PROZAC: Eli Lily Loses Patent Protection, Stocks Tumble
The United States Court of Appeals for the District of Columbia ruled yesterday that Eli Lily's patent on Prozac, set to expire in 2003, is not valid, clearing the way for a generic version of the drug to enter the market as early as next August, the New York Times reports. Barr Laboratories brought the suit against Lily in 1996, asserting that one of the drugmaker's two Prozac patents was a "double patent," and thus invalid. Drug companies often file numerous patent applications for different aspects of the same drug "to try to get even more years of exclusive sales." With a patent, a drug company has 20 years to be the sole seller of a given drug. Barr Chair and CEO Bruce Downey said, "We felt strongly that what they had a patent on was not patentable. We kept the faith because we felt so strongly about it." The appeals court agreed with Barr's contention about the patent set to expire in 2003, but ruled that Lily's patent expiring in August 2001 was valid (Peterson, 8/10). Downey said that within one year of the introduction of a generic version of Prozac, the generic "will garner about 70% of the market" (Helliker et al., Wall Street Journal, 8/10). Downey added that as a result of the ruling, other companies are now likely to challenge other brand name drug patents (New York Times, 8/10).
Lily's defeat not only hurt its stock prices but also impacted the industry as a whole. The company's stock shares dropped $33.38, finishing at $75.19, while Barr's stock shares increased $26.25, ending at $72. Other pharmaceutical companies' with brand name drugs also watched their stocks dive -- Merck fell $1.81 to $70.56, Pfizer fell $2.56 to $42.38, American Home Products fell $1.81 to $56.19 and Sepracor fell $23.38 to $106.13 (O'Brien, Wall Street Journal, 8/10). Analyst Neil Sweig at Ryan Beck-Southeast said Lily's stock "looks like dead money right now. Things should work out fine for the company two years from now, but that's a long time for Wall Street." But L. Roy Papp of Papp-America Abroad Fund said, Lily's stock "is not worth as much as it was, but it's a good company and they have a lot of other good drugs in the pipeline" (Appleby, USA Today, 8/10).
Sidney Taurel, Lily's chair, president and CEO, called the ruling "a big disappointment." The Los Angeles Times reports the ruling is likely to cost Lily about $1 billion per year in revenue, as about one million people who now buy Prozac at retail prices are expected to switch once the generic version is available (Bernstein, 8/10). In 1999, Prozac represented 26% of the drugmaker's $10 billion in sales. Taurel said Lily will appeal the decision, but the company also has a "contingency plan," in which it hopes to get regulatory approval for a once-a-week version of Prozac and a second-generation version being developed by Sepracor. Another part of the plan includes selling the new drug Sarafem, marketed as treatment for severe premenstrual symptoms, and developing other new drugs to "offset any reduction in sales of Prozac" (New York Times, 8/10). Lily officials expect sales and profits to return to double digits by 2003 (Wall Street Journal, 8/10).