The U.S. Antidepressant Market: Old Fashioned Branding Might Save the Day

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Over 40% of Americans have used an antidepressant at least once during their lifetime and, at 270 million prescriptions per year, antidepressants are the most consumed class of therapeutics in the US. However, revenue does not match prescription numbers due to fierce generic competition in the class. While retail prices for commonly prescribed branded anti-depressants like Cymbalta can reach over $170 per month, a generic equivalent will cost less than $20, and there is no major difference in treatment outcome between the two products.

Generics currently control over 40% of the market in terms of revenue and over 85% in terms of prescriptions and the market, which peaked at $12 billion in 2008, has lost $2.6 billion due to expired patents over the past three years and currently stands at $9.4 billion. Combined, the top five US antidepressant brands lost $2.2 billion to generic substitution, from a peak of $7.6 billion in 2009 to their current level of $5.4 billion, and the hemorrhage is expected to continue.

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Eli Lilly's (NYSE: LLY) Cymbalta (duloxetine), a selective serotonin and noradrenaline reuptake inhibitor (SNRI) launched by Lilly in 2004, generated $5 billion globally in 2012 with over 80% of sales realized in the US. The brand, which currently accounts for 22% of Lilly's global revenue, will lose US market exclusivity in December this year and its sales will face rapid and severe decline once generics enter the market.

When Prozac lost US patent exclusivity, in August 2001, it accounted for less than 25% of Lilly's $10.8 billion revenue at the time. Without Prozac to lean on, Lilly fell into a funk and its share price tumbled. After the dust settled, Lilly had lost more than $30 billion of its peak 2001 market value and had to make substantial cutbacks in both salaries and the number employees. Many executives saw their bonuses decline and Mr. Taurel, Lilly's CEO at the time, received only $1 in salary and bonus in 2002.

Forest's (NYSE: FRX) Lexapro (escitalopram - SSRI) which generated an estimated $750 in 2012, down from $2.1 billion in 2011, and is currently in second position, is expected to generate less than $100 million in 2013, again due to loss of patent protection and generic competition. In August 2011, Forest launched Viibryd (vilazodone), another selective serotonin reuptake inhibitor antidepressant, to replace Lexapro. Viibryd recorded sales of $164 million for financial year 2013, hardly a blockbuster.

Forest, which reports earnings in March, recorded revenue of $2.9 billion for financial year 2013, a decline of -34% from previous year level of $4.4 billion and reported a net loss of $32 million. Forest's shares have been trending downward lately, however since the company is actively seeking a partner, few traders are shorting the stock and many expect a surprise acquisition soon. 

Pfizer's (NYSE: PFE) Pristiq (desvenlafaxine - SNRI) and Effexor (venlafaxine - SNRI) currently compete for third and fifth positions with $500 and $100 million, respectively. Pfizer has been hit hard by generics recently, and has lost patent protection of six of its top brands, Caduet, Detrol, Geodon, Lipitor, Revatio and Viagra, in the last 18 months. Pfizer's revenues declined by 10% to $59 billion in 2012, from a peak of $ 65.3 in 2011, making Pfizer a much smaller company.

Development of novel anti-depressants grounded to a halt due to pharmaceutical brand managers' perception of the futility of competing against existing generic substitutes and of the difficulty of developing new anti-depressant drug targets. Anti-depressant R&D pipelines are relatively empty and many companies have either pulled the plug on their anti-depressant programs or stopped supporting their existing brands.

AstraZeneca (NYSE: AZN) wrote off over $146 million for Targacept's (NASDAQ: TRGT) TC-5214, which promised to lead a new anti-depressants sub-class dubbed nicotinic acetylcholine receptors antagonists, due to failure to make patients feel any better when compared to placebo.
Targacept share price declined 83% from a peak of $29.45 in March 2011 to its current level of $5. There was no noticeable effect on AZN shares related to the write off. In March 2013, Targacept initiated a Phase 2 study of TC-5214 for overactive bladder, a disorder that causes sudden and frequent urge to urinate and may lead to incontinence. 

According to a newly published report by The Pharmaceutical Strategist, the antidepressants market still holds promise for that innovative player that would manage to exact value out of the current dissatisfaction of treatment outcome experienced by both patients and physicians alike.

With its naturally fluctuating course, depression is a highly placebo-responsive condition. Mean placebo response rates in antidepressant clinical trials hover around the 35% level. Physician-patient relationship, socio-cultural background, the treatment situation set and setting and even the color and shape of the placebo pill are contributing factors to the placebo response.

A dependable brand name evokes an inherent response in the depressed patient. With billions of dollars already invested in developing antidepressant brands over the past two decades, finding a way to measure such response and to reliably measure its true effect can offer some of those valuable brands a new lease on life.

Amod Saul has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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