Global Insight Perspective | |
Significance | The European substance patent rejected by the European Patent Office (EPO) was originally scheduled to expire in 2014. The Patent Office's ruling is irreversible and a European process patent for Nexium is also under challenge, with an EPO hearing scheduled for March 2007. |
Implications | AstraZeneca still has other lines of defence on Nexium, such as data exclusivity extending to 2010 in the major European markets as well as process, method of use and additional substance patents with expiry dates ranging from 2009 to 2019. |
Outlook | All the same, the EPO decision leaves AstraZeneca looking increasingly vulnerable at a time when Nexium is also under generic threat in the key U.S. market and the company is making strenuous efforts to paper over the cracks in its drug development pipeline. |
The bad news about AstraZeneca just keeps on coming. After riding out a series of setbacks in its drug development pipeline over recent years, not to mention a damaging safety scare over its new cholesterol-management drug, Crestor (rosuvastatin), the U.K. company has continued to fray investors' nerves in the second half of 2006.
October saw the shock withdrawal of its investigational stroke drug NXY-059 from late-stage clinical trials, while more recently AstraZeneca has admitted that its only other advanced drug candidate scheduled for launch by the first half of 2008—the atherosclerosis treatment AGI-1067—probably isn't going anywhere (see United Kingdom: 18 December 2006: AstraZeneca Tightens Development Focus, Lowers Expectations for AGI-1067).
Now comes another unexpected blow in the form of the European Patent Office's (EPO) decision to revoke a substance patent on the ulcer treatment Nexium, AstraZeneca's star performer with worldwide sales of US$4.6 billion in 2005. Close to one-quarter of these sales (US$1.1 billion) were generated in Europe.
The patent in question, EP 0652872, was originally scheduled to expire in 2014. The EPO decided to overturn the patent following an appeal by German generic manufacturer Ratiopharm, which had already had a history of patent conflict with AstraZeneca in Europe over Nexium's once blockbusting predecessor, Losec (omeprazole). According to The Guardian, Nexium has been under attack by Ratiopharm since 2001; an EPO ruling in 2003 went in AstraZeneca's favour, but Ratiopharm appealed against the decision a year later.
Whatever the fine points of the EPO's ruling—the reasoning will not be published until next year and so far Ratiopharm has kept quiet about it—there is no comeback for AstraZeneca: the Patent Office has stressed that its decision is final. The company does, however, have other lines of defence on Nexium, such as process, method of use and additional substance patents with expiry dates ranging from 2009 to 2019. Nor will the EPO ruling open the floodgates to significant generic competition in Europe for at least another few years. In the major European markets AstraZeneca has data exclusivity on Nexium until 2010. This is an absolute barrier to generic entry: while patents may always be challenged, data exclusivity provisions prevent regulators from referring to the originator's dossier to assess generic equivalents for approval while the exclusivity is in force.
AstraZeneca has expressed disappointment with the EPO decision but insists it "has confidence in the intellectual property portfolio protecting Nexium". There is another cloud on the horizon, though. A process patent for Nexium (EP 0773940) is "under opposition" at the EPO, the company noted, with an oral hearing by the EPO's Opposition Division scheduled for 7 March 2007.
Outlook and Implications
While the EPO ruling on Nexium will not have any immediate impact on AstraZeneca's business, its longer-term implications are more disquieting. Certainly, in perceptual terms it was another markdown for the trouble-prone company, with the market knocking more than 4% off the value of AstraZeneca's shares. With the company's European patent position appearing vulnerable, further challenges are likely to follow.
Opinions are split as to whether the ruling has any bearing on Nexium's patent status in the all-important U.S. market, where the drug is under challenge from India's Ranbaxy and U.S. Ivax. AstraZeneca has filed lawsuits against both of these generic contenders, which filed Paragraph IV applications contesting various U.S. patents on Nexium that extend to 2019.
Another Indian company, Dr Reddy's Laboratories, recently filed a Paragraph IV application for esomeprazole magnesium delayed-release capsules in the United States. However, AstraZeneca has not launched any legal proceedings in this case as the application did not challenge three listed U.S. patents claiming esomeprazole magnesium, for which the U.K. company has exclusivity running until 2014 and 2015.
Ultimately, the generic threat to Nexium in the United States is more acute, not least because the market accounts for around 69% of the brand's worldwide sales. The challenges from Ranbaxy and Ivax are expected to go to trial in 2008, although there could be an 'at-risk' launch before then. Meanwhile, AstraZeneca has more pressing problems: last week Reuters reported that a number of U.S. retailers have filed a civil suit against AstraZeneca alleging that the company used "exclusionary" tactics to maintain its monopoly in the anti-ulcer market by switching patients over from Prilosec (omeprazole) to Nexium.
The accusation that Nexium—a single-isomer version of omeprazole—was little more than a minor variation on Losec/Prilosec geared to life-cycle management rather than patient benefit has dogged AstraZeneca since Nexium was first launched. Critics of the strategy will take comfort from the increased fragility of Nexium's patent position in Europe. For AstraZeneca, though, the EPO verdict has left the company's ill-starred drug development pipeline looking even more exposed. The company, which just announced a radical streamlining of its development efforts, will have to work harder than ever to convince investors that it has the capacity, both internally and through a promised spate of licensing or acquisition deals, to sustain business in the long term.