[The mega-blockbuster for hypertension goes off-patent in 2012. Tekturna/Rasilez, including a combination pill with Diovan, could make up some of the slack. So too could one or two midsized acquisitions similar to the 2008 deal for Speedel. Please see #msg-32988643 for NVS’ planned regulatory submissions in the next few years.]
LONDON -- Novartis AG is pulling out all the stops to avoid what the drug industry calls "the cliff."
Sales of Novartis's blockbuster drug, Diovan, are expected to tumble when the high-blood-pressure pill's patent expires in four years. That puts Joe Jimenez, a former packaged-goods executive tapped to run Novartis's prescription-drug business last year, in the difficult position of finding ways to make up for some $5 billion in annual revenue.
His plan: Instead of the traditional search for a single blockbuster drug, he will invest hundreds of millions of dollars in a new hypertension pill called Tekturna; speed development of a clutch of new drugs for cancer and other diseases; and expand aggressively in emerging markets to try to spur sales growth there.
"To get us through this period...we're going to have to take a multifaceted approach," he said in an interview at Novartis headquarters in Basel, Switzerland.
Mr. Jimenez's challenge illustrates a growing problem for big drug companies: As top-selling drugs come off patent, the "cliff" is getting steeper. With effective and inexpensive generic drugs on the market for many diseases, the traditional strategies for restoring sales, such as coming up with a new pill for the same disease, aren't working as well as they did a decade ago. Increasingly cost-conscious insurers and governments are refusing to pay for drugs that don't offer significant benefits over cheaper generics. Safety-conscious regulators are also scrutinizing new drugs more carefully before approving them for sale, making it harder for a company to count on a particular product making it to market.
It's unclear whether Mr. Jimenez's plan can work. For one, there's no guarantee the new drugs Novartis is developing will make it to market or catch on with doctors and patients. The global economic downturn, meanwhile, is hitting emerging economies hard, making it likely that drug sales in those countries will slow for at least the next few years.
There is also a risk that Diovan sales will begin dropping even before the drug's U.S. patent expires in September 2012. That's because a similar drug from Merck & Co., Cozaar, will lose U.S. patent protection in 2010. A generic version of that drug will give insurers a cheaper option than Diovan. Adding to the challenge, Novartis has several other drugs coming off patent around the same time as Diovan -- affecting a total of about 21% of the company's $39.8 billion in sales.
Novartis is "facing one of the largest patent cliffs in the industry," says Andrew Weiss, pharmaceutical analyst at Swiss bank Vontobel Group in Zurich. Compared to its peers the company has one of the fullest pipelines of new drugs in development, he says, but "the question is how likely is that pipeline to materialize by the time that cliff starts to go?"[One or more medium-sized acquisitions could help in this regard; I have a couple of suggestions :- ) ]
Still, some investors are encouraged by the way Mr. Jimenez is moving in a few different directions at once, rather than betting the farm on one new drug, which is a more-typical strategy. "Just the fact that they recognize that not one solution by itself is enough is quite good," says Denise Anderson, a healthcare analyst at Sit Investment Associates in Minneapolis, Minn., which owns Novartis shares.
With $5 billion in global sales last year, Diovan made up 13% of Novartis's total sales and an even greater share of its profits, analysts say. That's a far cry from Tekturna, which was launched last year and is expected to have sales of $150 million this year.
To try to convince doctors and insurers that Tekturna is worth paying for, Novartis is carrying out the biggest clinical trial program it has ever run, testing Tekturna in 35,000 patients in 14 different studies. The goal is to show that Tekturna helps prevent heart attacks, strokes, kidney disease and death better than existing medicines.
Even if the data are positive, though, Mr. Jimenez isn't counting on Tekturna to replace Diovan. "I wouldn't say that we could never build a Diovan-size brand, but it will be more difficult than it was back in the 90s," he said. Novartis says Tekturna will achieve sales of more than $1 billion a year.
The company is trying to rush a clutch of other drugs to market in time. They include two meningitis vaccines, a multiple-sclerosis drug[FTY720] and a new treatment for respiratory disease. [NVS also owns a portion of HGSI’s Albuferon for HCV.]
Novartis has boosted spending on clinical trials, and is placing a big bet by testing some drugs simultaneously on several different diseases. For example, while Novartis is waiting for the U.S. Food and Drug Administration to approve its new drug Afinitor for kidney cancer, it is going ahead with trials of the drug on several other types of cancer. That could backfire if the FDA finds flaws with Afinitor and rejects it.
In emerging markets, Novartis is focusing on Russia, China, Brazil, Turkey and South Korea. It plans to double or triple its sale forces in those countries. The five now account for about $2 billion in annual sales for Novartis, and a hoped for 30% boost in revenue would add $600 million a year.
Mr. Jimenez said he isn't deterred by the economic slowdown these countries are currently experiencing. Their economies should bounce back by 2012, when Novartis will need the sales boost, he said. The current economic slowdown "actually helps us, because other companies are scaling back," he added.‹
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