Company results released on 30 April by companies on either side of the branded versus generic fence show contrasting fortunes in the valuable market for ulcer drug omeprazole. While AstraZeneca's gastrointestinal franchise shrank by 3% compared with a year before, Schwarz's increased omeprazole manufacturing capacity is helping to drive growth.
AstraZeneca, which sells the blockbuster ulcer and heartburn medicines Prilosec (omeprazole) and Nexium (esomeprazole), announced that sales in its gastrointestinal products franchise fell 3% in Q1 2003, to $1.545 billion. This fall reflects the very different stages at which Prilosec and Nexium sit in the product life cycle. As the successor product to Prilosec, Nexium sales grew by 136%, to $835 million, in the first three months of 2003, but this was not enough to compensate for Prilosec's 45% fall to $692 million.
Schwarz launched its generic version of omeprazole in the US following Prilosec's loss of patent protection in December 2002. Schwarz sold E283 million of omeprazole in Q1 2003.
At launch, Schwarz said it would only be able to meet around 50% of the US demand for omeprazole. AstraZeneca's Prilosec held a 40% share of total omeprazole prescriptions in March, consistent with Schwarz's restricted manufacturing capabilities. However, Schwarz's ongoing manufacturing capacity has been increased to approximately 70% of the Prilosec brand. The change allowed Schwarz to raise its sales expectations for omeprazole to $1.2 billion in 2003.
AstraZeneca is fighting a strong rearguard action. Its patent defense strategy delivered 21 months of patent protected sales of Prilosec in the US after the launch there of Nexium - ample time in which patients could be switched to the successor product. Although the situation remains unclear, AstraZeneca's legal strategy may ensure that Schwarz is the only company permitted to sell generic omeprazole in the US until 2007.
Schwarz's monopoly of the generic omeprazole market allows it to sell the drug at a higher price than if multiple generics were available. This also helps to support the prices of competing products. Although Schwarz is considering further increasing its omeprazole manufacturing capacity - a move that would bite deeper into Prilosec sales - the lack of other generic competitors is sustaining Prilosec, Nexium, and the other drugs in this highly lucrative market.
Related research: Datamonitor, 2003: "Stakeholder Perspectives: Gastrointestinal Disorders - PPIs for GERD and PUD: never had it so good, or as good as it gets?" (DMHC1818)