Healthy Skepticism Library item: 1633

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Publication type: Journal Article

AstraZeneca to appeal 60 mln eur EU fine; analysts shrug off impact
2005 Jun 15;

Full text:

AstraZeneca PLC said it will appeal a 60 mln eur fine imposed by the European Commission for illegally blocking generic versions of its stomach ulcer medicine Losec, and denied it misled patent offices or courts to prolong protection of the drug.

The result of an investigation that commenced in 2003, the EC described the actions of the Anglo-Swedish pharmaceutical giant as constituting ‘serious abuses of its dominant market position’ and violating competition.

Financial analysts were not concerned about the impact of the fine on the company, which turned in profit of almost 5 bln usd in 2004, on sales of 21.4 bln usd.

‘The fine is a drop in the ocean to them — when you think about how much cash they’ve got for share buybacks it’s not really that significant,’ said Paul Diggle, a pharmaceutical analyst at Code Securities.

‘It could have been up to 10 pct of total sales, so it’s probably right at the low end of expectations.’

Losec, first sold in 1988, was once the world’s biggest selling drug, generating annual sales of more than 6 bln usd in 2000. Sales began to decline in 2001 when Astra launched Nexium, an improved version of the stomach acid-combating drug.

Generic versions, which first began appearing in Germany five years ago, have further eroded sales, which amounted to 1.95 bln usd in 2004.

‘Losec was a very important product for them, so it’s not surprising they did their best to control the market for as long as possible,’
Diggle commented.

According to the commission, the company obtained supplementary protection certificates for Losec, which extend the basic patent protection for medicines, by concealing from patent offices the date on which it first received marketing authorisation.

The company was also found to have de-registered Losec capsules in Denmark, Norway and Sweden in order to block or delay the entry by generic firms. If a drug is not present in a country, generic producers cannot obtain a market authorisation for their own version.

Following the ruling in Brussels, AstraZeneca swiftly moved to refute the findings, and said it does not accept the EU Commission’s decision.
In a statement, the company said the commission did not take into account the substantial evidence submitted by the company, and contended it ‘acted in good faith’.

Still, commission spokesman Jonathan Todd described the fine as sending a ‘a powerful signal’ to companies that may be seeking ways to abuse EU antitrust law.

But he noted that the commission’s novel application of EU antitrust rules meant ‘the fine was lower than it would otherwise have been’.

Investors joined financial experts in shrugging off the fine, with Astra shares showing little response to the news. Shareholders are currently more concerned with the companys pipeline of new drugs, which has suffered a series of setbacks in the last year.

AstraZeneca shares closed 30 pence lower at 2,246, valuing the UK’s No 2 drug group at around 40 bln stg. The stock declined throughout the day along with the general market.