The Party Is Over for Lunesta's Marketers

The party appears to be winding down at the high-flying, high-spending Sepracor, best known for its Lunesta sleep drug.

In a note from analysts FBR this morning, the money boffins describe how the Centers for Medicare and Medicaid Services is not expected to reverse its decision that there are no meaningful clinical differences between Xopenex and albuterol, and therefore won't change it's proposal to lower Medicare reimbursement for Xopenex.

If that wasn't bad enough, FBR also notes that it thinks Sepracor is being too ambitious in its sales forecasts for Lunesta: "SEPR is guiding to 2007 Lunesta sales of $640M to $660M (the Street estimate is in line with guidance). This implies 13%-16% annual growth over 2006. With quarterly sequential prescription growth nearly flat, we believe SEPR needs to lower its guidance range for the year. Our 2007 estimate is $601M."

FBR is right to be skeptical -- Lunesta has been stuck at just under 13% share for months and there are no signs it will break that barrier. Rather, things may actually get worse. First of all, generic Ambien is now firmly on the market and although some Rxs have switched to Ambien CR most patients appear to be figuring out that the extra price for ACR isn't worth it and the cheap generic will work just fine.

Second, Sepracor is winding down its marketing commitment to Lunesta. According to Nielsen Monitor-Plus (corporate owner of BWNRX), adspend on Lunesta declined 16.4% from January thru April this year. (It's still running at $119 million over 4 months, which isn't pocket lint, but this is a company which once blew $300 million --- about half the drug's total revenue! -- on Lunesta in a single year.)

And of course, marketing management at Sepracor went through some changes a few months ago.

Current unanswered questions: Sepracor has been a potential takeover target for months. Is it now a lot cheaper than it used to be? Pfizer, are you reading this? You guys need a sleep drug that works and Kindler said months ago that M&As were the way to go...

Previous coverage of the Sepracor saga here, and here, and here.

Comments

[Pharmalyst]

Jim - This was perhaps a good idea a couple of years ago(even then Sepracor was spending a s***load of money on those DTC ads - John Mack can shed more light on this). But a couple of years ago Pfizer was co-developing indiplon with someone else (name escapes me)...which subsequently failed.
Now that there is generic Ambien on the market, there is not much to be had for PFE by acquiring Lunesta....As John Mack has pointed out, see how Takeda is struggling with its sleeping pill.

[Jim Edwards]

On this blog, I have always bowed to pharmalyst's superior knowledge of numbers. However, just to note that I am not a total math rube, please check out my previous coverage of insomnia drug math (summary: abandon hope all ye who enter here):

http://www.brandweeknrx.com/2007/05/ambien_and_its_.html

http://www.brandweeknrx.com/2007/03/as_expected_mer.html

http://www.brandweeknrx.com/2007/03/backoftheenvelo.html

http://www.brandweeknrx.com/2007/03/bad_news_for_me.html

http://www.brandweeknrx.com/2007/03/lilly_wades_in_.html

[Pharmalyst]

Enjoyed reading those posts! BTW I read on Dr. Rost's blog that you are leaving NRx to join Columbia? All the best and welcome back to University life!