Surviving the patent cliff
Ransdell Pierson examines the outlook for drugmaker Eli Lilly today in a special report “Lilly’s survival plan is far from generic.”
The 134-year-old company faces a sharp fall in profits as patents expire in the coming years for some of its key drugs. It’s a common problem in the industry, as this graphic shows.
Eli Lilly CEO John Lechleiter has become the holdout kid. Unlike his chief rivals, he vows the 134-year-old drugmaker will strike no mega-deals as its top medicines face a seeming Apocalypse of patent expirations.
Grappling with a similar onslaught of generics, Pfizer and Merck last year purchased Wyeth and Schering-Plough, respectively. By doing so, they acquired new products, the promise of huge cost savings from laying off redundant staff, and potential stable earnings. They also bought themselves temporary peace of mind.
The companies had previously denounced big mergers as a sure way to destroy drug innovation, but could not resist the considerable short-term advantages of doing a deal.
Lechleiter isn’t having any of it. He scorns the very thought of a big merger or major acquisition to cushion the patent blows, even though drugstores will be flooded between now and 2014 with generic forms of Lilly’s Gemzar cancer drug, Zyprexa schizophrenia treatment, Cymbalta anti-depressant and Evista osteoporosis medicine. Together, the four blockbuster medicines have annual sales approaching $11 billion, accounting for half of the company’s revenue.