Bristol Needs a Break

If the judge rejects the bid for a preliminary injunction, analysts says Bristol-Myers faces sharp cuts in sales, profits and its dividend. Sanofi-Aventis holds the patent for Plavix, while Bristol-Myers has the U.S. marketing rights.

Apotex started selling its generic product last week, betting that the companies wouldn't win their patent infringement case. Apotex calls the Plavix patent invalid and unenforceable.

Still, Apotex is taking a chance with an "at-risk" launch, that is, marketing a generic drug before all legal challenges have been concluded. Under most circumstances, if a company goes this route and then loses in court, it could be hit with triple damages.

But Apotex negotiated a reduction in that penalty to a range of 40% to 50% of Bristol's and Sanofi's lost sales. The terms were part of an agreement signed in March that temporarily halted the patent infringement suit. The deal, later amended, included a promise by Apotex to hold off selling generic Plavix until mid-2011. Bristol-Myers and Sanofi-Aventis agreed to pay Apotex up to $40 million.

The arrangement required approval by both the Federal Trade Commission and states' attorneys general. Although the agreement was nullified when the attorneys general voted against it last month, Bristol-Myers and Sanofi-Aventis remained bound by the terms.

Meanwhile, they're trying to fight the Apotex drug by offering rebates to managed care companies for Plavix. In their petition for a preliminary injunction, they say rebates are designed to "stem the loss of market share and avoid the loss of patient loyalty."

Still, the brand-name companies are in a bind, says Hugh O'Neill, a Sanofi-Aventis vice president, in comments submitted to the court.

If they cut their Plavix price, they'll lose revenue even if they protect market share. However, if they maintain the Plavix price, they will "undoubtedly" lose market share to the cheaper drug. O'Neill says a hold-the-line strategy could lead to a 70% to 80% loss in sales in the first 60 days that an Apotex product is on the market.

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