Ten Drugs To Watch

Published: Feb 24, 2005

Standard & Poor's list of the top 10 drugs to watch in 2005 looks like a compilation of the hopes and dreams of beat-up Big Pharma stocks. Most of the drugs analyzed by the credit-rating firm belong to companies whose shares have been recently depressed, such as Merck (MRK:NYSE) and Pfizer (PFE:NYSE) , as well as companies trying to pull themselves out of a long-term trough, such as Schering-Plough (SGP:NYSE) and Bristol-Myers Squibb (BMY:NYSE) . "The past year, 2004, has not exactly been a banner year for the pharmaceutical industry," says the S&P evaluation prepared by credit analyst Arthur Wong. "While the industry has been criticized in the past several years for the relative lack of research and development productivity, despite the increasing billions poured into research, there are several very promising product candidates that may form the core of major pharmaceutical companies' future drug portfolios." S&P picked the drugs not only for their prospects, including the ability to reach $1 billion in annual sales, but also for their relative importance to their manufacturers. "The commercial success, or lack thereof, of these products may have credit rating implications," says the S&P report issued Friday. Some of the top 10 drugs already have reached the market, and early sales are promising. They include Vytorin, the cholesterol drug from Merck and Schering-Plough; Tysabri, the multiple sclerosis drug from Elan (ELN:NYSE) and Biogen Idec (BIIB:Nasdaq) ; and Cymbalta, the antidepressant from Eli Lilly (LLY:NYSE) . Other drugs have been approved by the Food and Drug Administration but haven't reached the market. They include Lyrica, from Pfizer, which has been approved for nerve pain related to diabetes and shingles; and Lunesta, the insomnia medication from Sepracor (SEPR:Nasdaq) . Both drugs were approved in December. Lunesta's launch has been delayed until March because the FDA says the drug is a controlled substance, and Sepracor must obtain clearance from the U.S. Drug Enforcement Agency. Lyrica also has been classified as a controlled substance. Pfizer hasn't said when the drug will be available. The biggest challenge for S&P's picks involves drugs still being tested or under review by the FDA. Bristol-Myers Squibb has two compounds on the list -- the rheumatoid arthritis drug, abatacept, and the diabetes drug, muraglitazar, which is being co-developed with Merck. "While it has made significant strides in resolving past business issues ... the commercial success of high-sales-potential, near-term prospects such as abatacept and muraglitazar are critical in stemming the three-year slide in Bristol-Myers Squibb's ratings," S&P says. The arthritis drug, still in late-stage clinical testing, has been granted fast-track review status by the FDA, and S&P expects a launch in late 2005 or early 2006. The diabetes drug is in late-stage clinical testing. Merck has another experimental product on the S&P list: Gardasil is a vaccine against human papilloma virus, or HPV, which can lead to cervical cancer. Merck is racing against GlaxoSmithKline (GSK:NYSE) , which also is working on an HPV vaccine, but S&P believes Merck will reach the market first. S&P expects Merck to file an application with the FDA later this year. Pfizer has two experimental drugs that have attracted S&P. There's Indiplon, an insomnia treatment, and Exubera, an inhaled form of insulin. Pfizer is working with Neurocrine Biosciences (NBIX:Nasdaq) on Indiplon, which has yet to be approved. Pfizer is collaborating with Sanofi-Aventis (SNY:NYSE) and Nektar Therapeutics (NEKT:Nasdaq) on the insulin product. S&P expects an application will be filed with the FDA during the first half of this year.

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