Novartis tips complex manufacturing to insulate Sandostatin from generics

Sandostatin LAR (octreotide acetate), a hormone drug used in the treatment of diseases including acromegaly, lost patent protection in key markets outside the US around a decade ago. However, the treatment has continued to generate significant sales in the US and the rest of the world.

The resistance of Sandostatin to generic competition stems from how difficult the drug is to produce. While Sandostatin has theoretically been vulnerable to generic competition outside the US for years, in practice it has only recently begun contending with an off-patent rival in Europe and Japan.

Generic competition contributed to a 7% decline in Sandostatin revenue outside the US in the fourth quarter. The decline is less severe than that suffered by many other drugs newly exposed to generic competition.

Talking to investors on a fourth quarter conference call, Novartis CEO Vasant Narasimhan explained why he expects the forecast arrival of a generic competitor on the US market to have a similarly muted initial impact.

Narasimhan said, “Given the production challenges with Sandostatin LAR, we expect this to more look like a biosimilar-type erosion as we’ve seen in Europe, where we’ve been able to hold very well our Sandostatin LAR share even in the face of entrants in Germany and the few other countries​.”

Exactly when Novartis will face generic competition to Sandostatin, which Narasimhan called “a very complex formulation [with] a complex manufacturing process​,” in the US market is unclear. Teva Pharmaceutical is aiming to get a copy to market soon but Novartis’ outlook is based in the assumption that it will be largely free from generic competition this year.

Novartis’ assumption is underpinned by its monitoring of the market.

Narasimhan said, “We have not seen any activity in the channels to indicate an entrance​.”

Even if Teva gets its generic copy to market around the middle of the year, Novartis does not expect it to have a meaningful effect on its financial performance in 2020, though that could start to change in 2021.

However, the likelihood that relatively few companies will enter the US market, coupled to the fact that those that do will face higher manufacturing costs than is typical for generics, means that Novartis may continue to generate significant sales from Sandostatin in 2021 and beyond.