Third Quarter Revenues Wounded by Patent Expiries

As third quarter results were being released last week, we hear of several top drugmakers facing hard knocks from the fall off the patent cliff. Pharmaceutical news have been populated with headlines such as the following: Sanofi drops as major patent expiries take hold, Bristol-Myers results fall short as Plavix sales evaporate, AstraZeneca continues to see revenue decline, and Lilly revenues down as generics erode Zyprexa sales.

French drugmaker, Sanofi, suffered net sales loss of EUR448 million (~US$578 million) as a result of generic competition, particularly with the loss of patent rights to its colorectal cancer drug, Eloxatin (oxaliplatin) in the United States this August. Sanofi’s share of revenues from its Bristol-Myers Squibb-partnered megablockbuster blood thinner, Plavix (clopidogrel), fell 10% to EUR505 million (~US$651 million), while global sales of its antihypertensive, Avapro (irbesartan), also partnered with BMS, plummeted 26% to EUR334 million (~US$431 million) in the third quarter.  According to analyst Stephen McGarry from Societe Generale in London, “this was the first full quarter with all three major patent expiries in 2012.” He added that this year “represents the trough year for Sanofi’s earnings.”

Despite that, Christopher Viehbacher, CEO of Sanofi, believes that they are “seeing the light at the end of the tunnel,” thanks to the company’s growth platforms. During the third quarter, Sanofi received FDA approval for Zaltrap (aflibercept) for previously treated metastatic colorectal cancer, Aubagio (teriflunomide) for relapsing multiple sclerosis and Auvi-Q (epinephrine injection, USP) for patients with life-threatening allergies, all of which are expected to provide future sales some momentum. Plavix was also approved for two new indications in Japan, although this won’t make up for the loss from generics entering the market.

Sanofi’s decline in profits was, however, not as bad as some of its rivals. Lilly endured another difficult quarter as revenues slumped 11% with its antipsychotic Zyprexa (olanzapine) now off patent while BMS saw an extremely poor third quarter where the downward slide of Plavix revenues was further bruised by the discontinuation of its hepatitis C candidate BMS-986094.

AstraZeneca was hit the hardest with a worse-than-expected 15%-dip in third quarter sales, attributed to a big slump in Seroquel (quetiapine) sales as well as the costs relating the disposals of Astra Tech and Aptium Oncology. The company’s antipsychotic came off patent in March this year and looming ahead is the patent expiration of Nexium (esomeprazole), AstraZeneca’s proton pump inhibitor for heartburn relief, in the United States.

These are times when pharmaceutical companies turn to their R&D pipeline, in hope of discovering the next blockbuster. Sanofi believes that it is making good progress with its pipeline and that its growth platform will continue to provide consistent revenues over the next few years, supported by its long-acting insulin, Lantus, for diabetes, and its acquisition of the US biotech unit, Genzyme, both of which achieved strong double-digit sales growth. AstraZeneca’s mid- to late-stage pipeline is, on the other hand, looking rather weak. One strategy the company has in mind is to turn to acquisitions to strengthen its R&D portfolio and increase productivity. It would be interesting to sit back and observe how pharma deals with such inevitable loss of patent exclusivities and see if they appreciate the lessons learned from Procardia XL (nifedipine extended release tablets) whereby exploiting innovative drug delivery solutions has helped extend product lifecycle.