Replies to post #82008 on Biotech Values

[DewDiligence]

Why Arixtra Is Inconsequential to MNTA

…my concern as a MNTA holder is that if Arixtra is able to position itself with a significant market share just prior to generic enoxaparin being approved, it may pose a significant barrier to adoption of the generic (i.e. MNTA produced) drug.

There are several reasons why your concern is overblown, IMO. First and perhaps most important, US generic drugs do not need to be adopted—they are automatically substitutable for the corresponding branded drug unless a prescription explicitly specifies no substitution. Therefore, it’s almost impossible to imagine a scenario in which Arixtra takes share from generic Lovenox, specifically, to a larger degree than it takes share from Lovenox generally.

Second, Arixtra has an FDA indication only for prophylaxis and treatment of VTE. It does not have an FDA indication for ACS.

Third, simple arithmetic shows that Arixtra sales could increase dramatically and still barely make a dent in US Lovenox sales. In 2Q09, annualized US sales of Lovenox were $2.6B (#msg-40073523) while annualized US sales of Arixtra were $220M (http://www.gsk.com/investors/reports/q22009/q22009_statutory.pdf [see page 2]). In other words, Lovenox is outselling Arixtra in the US market by more then eleven to one.

For the sake of discussion, let’s assume that US Arixtra sales doubled overnight and all of this increase came at the expense of Lovenox. Even under such extreme assumptions, US sales of Lovenox would decline by only 8.5%.

In summary, Arixtra is a fine drug but its effect on MNTA is barely more than round-off error in any bona fide valuation analysis. There remains little doubt that a single approved generic version of Lovenox would easily become the largest-selling US generic drug of all time by a wide margin.