Investor reaction to news of FDA's approval of Momenta Pharmaceuticals M-enoxaparin, a generic version of Sanofi-Aventis' anti-thrombotic Lovenox (enoxaparin) was swift and brutal. Shares of the French pharma traded down approximately 5 percent on the news July 23, ending the day at $29.35.

The negative reaction is unsurprising giving the importance of Lovenox, Sanofi's low molecular weight heparin for the treatment and prevention of deep vein thrombosis, to the firm's bottom line. In 2009 alone, sales of the drug were approximately $4 billion, which equates to 10 percent of the big pharma's yearly revenue. Depending on how quickly Momenta and its partner Sandoz launch their generic version, analysts estimate generic Lovenox could shave as much as seven percent from Sanofi's 2001 earnings per share.

Ahead of Sanofi's July 29 earnings call, the news is a stark reminder of how dependent Sanofi is on an aging pipeline of products. Of the company's top eight marketed products, only its long acting basal insulin Lantus (insulin glargine) does not face near-term generic competition.

For Momenta, the approval is no less than a momentous occasion. M-enoxaparin is the biotechnology company's first drug to be approved, and investors sent the drug's stock price soaring 82 percent to $9.77 in response to the positive regulatory decision. In a conference call announcing the approval, CEO Craig Wheeler called the news "a historical milestone for the company," which started in 2002 as a 20-person research organization.

Analysts agreed. Joseph Schwartz, an analyst with Leerink Swann, wrote in a same-day note to investors that the regulatory decision "validated Momenta's business model" and increased from 65 percent to 85 percent the chances that another of Momenta's follow-on molecules - its generic version of Teva's multiple sclerosis drug Copaxone ( glatiramer ) -would be approved in the coming months.

But the decision has implications for almost every biopharma player in the industry, from big generics players like Teva who are moving into the branded world to big pharmas who have retreated from primary care oral medicines to the supposedly safer realm of specialty biologics. That's because via the M-enoxaparin approval, industry gains more insight into FDA's thinking on the thorny issue of follow-on biologics. While the recent passage of the health care reform bill provides for a generic biologics pathway, the actual specifics of what's required for an approval, especially the FDA's definition of what's considered fully substitutable, have yet to be clarified (Also see "FOBs: Industry Begins To Plot Course Along Pathway As It Awaits FDA Policy" - Pink Sheet, 5 July, 2010.).

The approval of Lovenox, although not technically a biologic because of its derivation from pig intestines and the extensive purification and processing required to create the final product, signals how FDA may act when it comes to the creation of more complicated protein-based products from biotechnology players such as Amgen and Roche's Genentech.

"Many in the industry have felt that if FDA ultimately approves generic versions of Lovenox and it makes those generics fully 'substitutable' - which it just has - then this might signal what FDA may also ultimately do when it comes to 'true' biologics that generic companies are also pursuing," Tim Anderson, an analyst with Bernstein Research, wrote in a research note on the action.

"Today's news is likely to be viewed as a negative for the biotechnology industry as well as branded pharmaceutical players that also have biologic drugs," he pointed out.

Potentially Rapid Erosion of Lovenox Market Share

As investors' reactions July 23 showed, Sanofi is the first company to feel the sting of the generic Lovenox approval. Beyond Lovenox, the company is highly dependent on historic growth drivers such as Plavix (clopidogrel), the firm's platelet ADP receptor agonist, and Taxotere (docetaxel), its top selling oncology product. Together those two products generated €4.8 billion in sales in 2009. But Plavix loses patent protection in 2011 and yearly sales are already sagging due to generic competition in Europe, with first quarter sales dropping 47 percent. Taxotere, meanwhile, loses patent protection later this year (Also see "Unknown Timing of Lovenox Generics Complicates Sanofi-Aventis' Outlook" - Pink Sheet, 15 February, 2010.).

Although Lovenox officially doesn't officially lose patent protection until 2012, the threat of generics has loomed since 2003. Teva and Amphastar have also filed ANDAs for M-enoxaparin, with Teva's application under review even longer than the version developed by Momenta/Sandoz. Sanofi filed a citizen's petition to block the introduction of generic Lovenox versions in 2003. FDA ultimately rejected that petition, outlining five criteria it used to establish the equivalence of Momenta/Sandoz's drug to the innovator molecule ( Also see "FDA Approves Momenta/Sandoz' Lovenox Generic Without Need For Clinical Studies" - Pink Sheet, 23 July, 2010. ).

As Bernstein's Anderson noted in January, when he first predicted the arrival of a generic Lovenox, the real commercial impact of the M-enoxaparin approval hinges on FDA's decision to deem the follow-on as fully substitutable. Given FDA's positive nod to Momenta/Sandoz, he and other analysts expect the new generic will quickly erode branded Lovenox sales, one of the most expensive medicines prescribed in the hospital setting.

Indeed, according to IMS, approximately 40 percent of the drug is used in the in-patient setting, allowing hospital pharmacies to exert more direct control over prescribers by mandating use of the favorably priced generic. To add to Sanofi's woes, the drug maker could lose market share in the out-patient setting as well since patients who begin therapy on a generic in the hospital would likely stay on the same version of the medicine once discharged.

How quickly Lovenox sales fall off will also depend on Momenta/Sandoz' ability to quickly launch their version, as well as the pricing strategy associated with the generic. During the company's call with investors, Momenta's Wheeler refused to elaborate on questions related to the timing of the M-enoxaparin's launch, noting that Sandoz is handling the commercial strategy for the medicine. "We have built supply to be able to meet what we believe will be the demands in the marketplace. We are not giving specific guidance in terms of market share, but I will say that we have supply in place and ready to go for launch," he said.

Sanofi's Next Steps?

It's possible Sanofi may move to block Sandoz and Momenta from launching their medicine, bringing litigation challenging FDA's action. No injunctions on the matter have currently been filed, and Wheeler promised investors that the two companies "are prepared for this potential action and are confident that the ANDA represented a very strong scientific basis for approval."

Rumors have been swirling since early July that the French drug maker is on the cusp of a major U.S. biotech acquisition in the realm of $20 billion. Even as news of M-enoxaparin's approval broke, news outlets were reporting unconfirmed reports that Sanofi was in talks to purchase Genzyme, which has struggled to turn itself around in the wake of viral contamination at its Allston Landing manufacturing plant and the resulting limited supply of its key products Cerezyme (imiglucerase) and Fabrazyme (agalsidase beta) (Also see "Genzyme Warns Of Further Shortages Of Cerezyme, Fabrazyme" - Pink Sheet, 29 June, 2010.).

In the interim, it seems likely Sanofi will place renewed emphasis on Lantus. The company is in the midst of trying to rebuild - or at least rebrand - its diabetes business, hoping to double sales in this arena from 2008 to 2013. As part of its efforts to become a 360 degree solutions provider focused not only on drugs, but services and monitoring devices, the French pharma in January created a dedicated diabetes business unity under SVP and global diabetes head Pierre Chancel.

The new operational structure is designed to streamline decision making, while allowing Chancel and his team the ability to invest in innovative products via deal making and internal R&D. Already, a shift in emphasis can be felt; in the past 6 months, the unit has inked five different partnerships including its first big foray into the device realm, a tie-up with AgaMatrix (Also see "Sanofi-Aventis Enters Diabetes Pact With AgaMatrix For Blood Glucose Monitors" - Pink Sheet, 31 March, 2010.).

- Ellen Foster Licking ( e.licking@elsevier.com )

Under Pressure: Sanofi's Strategy Will Be Tested By Generic Lovenox Approval

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