Reckitt May Be Underestimating Heroin Treatments Staying Energy
Suboxone, Reckitts fastest-growing product, is popular with U.S. doctors, who say it can wean addicts off opiates more effectively than methadone. Protection from generic competition runs out in October and Reckitt has repeatedly said the drugs profit and revenue will fall as much as 80 percent next year.
Nine of 11 analysts surveyed by Bloomberg say that figure is too pessimistic, as Reckitt will probably preserve sales by throwing regulatory roadblocks at competitors and improving drug delivery by creating a Suboxone film-strip that dissolves in the mouth. Suboxone sales rose 45 percent last year to 341 million pounds ($564 million), accounting for about 5 percent of revenue at the maker of Lysol cleaners and Colmans mustard.
“Reckitt are always under-promising and over-delivering — there is an expectation they will do that with Suboxone,” said David Keir, investment director at Scottish Widows Investment Partnership whose funds include 1.05 percent of Reckitt shares.
Slough, England-based Reckitt has beaten analysts earnings estimates for seven consecutive quarters, Bloomberg data shows. A drop of only 30 percent in Suboxone sales next year would add 6 to 7 percent to earnings per share estimates, according to Andy Smith, an analyst at ICAP Securities in London.
“Reckitt has a track record of conservatism in providing market guidance,” Smith said. He advises buying the shares, which fell 5 pence to 2,926 pence in London yesterday.
Orphan Status
Of the 11 analysts interviewed by Bloomberg, only two agreed with Chief Executive Officer Bart Bechts forecast of an 80 percent sales decline, reiterated as recently as July. Becht has said Reckitt wont produce its own generic version of the drug.
“Our guidance is based on our best estimates, given previous experience of loss of orphan drug status, and we stick to that,” spokeswoman Andraea Dawson-Shepherd said by phone. She wouldnt comment further, and Becht declined to be interviewed.
Until next month, Suboxone benefits from so-called orphan status, which provides an extra seven years exclusivity after a drugs patent runs out. U.S. regulators grant the distinction to some medicines treating rarer conditions.
Suboxone affects the same brain receptors as morphine or heroin, without producing the same euphoric “high” or withdrawal symptoms. In 2006, 560,000 Americans aged 12 and older had abused heroin at least once in the year prior to being surveyed, according to the U.S. National Survey on Drug Use.
Patients Double
With no generic competition, weaning drug users off heroin using Suboxone comes at a price. The treatment sells for $576.65 for 90 tablets of 8 milligrams on drugstore.com, representing a cost of about $2,339 a year to users taking one a day.
Dr. Tom Kosten, Deputy Chair of Psychiatry and Dean for Clinical Research at Texas Baylor College of Medicine, says he can prescribe Suboxone for about $5 a tablet. That compares with 50 cents per dose of methadone, a traditional treatment for heroin addicts that comes with more withdrawal symptoms, a greater risk of overdose and more need for doctors oversight.
“There are more people who want to come in for Suboxone than we have been able to handle,” Kosten said. He has 20 patients on Suboxone at Houstons VA medical center, compared with 120 on methadone, and expects that proportion to reverse itself by next year.
FDA Approval
Suboxones main ingredient, buprenorphine, was discovered in the 1960s. Naloxone, the other ingredient, makes it impossible to get high if Suboxone is ground up and injected.
Suboxone in its present form was given approval by the U.S. Food and Drug Administration in 2002 to be prescribed by registered doctors. Its the kind of drug that would typically lose most of its sales on the first day of generic competition, according to independent pharmaceutical analyst Frances Cloud.
To delay that day, Reckitt has filed a so-called citizen petition, which calls for patient safety tests, against any generic competition that may appear. The company may also buy back the European distribution rights to the medication from Schering-Plough Corp. to hold on to revenue, according to Chas Manso de Zuniga, an analyst at Evolution Securities in London. No talks are being held on such a transaction, Monique Mols, a Schering-Plough spokeswoman in the Netherlands, said by e-mail.