12/07 16:04 FOCUS-Lilly sets deal to reformulate, protect Prozac
(Adds analysts' quotes, background; updates stocks) By Kevin
Drawbaugh
CHICAGO, Dec 7 (Reuters) - Drug maker Eli Lilly & Co. Inc., moving
to shield Prozac from competition from generic drug makers, said
Monday it struck a deal with Sepracor Inc. for a reformulated version
of the blockbuster antidepressant.
Sepracor, a small drug firm in Marlborough, Mass., is developing a
molecularly altered version of Prozac that may reduce potential side
effects and qualify the new drug for separate patent protection.
In exchange for exclusive worldwide rights to the new compound,
called R-fluoxetine, Lilly, based in Indianapolis, said it will pay
Sepracor $20 million, plus $70 million in later payments based on its
progress in developing it.
If the compound makes it to market, possibly by 2002, Sepracor
would get royalties from sales. But more importantly, Lilly could extend
the exclusive patent on its most successful drug by a decade or more,
industry analysts said.
"This really shows how the number of tools that drug companies have
to mitigate the impact of patent expirations is expanding every day,"
said Jim Flynn at investment bank and brokerage ING Baring Furman
Selz.
Prozac, the second-biggest selling prescription drug in America,
generated nearly a third of Lilly's revenues of $7.2 billion in the first
nine months of 1998. It has been the company's lead product since
shortly after its 1987 debut.
Domestic sales of Prozac totaled $1.6 billion over the nine months,
trailing Prilosec, a stomach ulcer medicine from Sweden's Astra AB,
which had sales of $2.1 billion.
Two other antidepressants -- Zoloft from Pfizer Inc. and Paxil from
SmithKline Beecham Plc -- are also among the biggest-selling drugs
in the nation.
"It shows how we have succumbed to the greatest marketing
campaign of all time, which is that psychological and social problems
can be dealt with by drugging ourselves," said Dr. Peter Breggin,
director of the Center for the Study of Psychiatry in Bethesda, Md.,
and a long-time Prozac critic.
"It's a testimonial to the power of biological psychiatry in combination
with the drug companies," Breggin said.
For some time, Wall Street has fretted about Lilly's future after
Prozac. The drug's patent, which prohibits others from manufacturing
it, expires in two stages in 2001 and 2003.
That timetable may change, analysts said, depending on the outcome
of a patent lawsuit scheduled to come to trial in late January in
Indianapolis. Generic drug maker Barr Laboratories Inc. of Pomona,
N.Y., is challenging Prozac's patents.
Regardless of the trial's outcome, Lilly has rolled out new drugs in
expectation of eventually seeing a decline in Prozac sales. Some,
such as Zyprexa for schizophrenia and ReoPro for coronary blood
clots, have been winners. Another, Evista for osteoporosis, has been
disappointing, analysts said.
"The only way in which the (Sepracor) deal would have major
significance to Lilly would be in the unlikely event that the company
loses the patent suit to (Barr)," said James Keeney at brokerage
ABN AMRO.
Sepracor's stock fell $3.125 to $84.875 on Nasdaq, while Lilly added
87.5 cents to $86.81 on the New York Stock Exchange.
Sepracor said Oct. 14 that it started a Phase I clinical trial with
R-fluoxetine. <BRL.N> <SEPR.O> <LLY.N> <PFE.N> SB.L>
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