Aventis “Contingency Plans” For Allegra Include Outlicensing

Aventis is considering outlicensing the antihistamine Allegra (fexofenadine) as a "contingency plan" in the event that the product loses its sole-source prescription-only status.

One major risk factor for Allegra in the U.S. is "the patent challenge by a number of generic companies, challenging our exclusivity" on the drug, Chief Operating Officer Richard Markham said during a Feb. 5 earnings call.

The patent case is set for trial in September in the U.S. District Court of New Jersey. Five separately filed complaints by Barr Laboratories, Impax, Teva, Mylan and Dr. Reddy's have been coordinated for a joint hearing, Aventis said.

If Aventis' patent defense is unsuccessful, a generic version of the antihistamine could enter the Rx market in "early 2005," Markham noted.

"We consider it important to keep Allegra as long as Allegra is a patent-protected product because it generates a lot of cash flow," CFO Patrick Langlois said.

However, if Aventis loses the court challenge, "we just don't want to let the product disappear. We feel that there is a way to extract value by licensing the rights to whoever wants to buy it."

"One of the options would be to form a partnership with someone else...because we have a number of other companies who are interested in acquiring the Allegra asset in the U.S.," Markham added.

If Allegra loses exclusivity in 2005, Aventis expects a $0.63 per share hit to earnings - after factoring in any revenues from an outlicensing deal, Langlois added.

The potential loss of Allegra is one of the major uncertainties facing Aventis in the near term.

Allegra revenues already are under pressure after to the OTC switch of Claritin (loratadine) and new competition from Merck's Singulair (¹ (Also see "Allegra Faces Increasing Challenges In Rx Drug Arena" - Pink Sheet, 19 Jan, 2004.), p. 3). The Rx allergy market contracted 27% in 2003, Aventis said.

"We are holding a slightly increasing market share but in a declining market," Markham said. "So going forward, we see Allegra declining on a year-over-year basis" at a 7% to 8% rate.

On a constant currency basis, Aventis recorded a .1% drop in U.S. Allegra revenues in 2003 to $1.8 bil. (€1.5 bil.). The drug's worldwide sales grew 1.1% to $2.2 bil. due to a strong performance in Japan.

Procter & Gamble represents the most obvious candidate to strike a deal for Allegra. P&G has articulated interest building on the switch success of Prilosec OTC , which it markets with AstraZeneca (² (Also see "Does A Procter & Gamble-Aventis Merger Make Cents?" - Pink Sheet, 19 Jan, 2004.), p. 4).

The consumer products firm already has a relationship with Aventis through the shared stake in the osteoporosis drug Actonel , which posted $866 mil. in 2003 sales.

Under one scenario, P&G could exchange its share in the Actonel venture for Allegra marketing rights. Markham called Actonel a potential blockbuster drug that could reach more than $2.5 bil. in annual sales.

Should P&G pursue access to a switch pipeline at Aventis, the deal might also include allergic rhinitis nasal spray Nasacort , which had $350 mil. in 2003 sales.

Aventis also disclosed plans to divest $1.9 bil. in older brands as part of an effort to pare its product line to focus on high-margin, high-growth agents.

Separately, the call represented Aventis' first full public defense against Sanofi-Synthelabo's hostile takeover bid.

"We are clearly and firmly rejecting their offer" because Sanofi has considerable risks and provides Aventis shareholders with no value, Chairman Igor Landau said.

Indeed, Landau argued Aventis is better off on its own, predicting the firm will deliver sales growth of 6% to 7% in 2004 and average revenue growth of 10% to 11% from 2005 to 2007. In 2003, Aventis' sales rose 5.9% to $21.2 bil. on a constant exchange basis, led by human vaccine sales. The company's net income grew 17.5% to $3.1 bil.

"If we were to combine with someone else," Aventis would prefer to pair itself with a company its own size or bigger to become the world leader, Landau said. Aventis is currently the fifth largest pharmaceutical firm in the world, while Sanofi is the fourteenth.