Peter,
<<On IMCL, the short answer is to look at what BMY paid for their share of the drug. A pharma doesn't lay out in excess of $1b for a drug that hasn't yet been approved without first doing a lot of homework.>>
Below is an article on Drug Giants with an update on IMCL;
and Bristol-Myers Squibb $B investment...do you have any insight into what might happen next?
Thanks in advance,
Shawn
Pharmaceuticals
Drug Giants Show Their Achilles Heels
Matthew Herper, Forbes.com, 01.02.02, 5:35 PM ET
NEW YORK - Last September, ImClone Chief Executive Samuel Waksal boasted that his company's new cancer fighter would be "one of the biggest drugs in the history of oncology." Bolstering that audacious claim, drug giant Bristol-Myers Squibb dropped $2 billion securing the rights to the drug, dubbed Erbitux, and making an investment in ImClone.
So it came as a bit of a shock on Dec. 28 when the Food and Drug Administration rejected the new drug application that ImClone (nasdaq: IMCL - news - people) submitted for Erbitux. The rejection is maybe just a delay, meaning the FDA wants more data than ImClone provided. But the delay is surprising given the weight Bristol-Myers (nasdaq: BMY - news - people) threw behind the drug.
Then again, Bristol probably felt some level of desperation--and that had to make Erbitux, a great drug in the first place, look even better than it is. Bristol-Myers is in the middle of a massive turnaround. It has sold or spun off its orthopedics and consumer divisions and pledged to focus intensely on its core drug business, which it enlarged with the purchase of DuPont's (nyse: DD - news - people) pharmaceuticals division.
The only problem is that, although Bristol has been putting together an impressive pipeline, it's facing a period in which it can't promise investors much growth: Patent expirations are approaching on Glucophage, a diabetes treatment with more than $1 billion in sales; BuSpar, an anti-anxiety drug that was once a blockbuster; and its famous cancer drug, Taxol.
Similar problems have plagued Merck (nyse: MRK - news - people), one of the biggest losers in the Dow for 2001. Patent expirations led the Whitehouse Station, N.J.-based giant, which had drug sales of $21 billion in 2001, to warn of flat earnings in 2002. In six months, it could lose $4 billion in annual sales, as five aging drugs lose the last of their patent protection due to cheaper generics. Cholesterol fighter Zocor, which Merck expects to have 2002 sales of more than $1 billion, will lose exclusivity four years later.
Merck has some of the best research laboratories in the drug business, and those labs have churned out a host of neuroscience drugs to replace Merck's fabled heart drugs, which are also losing patent protection. Unfortunately, growth from new drugs does not always line up with the hemorrhaging that results as older drugs lose patents and are exposed to generic competition.
If drug companies are going to rely on blockbusters, the massive growth that results from a new drug pipeline may inevitably be followed by growth droughts, as drug stables age and go off patent. When a drug worth billions of dollars loses almost all of its value, it's going to hurt, no matter how good a company's pipeline or how big the drug.
Right now, the best-armored battleship in the drug business is Pfizer (nyse: PFE - news - people). But that armor is partly a result of the age of its stable of drugs. Lipitor, a $6.5 billion cholesterol fighter and currently the world's biggest drug, and Norvasc, an antihypertension drug, don't face patent expirations for several years. At Pfizer's annual analyst meeting last December, CEO Hank McKinnell said he doesn't think Pfizer will have to face patent expirations until 2006-2007.
That means that, to some extent, the patent droughts are an issue not of if, but of when. Is there any alternative? Maybe. While Merck was one of the Dow's worst performers, Johnson & Johnson (nyse: JNJ - news - people) was one of its best. Although J&J relies on drugs for much of its growth, it is also big in areas like medical devices--including its much-vaunted re-entry into stents, which are used to re-open clogged arteries.
But for its diversity, Johnson & Johnson pays with massive complexity--it has 195 operating divisions in 51 countries. Other drug firms will likely rely on trying to have enough blockbusters to keep the ball rolling, as Bristol-Myers does. Unfortunately, that probably means that, like Bristol, they will face the occasional patent drought.
forbes.com |
