As patents expire, firms seek to replace lost sales

Drug research

Medimmune Sale

April 24, 2007|By Jonathan D. Rockoff | Jonathan D. Rockoff,Sun Reporter

WASHINGTON -- Last year, the Food and Drug Administration approved 22 new drugs for sale. So far this year, it has approved three.

It's that dearth of new products to replace the many blockbuster drugs coming off patent protection that is driving major drugmakers to buy from smaller competitors what they have struggled to develop themselves.

AstraZeneca PLC's deal to acquire Maryland's MedImmune Inc., developer of the FluMist nasal-spray vaccine, for $15.6 billion is the latest such effort.

Patents on branded drugs usually expire after 20 years, opening the door for the sale of cheaper generic versions. The generic drug industry predicts that 13 brand-name medicines will lose patent protection this year, including top sellers such as blood pressure treatment Norvasc and Clarinex, an antihistamine.

Britain's AstraZeneca and other pharmaceutical companies have spent billions of dollars trying to develop the next generation of drugs. While they have identified several promising successors, analysts say, they haven't come up with enough to fill up their product lines and replace all lost sales, estimated to be $26.5 billion this year alone.

"They're looking for ways to replenish their pipelines," said Dr. Jay Markowitz, a biotechnology analyst at T. Rowe Price in Baltimore, which is a major MedImmune shareholder. "And they realize they can't do it all internally."

Part of the problem is scientific. The fastest growing category of treatments involves a new kind of medicine, often called biotech drugs because they're usually made using recombinant DNA technology. A biotech drug is far more difficult to develop than simple molecules, such as aspirin, that major drug companies have been selling.

"There was, maybe, an expectation that the process would get easier and faster, but it hasn't," said Alex MacKerell, a University of Maryland pharmaceutical science professor who uses computers to identify the most promising compounds for study.

Many biotechnology companies have outpaced larger competitors in identifying, validating and then developing biotech drugs.

Big drug makers, using cash stockpiled during headier times, are trying to take advantage of the expertise by buying the most successful upstart companies.

They are making expensive bets that promising treatments won't hit development snags. They hope they'll be able to produce medicines that tap into lucrative markets, such as for diabetes, heart disease and cancer. Four large firms reportedly bid for MedImmune, a Gaithersburg company known for its flu and respiratory treatments.

Last year, big pharmaceutical companies bought at least 13 smaller biotechnology companies in major deals worth a record $19 billion, according to a report by Sanford C. Bernstein & Co. There have been several more acquisitions this year, including Schering-Plough's $14.4 billion purchase of Organon BioSciences last month.

"It's not something that will go away any time soon. It's only going to increase," said Alan S. Louie, research director of Health Industry Insights in Framingham, Mass.

Offering new treatments will be increasingly important if regulators continue to show signs of skittishness about approving newer versions of existing drugs, after Vioxx had to be withdrawn from the market for safety reasons. This month, a panel of experts advised the FDA to reject Arcoxia, a drug that Merck & Co. proposed as a replacement for the controversial painkiller.

"That will tend to push companies to develop drugs in new therapeutic categories," said John E. Calfee, a resident scholar at the American Enterprise Institute who follows government oversight of the drug industry.

The FDA is expected to issue a final decision on Arcoxia soon. After the advisory committee's vote, agency officials emphasized that the recommendation was limited to one class of drugs with serious side effects.

Vaccines, a MedImmune strength, are considered an especially fertile market for drug makers looking to maximize profits. Many large companies abandoned vaccine production in the 1980s and 1990s, but fears of bioterrorism and deadly bird flu have revived that sector.

To encourage research, governments have guaranteed purchases of bird flu vaccines. It also helps that companies are discovering expensive new vaccines for adults that cost more than childhood immunizations.

jonathan.rockoff@baltsun.com

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