Don,
Can anybody tell me what the statical average duration is for the front running drug in the high profit margin areas? Can anybody tell me how this should impact the PV of this stock?
I don't have any statistics, but I can give you my general impressions. The first drug to market in an area generally dominates (in dollar terms) throughout its patented life unless someone comes up with a demonstrably better product. Thus omeprazole (the biggest drug of all) is more expensive and no better, and perhaps a little worse, than its competitors (currently one in the US, two in Europe). However, if someone comes up with an improved version, it can end up dominating - e.g., Glaxo's ranitidine (Zantac)eventually beat out cimetidine (Tagamet) even though more expensive, because of a better side-effect profile. Hoever Tagamet remained a very significant drug. A similar but more recent example is Lipitor, where the second, but better, drug ended up with the bigger share.
Historically, what kills off a drug in dollar terms is its patent expiration, not competition. Once the patent expires the margins plummet and the marketing push dies off considerably as well.
The only signficant area where the market seems to have been concerned with half-life of the drugs is the HIV market. For a long time AGPH was underpriced because people thought Viracept was going to be supplanted by the next great AIDS breakthrough. Hasn't happened yet.
Remember also there is a very long lead time for new drugs - it is not as if they suddenly pop up with no notice. We pretty much know that there isn't going to be another significant new antihistamine to compete with SEPR's suite in the next four or five years, and similarly with most of the other SEPR ICE's. This long lead time is generally a curse for the industry, but it turns into a blessing once you have an approved drug.
Sure it is possible that a breakthrough in asthma might wipe out albuterol-type drugs - just don't hold your breath <G>.
Finally, it is worth noting that SEPR's shorter-than-normal time from patent to approved drug is significant as well. Many drugs have their standard patent life ending just about as they are approved because of the long lead time. They can typically get a 5 year extension in these cases to compensate them for the regulatory review process, but that still only gives them a 5 year life. SEPR will get close on its full patent life for most of its drugs.
Peter |
