Generic Antidepressant May Affect Wyeth

The difference between a pill and a capsule might not seem big, but it could result in hundreds of millions of dollars in lost sales for Wyeth's top drug.

The Madison, N.J.-based company makes the best-selling antidepressant in the world, Effexor, with sales on pace to exceed $3.7 billion this year. The most common version is an extended-release capsule, Effexor XR.

Until recently, it seemed Wyeth would be the exclusive seller of extended-release Effexor in the United States through July 2010, thanks to its resolution of patent litigation in 2005.
But now Wyeth's market exclusivity is being threatened. Sun Pharmaceutical Industries Ltd., a generics manufacturer in India, has applied for U.S. Food and Drug Administration approval to sell a drug with the same active ingredient as Effexor XR, but with an important difference: It's an extended-release tablet, not a capsule.

FDA approval of what is likely to be a lower-priced drug from Sun might come when patent protection for Effexor's active ingredient, venlafaxine, runs out in June 2008. Patent protection for the capsule formulation expires later. Sun's different formulation should allow it to sidestep Wyeth's patent rights, and Wyeth already has told Sun it won't sue for patent infringement.
The near-term impact on Effexor sales won't be as great as it would be if an equivalent generic capsule were hitting the market. But Sun's plan, which surfaced in October, underscores the many challenges facing Wyeth, whose prospects appeared much brighter earlier this year.
The company's efforts to bring new drugs to market have run into regulatory roadblocks, and some current blockbuster drugs — including Protonix heartburn pills as well as Effexor XR — face the threat of generic competition sooner than previously expected.

"It's not helpful," Deutsche Bank analyst Barbara Ryan said. "The issue is Wyeth has tremendous exposure to generic competition between now and 2010, and a lot of arrows are pointed at their two major drugs, Protonix and Effexor."

Bank of America estimated the Sun version of Effexor XR could take 10 percent to 15 percent of the market share for the drug. That would represent more than $500 million in lost sales annually for Wyeth.

Wyeth's recent stock activity reflects these concerns. Shares have tumbled 25 percent since hitting a five-year high of $62.20 in June, closing Wednesday at $46.36. As a result, the stock trades at a lower price-to-earnings multiple, 13.1, than any other major pharmaceutical but Pfizer Inc., which is at 10.8.

Wyeth has played down the potential impact of the Sun version of Effexor XR. For one thing, the Sun pills are unlikely to be certified by the FDA as the exact equivalent to Effexor XR because of the different formulation. As a result, Sun's product won't benefit from state laws that require pharmacies to automatically substitute generics for branded drugs. The laws require generics to be exact copies, including the same formulation. For Sun to get its pills into patients' hands, doctors would have to write new prescriptions specifically for the Sun product, not Effexor XR.
"It's more than a difference of being a capsule versus a tablet," Joseph Mahady, Wyeth senior vice president, told investors at a conference last month. "It is likely to be a very different technology. It may indeed be a very different delivery profile of the product."

The company hasn't sued Sun because the basic patent — plus a six-month period of exclusivity for doing pediatric studies of Effexor — expires in June and the Sun product apparently won't infringe on other patents.

"Presumably the only reason (Wyeth) wouldn't fight it is because they thought they had no chance of prevailing," said Steven Lieberman, a patent lawyer in Washington who isn't involved in the case. (Lieberman represents Dow Jones & Co., publisher of Dow Jones Newswires, in an unrelated case.)

Sun's tactic is somewhat unusual. More typically, generic manufacturers want to sell exact copies of branded drugs. They either wait for patent protection to run out, or they claim patents are invalid in the hopes of selling a generic drug before patents expire. Pfizer Inc.'s Norvasc anti-hypertension medication lost patent protection earlier this year due to such challenges.

But selling an alternative formulation isn't unprecedented. In 2004, Ivax Corp. began selling tablet versions of Pfizer's Neurontin capsules for epilepsy, causing an immediate slowdown in the growth of Neurontin's sales, to 10 percent for the quarter in which Ivax launched from 32 percent in the preceding quarter. Ivax is now part of Teva Pharmaceutical Industries Ltd.

"The challenge is clear" because of the alternative formulation, Uday Baldota, Sun's vice president of investor relations, said in an interview. "The effort on promotion and marketing will be different from what you will do on a fully substitutable generic product."

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