Sepracor's really taken a pounding after an FDA "non-approvable" letter for their antihistamine compound. But they haven't been a quiet drug stock to be in, and it isn't a quiet company.
They certainly don't have a quiet business plan, either. As readers who are in the business are well aware, Sepracor doesn't develop any really new drugs. Instead, they look for "improved versions" (pure enantiomers or active metabolites) of existing ones. As the company says:
"In contrast to traditional new drug development, the safety and efficacy of the racemates and parent drugs of Sepracor's pharmaceuticals under development are often well understood before clinical trials begin. Parent drugs have been successfully taken through clinical studies and may have been on the market for years."
Well, yes, but what that leaves unspoken is that someone else did all that. And what it reallyleaves unspoken is that they didn't do it so that Sepracor could cash in with a second-generation compound. Friday's Wall Street Journal article on their stock plunge contained a line about Sepracor helping Schering-Plough develop their successor to Claritin, Clarinex. If you were to ask Schering, they'd probably tell you that Sepracor helped develop that one in much the same way that Blackbeard helped with jewelry shipments. Lilly felt the same way about the single-enantiomer version of Prozac that they ended up licensing.
Both companies were beavering away on these projects when Sepracor showed up with really unwelcome news: They informed Lilly and Schering that they had patent rights for the use of these second-generation compounds. This (as far as one can tell) completely blindsided both companies, who were sure that (as usual) their chemical matter and its uses was covered under their own patents.
Oops. Sepracor had done a more careful job of reading the existing patent claims, it turned out. There was great gritting of teeth at the companies involved (and probably great public flogging of the Legal departments,) but they both went ahead and signed deals. Sepracor got money upfront and a piece of the profits if the drugs made it to market.
They ended up going 1-for-2 on these, but not calmly. The Prozac enantiomer project with Lilly went into the clinic, where it proved, as expected, to be more active. It also proved to be more toxic. Oops. With that one gone, they needed Schering's compound, more than ever. It's finally hitting the market, but not without delays. Schering's problems with the FDA over manufacturing issues have caused Sepracor plenty of trouble. While Schering's stock price felt the pain, Sepracor (with fewer drugs in its portfolio) felt it even more. Clarinex was finally approved last December, and Sepracor went up almost 6% in one day.
They have several other examples of this strategy. The most successful has been licensing the second-generation form of Seldane back to Hoechst (now Aventis), where it's now known to the world as Allegra. So, what went wrongt this time? This compound was an active metabolite of Johnson and Johnson's Hismanal. While that worked with Clarinex, the danger is that active metabolites are new compounds, with new properties all the way. It's not like the single-enantiomer drugs, where at least patients have been getting dosed with the compound already. In this case, there were toxicology problems that Hismanal doesn't seem to have.
And what now for Sepracor? As has been apparent for many years now, their business model is based on a non-renewable resource - incomplete patent coverage. Those loopholes have closed decisively, since everyone now knows what will happen if they aren't. In that way, Sepracor's influence has been a good one on the industry, keeping everyone on their toes.
They've talked over the years about becoming a real, research-driven drug company, but I'll believe it when I see it. That requires costly infrastructure that they don't have, and entails a success rate that (last week's setback notwithstanding) is lower than they're accustomed to. And instead of fishing for drugs from a secluded spot, it would put them right in the big tank with the rest of the sharks.
