The big U.S. and European drug companies are dealing with a 'cliff' of their own as blockbuster drugs lose their patent protection. But they are turning back to researching and developing new drugs to fill the gap and the industry has been one of the better performing groups in health care so far this year.
With big drugs like Sanofi's Plavix now subject to competition from generics, Fitch Ratings estimates that the "patent cliff" could cost the drug industry $25 billion this year.
"We saw the patent cliff coming as recently as the middle of the last decade and began to invest in our pipeline," Eli Lilly CEO John Lechleiter told CNBC this week. That gave the company time to begin developing new drugs and now has 35 in various stages of testing.
"Unfortunately, the timing of the launch of the first of those products doesn't precisely coincide with the loss of revenue from our patents," Lechleiter added.
Eli Lilly expects growth to resume after 2014, when it feels the brunt of the loss of the patent for Cymbalta, an anti-depression drug.
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For Sanofi, 2012 was the year of its patent cliff, making 2013 crucial, CEO Chris Viehbacher said in a CNBC interview.
"The next chapter is really around research and development," he said. "I'm really excited about the late stage R&D pipeline we have. We've got a good mix from vaccine to consumer to animal health and human health."
These new products should help drive growth at Sanofi. "We've been able to say we can grow our business at about 5 percent average sales growth between 2012 and 2015," Viehbacher said.
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Big U.S. pharma stocks are up about 5 percent so far this year. Biotechs, meanwhile, are up nearly 6 percent and have risen 17 percent over the past six months.
Jean-Jacques Bienaime, BioMarin Pharmaceutical's CEO, told CNBC his company has five products in clinical trials, which is large for a company its size.
BioMarin is most excited about a treatment for Morquio syndrome, or MPS IV, an enzyme deficiency that can lead to skeletal dysplasia, short stature, and joint abnormalities.
"It has the potential of doubling the revenues of the company and bringing it to about a billion dollars of revenues in the future," Bienaime said of the treatment. He expects to file for approval with the Food and Drug Administration by the end of the quarter and with European authorities by the end of April.
"There's a good chance to get approval this year," he added.
Oncology company Onyx Pharmaceuticals is also finding a new potential use for existing cancer drug Nexavar.
Dr. Anthony Coles, Onyx's CEO, said that data released last week suggested the amount of time a patient with thyroid cancer survives before their cancer grows was extended as a result of Nexavar.
"It should be the basis of an FDA application that we'll file with our partner Bayer later this year," he said. The drug already generates about $1 billion in revenue.
Onyx is also looking to bring its blood cancer drug Kyprolis to Europe and emerging markets to increase revenues.
"Beyond that, we're investing in early stages of treatment," Coles said. "Kyprolis in combination with other treatments can improve the amount of time patients with multiple myeloma can live before their cancer progresses."