Novartis hit on Gleevec in U.S. tells the tale for India's Sun Pharma

Novartis HQ

Novartis ($NVS) held about half its market share as India's Sun Pharmaceuticals launched a generic version of blood cancer drug Gleevec/Glivec (imatinib) in the U.S. at the start of February--but that figure is expected to collapse by the third quarter as the 180-day market exclusivity ends and a swarm of new offers appear.

David Epstein, head of pharma for the Swiss-based firm, discussed the loss of exclusivity in the world's top market at length on a recent earnings call, setting up Mumbai-based Kotak Institutional Equities analysts Chirag Talati and Kumar Gaurav to work backward and crunch a few numbers in relation to Sun's launch.

Epstein noted that the overall pharma division sales were up 1% in the first quarter and would have gained 4% without the loss of exclusivity for the oncology therapy in the U.S.

The analysts noted that Novartis' first-quarter results suggest 35% to 40% price erosion for Gleevec in the U.S., with Novartis retaining over 50% market share so far, according to a note to clients.

"We believe the key sensitivity for Gleevec is the competition it will face after the 180-day exclusivity," the analysts said, adding that by the second half of 2018, "We expect pricing to collapse by 80-90% and face further erosion over time as the market eventually will settle at eight-to-10 players."

Epstein too sees a price collapse--but a little bit quicker.

"There will be multiple generics entering in, if I recall correctly, in Q3 of this year," he said on the call. "It's hard to know exactly how many, but would not be surprising if there were four, 5 or 6 of them. If history is any guide, prices will more or less collapse at that point in time, and you would expect then our volume to become fairly small."

Kotak, placing a sell recommendation on Sun citing the upcoming Gleevec competition and ongoing restructuring, said among the players ready to come in on day 181 are Toronto-based Apotex, using an API from Hyderabad-based Natco Pharma, and Israel's Teva, using an API from Croatia-based unit Pliva.

- here's the Novartis release