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Biotech / Medical : Biotech Valuation -- Ignore unavailable to you. Want to Upgrade?

To: Biomaven who wrote (7820)	1/31/2003 11:27:16 AM
From: Biomaven	Respond to of 52153

Interesting patent case: Reuters Market ready for Glaxo defeat in U.S. Paxil trial Friday January 31, 10:53 am ET By Ben Hirschler, European Pharmaceuticals Correspondent LONDON, Jan 31 (Reuters) - GlaxoSmithKline Plc (London:GSK.L - News) faces a key trial over U.S. patents on its best-selling antidepressant Paxil in Chicago next week, and investors are braced for the worst.ADVERTISEMENT [] With global sales of 1.86 billion pounds ($3.1 billion) in 2001, Paxil is the British pharmaceutical giant's biggest product, accounting for nine percent of group revenues. The United States makes up two-thirds of the drug's total sales. That makes Paxil crucial to GSK and any loss of patent protection, opening the door to cheap copycat generics, would have a major impact on the bottom line. Fears for the Paxil patent have already helped drag the stock to an 18 percent discount to the sector, based on forward price/earnings, suggesting to some that defeat is priced in. "It's very hard to call the outcome of the case... but the valuation on the stock suggests it is now discounting the worst-case scenario," said Nigel Barnes of Merrill Lynch. GSK claims patent protection on Paxil through 2006. If generic firms win they could, in theory, launch as early as September this year, when separate exclusivity under the Hatch-Waxman act expires. In practice, analysts think the earliest plausible launch is 2004. Battle lines will be drawn in the Federal District Court of the Northern District of Illinois (Chicago) on February 5, at the start of a trial that is expected to last 2-3 weeks with a result shortly afterwards, possibly in March or April. LEGAL MAZE The case pitches Europe's largest drugs firm against Canadian generic producer Apotex, which claims to have a so-called anhydrate form of the drug that does not infringe the hemihydrate version marketed by GSK. GSK counters that all anhydrate forms of the paroxetine hydrochloride, the active ingredient in Paxil, convert naturally and during tablet-making to the more stable hemihydrate form, so infringing its basic patent. The case is highly technical but many analyst models now assume that GSK will not prevail. If it were to win, shares in GSK could jump as much as 10 percent as current expectations of generics in 2004 are stripped out of forecasts, according to analysts at Deutsche Bank. The legal maze, however, does not begin and end in Chicago. A further case, for which a date has yet to be set, is also pending in Philadelphia and any generic challenger is unlikely to risk a launch before a decision in that anhydrate-based case in late 2003 or early 2004. Overall, GSK executives think they have a good chance of holding generic Paxil at bay for the time being, especially as any generic firm launching "at risk" would face claims for triple damages from GSK for lost sales if it finally prevails. PAXIL CR In a bid to minimise the impact, should it lose the court cases, GSK is promoting a new controlled release version of the medicine, called Paxil CR, that is protected by separate patents. The move parallels a similar strategy for Augmentin -- GSK's top antibiotic that already faces copycat generics -- where follow-on versions of original drugs have also been launched. This "life-cycle management" is already delivering results and analysts at Merrill Lynch believe Paxil CR could account for some 50 percent of Paxil sales by the end of 2003, offering significant protection to any eventual generic erosion. Note that SKYE benefits from Paxil CR. Peter