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DBL%20Hendrix%20small.png College chemistry, 1983

Derek Lowe The 2002 Model

Dbl%20new%20portrait%20B%26W.png After 10 years of blogging. . .

Derek Lowe, an Arkansan by birth, got his BA from Hendrix College and his PhD in organic chemistry from Duke before spending time in Germany on a Humboldt Fellowship on his post-doc. He's worked for several major pharmaceutical companies since 1989 on drug discovery projects against schizophrenia, Alzheimer's, diabetes, osteoporosis and other diseases. To contact Derek email him directly: Twitter: Dereklowe

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September 4, 2009

Sepracor: A Desirable Property?

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Posted by Derek

Well, I didn't see this one coming. Dainippon Sumitomo has announced that they're buying Sepracor. My first thought on reading this was "Are they sure they want to do that?"

I say that because the ostensible reason that the Japanese company is pulling out their wallet is that they're looking to replace declining revenues at home. In that case, why are they buying declining revenues over here? Their flagship product (Lunesta) is going to be going off patent in the not-too-distant future, and they don't have a gigantic pipeline of stuff behind it.

The answer seems to be a deficiency that many Japanese firms have felt: a lack of boots-on-the-ground sales staff over here. The US is the biggest single profit center for the worldwide drug industry, and it's impossible for a big company to ignore that. But realizing all those potential profits isn't easy, if you're coming in from a standing start. (It's not like Dainippon Sumitomo has a big profile over here). Says the Boston Globe:

In a note to investors on the sale, Credit Suisse analyst Scott Hirsch said the deal made sense for Sepracor. He noted that the company is generating $300 million to $400 million in cash a year but has a limited pipeline of new drugs in development and its existing products will face competition from generic drugs in coming years. Hirsch also doubted another suitor would step forward with a better bid.

“In our view, if a US firm wanted Sepracor, that likely would’ve happened already, as there have been plenty of lookers over the years,’’ said Hirsch, who has a neutral rating on the stock. “We think Dainippon Sumitomo is more interested in the sales platform and operating leverage than the revenue stream.’’

So where does that leave Sepracor's research operations? It's true that Takeda has apparently been very kind to Millennium's research staff, but that was a more research-driven deal than this one seems to be. I'm sure the folks at Sepracor are looking for a little more clarity on that question. The problem is, the company's revenues have come almost entirely from clever (albeit irritating) patent-busting moves (active metabolites, pure enantiomers, and so on), but these strategies ran out of gas some time ago as the rest of the industry tightened up its IP protection. Rightly or not, Sepracor doesn't have a reputation as an outfit with a lot of great in-house research ideas. Outside of a ready-made sales force, what exactly do they have to offer?

Comments (7) + TrackBacks (0) | Category: Business and Markets | Drug Industry History


1. petros on September 4, 2009 7:58 AM writes...

I too was suprised when I saw this news yesterday and just after looking at some comments on active enantiomers. Although that doesn;t always work. It didn't with fluoxetine! And just as Xopenex has to cope with generic competition as well.

Sepracor's always been short on R&D, and I think they stopped NCE work some time ago. Their patents were masterpieces of non-disclosure. No details of separations and identical filings for D and L enantiomers, while their claimed activity for levalbuterol always seemed too good to credit

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2. Esteban on September 4, 2009 8:39 AM writes...

@Tampa Doctor: WTF?

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3. Jose on September 4, 2009 9:40 AM writes...

Strange game is afoot when a deal like that makes sense- Ebay/Skype, Kodak/Sterling-Winthrop...

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4. Brad on September 4, 2009 10:01 AM writes...


I'm thinking Daimler-Benz's "merger" with Chrysler.

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5. Chemjobber on September 4, 2009 12:13 PM writes...

The US is the biggest single profit center for the worldwide drug industry

You can't say that!

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6. partial agonist on September 4, 2009 5:08 PM writes...

"they stopped NCE work some time ago"

Not true. They did suffer some fits and starts in this area, since their first effort into NCEs about 10 years ago was led by horrible management (at least on the chemistry side, a raving looney named Hauske) but in the past 3-5 years they have totally revamped things with good people with big pharma expertise and past success.

They have some very promising early NCE stuff. Some of it was made by managing external research CROs, but internally their NCE effort is on the cusp of success from my information (I have many friends and former co-workers there).

Granted they are probably not successful enough for the scientists to stay employed there, if the new company wants revenue and a sales force most of all.

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7. rimjobjoe on November 17, 2009 6:46 AM writes...

"but in the past 3-5 years they have totally revamped things with good people with big pharma expertise and past success."

That is why their pipeline is bursting out the seams.

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