliptin) tablets. Ertugliflozin is Pfizer’s investigational medicine for Type 2 diabetes, with Phase III trials expected to begin later in 2013.

Pfizer also announced plans to move forward to internally separate its commercial operations into three business segments, two of which will include Innovative business lines and a third which will include the Value business line. Each of the three segments will include developed markets and emerging markets. The changes will be implemented in fiscal 2014 in countries that do not require a consultation with works councils or unions and will be implemented in countries that require consultation after the successful conclusion of those processes.

Merck & Co. Merck reported a 12% decline in pharmaceutical product revenue for the second quarter of 2013. In the second quarter of 2013, the company had pharmaceutical sales of $10.56 billion, which was down from $9.31 billion in the year-ago period. A primary cause was a decline of global sales of Singulair (montelukast sodium) due to generic-drug competition. Worldwide sales of Singulair, a once-a-day oral medicine for the chronic treatment of asthma and the relief of symptoms of allergic rhinitis, declined 80% to $281 million in the second quarter of 2013 from $1.41 billion. The patents for Singulair expired in the US in August 2012 and expired in major European markets in February 2013. The company experienced a significant and rapid reduction in sales in the US and is now also experiencing a substantial decline in Europe. Merck also saw revenue declines due to further loss of market exclusivity for the antimigraine drug Maxalt (rizatriptan benzoate), the antihypertensive drug Cozaar (losartan potassium)/Hyzaar (losartan potassium/hydrochlorothiazide) and the antihistamine Clarinex (desloratadine). These declines were partially offset by growth in the company’s diabetes drugs, Januvia (sitagliptin)/Janumet (sitagliptin/metformin HCI), Gardasil (human papillomavirus quadrivalent (Types 6, 11, 16 and 18) vaccine, recombinant], and the arthritis drug Simponi (golimumab).

In other key developments for the second quarter, Merck reported preliminary results from an ongoing Phase IB expansion study evaluating the safety and efficacy of MK-3475, Merck’s investigational antibody therapy targeting PD-1, in patients with advanced (inoperable and metastatic) melanoma. Also, FDA approved Liptruzet (ezetimibe and atorvastatin) tablets for the treatment of elevated low-density lipoprotein cholesterol in patients with primary or mixed hyperlipidemia as adjunctive therapy to diet when diet alone is not enough. The company also received a Complete Response Letter from FDA regarding the new drug application for suvorexant, Merck’s investigational medicine for the treatment of insomnia. The company is evaluating the requests outlined in the Complete Response Letter and plans to submit definitive data in response to FDA in the first half of 2014.

Sanofi. In reporting its second-quarter 2013 results, Sanofi CEO Christopher A. Viehbacher acknowledged the negative impact resulting from loss of patent expiration and resulting generic-drug incursion. “The second quarter was a difficult quarter. As expected, this was the last quarter with a tough comparison to the prior year due to the residual impact of the patent cliff,” he said in a company press release. “Sales were also affected by our business in Brazil and commercial underperformance in certain business areas. However, sales growth of 7.7% of our growth platforms in the first half of 2013 continues to demonstrate the value of Sanofi’s integrated business model. In addition, we keep on making strong progress in delivering a growing portfolio of high potential R&D assets, as highlighted by the multiple clinical and regulatory milestones reached in the second quarter of 2013. We continue to expect to return to growth in the second half of 2013,” he concluded.

In the second quarter, Sanofi reported that sales in its pharmaceuticals business were EUR 6.71 billion ($8.92 billion), a decrease of 7.1%, which reflected generic competition, EU austerity measures, and an adjustment of EUR 122 million ($162 million) related to Brazil. Sales lost due to generic competition on its main legacy products in the US and European Union were EUR 481 million, ($640 million) primarily due to declining sales in the US for the anticancer drug Eloxatin (oxaliplatin injection), the anticoagulant Lovenox (enoxaparin), and the active ingredient of Plavix (clopidogrel bisulfate), a drug to inhibit blood clots, and in the EU, for the antihypertensive drug Aprovel (irbesartan).

