Eli Lilly to Pay Up to $90 Mln to Develop, Sell Sepracor Antidepressant
Bloomberg News
December 7, 1998, 12:10 p.m. ET
Lilly Buys Sepracor Rights to New Version of Prozac (Update4)
(Adds analyst and company comment, updates shares.)
Indianapolis, Dec. 7 (Bloomberg) -- Eli Lilly & Co. said it
bought the rights from Sepracor Inc. for a successor to Lilly's
best-selling drug Prozac, moving to hold onto its market
leadership after Prozac loses patent protection.
Lilly, the world's 10th-largest drugmaker, will pay as much
as $90 million plus royalties for Sepracor's R-fluoxetine, a
version of Prozac that could have fewer side effects such as loss
of sex drive or impotence.
Sepracor's compound has patent protection until 2015 and
could help Lilly stave off generic competition for Prozac, which
had sales of $793 million in the third quarter and accounted for
about 30 percent of Lilly's 1997 sales. Patents on the nearly 11-
year-old antidepressant begin expiring after 2001.
''It's a silver bullet for Lilly's Prozac problem,'' said
Erick Lucera, an analyst with Independence Investment Associates,
which holds about 721,000 shares of Sepracor, an unprofitable
biotechnology company that specializes in developing purified
versions of best-selling drugs.
Shares of Marlborough, Massachusetts-based Sepracor were
unchanged at 88 at midday, after trading as high as 98
before U.S. markets opened. Shares in Indianapolis-based Lilly
rose 1/8 to 86 1/4.
Lilly will pay Sepracor an initial $20 million and as much
as $70 million in additional payments depending on the
antidepressant drug's progress in development, and will pay an
undisclosed royalty on sales of the product.
Prolonging a Patent
''This is good news for both of them,'' said Michael
Sheffery, an analyst with Orbimed Advisors. ''Sepracor is
providing a service for the industry that is clearly needed in
terms of prolonging a patent. For Lilly it affords them another
option for dealing with year X and the Prozac patent
expiration.''
Lilly said it expects to submit a marketing application to
the Food and Drug Administration for the new version of the anti-
depressant drug by 2001. Sepracor has said it expects Lilly's
patents to hold until June of 2004, and is aiming to get the new
version of the drug on the market by 2002.
The immediate hurdle for Lilly, though, could be defending
Prozac against generic competition long enough to get the new
version well established, according to independent analyst Hemant
Shah. While Lilly's patents begin to expire in 2001, the company
will face the first challenges to its Prozac empire much sooner.
Fighting Generic Drugmaker
Lilly and generic drugmaker Barr Laboratories Inc. are
expected to begin a trial next month on Barr's attempt to make a
generic version of Prozac.
Barr has been successful in winning the right to sell
generic versions of successful drugs, such as tamoxifen, Shah
said.
Still, a Barr victory in court likely would not mean
immediate sales of a generic Prozac, Shah said. If Barr wins,
then Lilly will appeal, he said. ''The whole court battle could
take two to three years,'' said Shah, who rates Lilly
''attractive.''
Lilly also needs to demonstrate the new version is an
improvement on Prozac and lower priced generic versions of it,
said Sidney Wolfe, director of Public Citizen's Health Research
Group, a Washington-based consumer watchdog group.
Otherwise, Wolfe said, ''they are doing something that is
going to keep the price inflated in this country to the
deteriment of people who may need the drug and may not be able to
afford'' the brand-name version.
Sepracor, founded in 1984, has discovered how to strip out
the side effects from drugs, including Prozac and Schering-Plough
Corp.'s antihistamine Claritin, by reformulating them to separate
active compounds from those that cause unwanted side effects.
Sepracor Shares Gain
Sepracor shares have more than doubled in the last year as
the company works on reformulating the top four allergy drugs as
well as two of the most popular asthma drugs.
Sepracor has an agreement with Johnson & Johnson to develop
a safer version of J&J's $1 billion Propulsid heartburn drug,
which can cause fatal heart rhythms. The company is nearing
approval for its Xopenex asthma drug -- a purified version of the
widely prescribed albuterol asthma medication. Sepracor is also
working on versions of Claritin and J&J's Hismanal.
The company already has one reformulated drug on the market:
Allegra, a safer version of the Hoechst AG's antihistamine drug
Seldane. The two companies are in a dispute over which one first
came up with the new formulation and Sepracor is not due to
receive any royalty payments on the drug before 2001.
With the Lilly agreement, ''you get another big drugmaker
and that adds credibility'' for Sepracor, Lucera said.
Lock and Key
Drugs such as Claritin and Prozac are made of ''twinned''
mirror-image sub-compounds, called isomers. While the active
isomer fits like a key into a molecular lock to produce a drug's
benefit, the mirror image isomer is like a key with the grooves
on top. At best, that means it won't fit the lock and is
inactive. At worst, it might fit an unintended lock and cause
side effects.
Big drugmakers, in their eagerness to bring new products to
market, skipped separating and patenting the individual isomers.
Sepracor develops versions that contain only a single
isomer, and licenses them back to the drugs' originators, and
they are now seeking regulatory approval to begin selling them.
The Food and Drug Administration has pushed big drugmakers
to start using the purifying technology, Sheffery said.
''It provides not only patent extension, it can also
eliminate troubling side effects,'' he said.
While Prozac carries certain side effects such as the
potential for impotence and loss of sex drive, it's not believed
to pose a health hazard to users. Still, Sepracor's drug ''has
the potential to provide treatment benefits in a broader range of
patients and for a broader range of indications than most
currently available antidepressants, including Prozac,'' Lilly
said.
-- Kristin Reed in Washington (202) 624-1858 with reporting by |
