Their companies just survived a big challenge in court, so investors in Sanofi-Aventis ( SNY) and Bristol-Myers Squibb ( BMY) can now focus on a challenge coming from the lab.

At the center of both matters is Plavix, the anticoagulant that produced $6.3 billion in sales in 2005, making it the world's second-best-selling drug behind only Pfizer's ( PFE) Lipitor.

A U.S. federal appeals court on Dec. 8 upheld a preliminary injunction blocking Canada's Apotex from selling generic versions of the drug. The injunction protects Plavix until a court decides a patent infringement suit filed against Apotex, a case that many analysts predict the generic-drug maker will lose.

Oral arguments start Jan. 22, but a decision will take many months.

Meanwhile, a scientific challenge that's no less important is being mounted by Eli Lilly ( LLY) and its experimental clot-preventer Prasugrel. A Lilly-sponsored clinical trial, whose results are due in mid-2007, will have a profound effect on all three companies because it directly compares Plavix and Prasugrel in preventing heart attacks, stroke and death.

Bristol-Myers, which licenses Plavix for marketing in the U.S. and Canada, needs this drug to maintain a revenue foundation for the next four years, assuming its U.S. patent remains in force until mid-2011. For the first half of last year, Plavix accounted for 22% of Bristol-Myers' revenue and 8% of Sanofi-Aventis' sales.

"Plavix has taken the market by storm," says Heather Brilliant, a pharmaceuticals analyst at the Morningstar investment research firm. "There are not a lot of alternatives."

For its part, Lilly needs more competitive drugs to reach the market before generic competition hits some of its top products, most notably the schizophrenia drug Zyprexa, early in the next decade.

"Prasugrel has the potential to be a multibillion-dollar product," Brilliant says. "It's the most important drug in Lilly's pipeline -- twice as important as any other drug in the late-stage pipeline."

If Prasugrel didn't come to market, its failure would knock $4 off Lilly's fair value, which Morningstar says is now $61 a share. The stock closed Thursday at $52.23. Brilliant doesn't own shares, and her firm doesn't have an investment banking relationship.

At about the time the Plavix patent-challenge ruling may be announced, Lilly is expected to release results of the Prasugrel clinical trial. Favorable news could encourage Lilly to seek U.S. approval in late 2007. A best-case scenario would put the drug, being developed with Japan's Daiichi Sankyo, on the market in late 2008.

Early research indicates Prasugrel could do a better job than Plavix in reducing dangerous clots. Both drugs prevent blood platelets from sticking together. Although platelets are essential for preventing excessive bleeding after an injury, they can pile up near cholesterol-caused plaque in arteries.

If plaque combines with platelets to block blood flow, a person risks a heart attack or stroke.

Goldman Sachs' James Kelly says clinical trials show that Prasugrel "appears to be more potent" than Plavix and that it takes effect faster. In a recent report to clients, he says Prasugrel "seems to be more consistent, working with a larger proportion of patients, including those nonresponsive to Plavix."

The big question is whether Prasugrel raises the risk of internal bleeding and by how much. One clinical trial showed Prasugrel had a higher bleeding rate at a higher dose than Plavix, but there was no difference at a lower dose, Kelly says.

The clincher should come later this year when Lilly announces results of a clinical trial whose acronym is TRITON. An independent safety monitoring board recently reported for the third and final time, saying the test should continue. Safety boards periodically examine clinical trials to guard against trouble spots.

Because these boards can recommended halting a trial, "we are encouraged by the positive opinion, which suggests that major bleeding has not been a problem," says Kelly, who has a buy rating. He doesn't own shares, but his firm has had a recent investment banking relationship with Lilly.

By contrast, Seamus Fernandez of Leerink Swann says his reading of existing data indicates that the bleeding risk is a "mounting concern." He notes in a Jan. 3 research report that his firm's medical consultants predict Prasugrel will cause more bleeding, especially with long-term use.

Although he agrees that Prasugrel appears to act faster and more consistently than Plavix, Fernandez says his worries about Prasugrel "tip the balance" in his rating of Lilly's stock, which he cut to market-perform from outperform. Previously, he had predicted $500 million in sales for 2009 and $1 billion for 2010. Now he has removed those estimates.

He doesn't own shares of Lilly, and his firm doesn't have an investment banking relationship.

Fernandez also questions some Wall Street predictions that Prasugrel will produce enough revenue to offset Zyprexa's patient expiration in 2011. To replace Zyprexa's impact on Lilly's bottom line, Prasugrel must produce annual worldwide sales of more than $8 billion because the profit will be split between Lilly and Daiichi Sankyo.

By his calculations, getting worldwide sales to surpass $5 billion a year, excluding Japan, assumes that half of Plavix users would switch to Lilly's drug. His consultants say such a goal could only be achieved by Prasugrel being at least 20% better than Plavix while producing "only a minor increase in nuisance bleeding."

Given the consultants' concerns, Fernandez says such an improvement is "unlikely."

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