Overall, Sanofi’s 2013 first-half sales for its pharmaceuticals business reached EUR 13.5 billion ($18.0 billion), a decrease of 5.7%. First-half sales lost due to generic competition on main legacy products in the U.S. and EU were EUR 1.036 million ($1.378 billion). Sales of Plavix were EUR 493 million ($656 million), down 1.3% in the second quarter impacted by decreased sales of active ingredient for the US (EUR 5 million [$6.6 million] versus EUR 28 million [$37 million] in the second quarter of 2012) as the product lost its exclusivity in the US on May 17, 2012. Sales of Lovenox were EUR 436 million ($580 million) in the second quarter, a decrease of 9.2%, mainly due to generic competition in the US where sales of the branded product declined 43.7% to EUR 48 million ($64 million). Second-quarter sales of Eloxatin were EUR 60 million ($79.8 million), a decrease of 83.7%, reflecting generic competition in the US where the product lost its market exclusivity August 9, 2012, and sales decline in emerging markets (EUR 31 million [$41 million], down 20.0%). First-half sales of Eloxatin declined 84.2% to EUR 119 million ($158 million). Second-quarter sales of Aprovel/Avapro decreased 27.5% to EUR 238 million ($316 million), reflecting generic competition in Western Europe where sales decreased 45.3% to EUR 94 million ($125 million).

On a positive note, products from Sanofi’s diabetes franchise sales totaled EUR 1.621 billion in the second quarter, an increase of 16.2%. For the first half of 2013, the company’s diabetes division recorded sales of EUR 3.163 billion, an increase of 17.8% in the first half of 2013. Second-quarter sales of Genzyme reached EUR 525 million ($698 million), an increase of 25.6%, driven by growth of Cerezyme (imiglucerase), a drug to treat Gaucher’s disease, and the enzyme-replacement therapy Fabrazyme (agalsidase beta) and the launch of the multiple-sclerosis drug Aubagio (teriflunomide) in the US. First-half sales of Genzyme totaled EUR 1.018 million ($1.354 million), an increase of 25.5%.

AstraZeneca. AstraZeneca reported a 4% decline in sales to $6.232 billion in the second quarter. Loss of exclusivity on several key brands accounted for approximately $500 million in revenue decline in the quarter. Five growth platforms (emerging markets, Japan, the antiplatelet Brilinta (ticagrelor), its diabetes franchise, and its respiratory franchise) contributed more than $400 million in revenue growth in the second quarter.

Other key developments thus far for the company in 2013 are the acquisitions of the specialty pharmaceutical company Omthera Pharmaceuticals and the pharmaceutical company Pearl Therapeutics and a recent collaboration with FibroGen to add three late-stage assets to the pipeline. Omthera’s investigational product, Epanova, for the potential treatment of patients with very high triglycerides, is an omega-3 free fatty acid composition that has been shown to bolster levels of eicosapentaenoic acid and docosahexaenoic acid. Pearl Therapeutics specializes in inhaled small molecules to treat respiratory disease. Pearl’s lead product, PT003, is a fixed-dose combination of formoterol fumarate, a long-acting beta-2-agonist and glycopyrrolate, a long-acting muscarinic antagonist. AstraZeneca and FibroGen formed a strategic collaboration to develop and commercialize FG-4592, an oral compound in late stage development for the treatment of anemia associated with chronic kidney disease and end-stage renal disease. Separately, AstraZeneca also filed a new drug application for Forxiga (dapagliflozin) with FDA in July 2013.

"We have made real progress in the second quarter against our strategic priorities despite the anticipated impact on revenue of the loss of exclusivity for some brands,” said AstraZeneca CEO Pascal Soriot,” in a company statement. “We continue to invest in distinctive science, our pipeline projects, products and key markets and our five key growth platforms delivered a double-digit increase in revenue contribution. Despite the fostamatinib disappointment, the late-stage pipeline in our core therapy areas is growing and has been further strengthened with the acquisitions of Omthera Pharmaceuticals and Pearl Therapeutics and the recently announced collaboration with FibroGen. In announcing the Cambridge Biomedical Campus as the location of our new UK strategic center, we also reaffirmed our commitment to invest in research and development productivity."