GSK faces £1bn hit from launch of Paxil rival

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GlaxoSmithKline, the UK's number one drug maker, is bracing itself for the loss of more than £1bn in sales of its blockbuster anti-depressant Paxil after a Canadian company said it is to launch a copycat rival.

The onset of generic competition to Paxil - which is sold in the UK as Seroxat - comes at least six months earlier than expected and throws into turmoil GSK's campaign to switch Paxil users to a new version of the drug.

Apotex said it will start selling generic Paxil in the US, even though a court case to establish whether it infringes GSK's patents has not yet begun.

Most analysts had expected it to wait until the outcome of the case because it would have to pay significant damages if it loses. Apotex's bold move highlights the growing confidence of generic drug makers in their patent skirmishes with Big Pharma.

Barry Sherman, the combative chief executive of Apotex, said: "We consider it outrageous that GSK has kept an affordable alternative from consumers for years by asserting patents that they knew, or ought to have known, were either invalid or that our product did not infringe."

Paxil had sales of £2.1bn in 2002, two-thirds of that in the US. In court papers, GSK said that it could lose 80 per cent of its US sales of Paxil within weeks of a rival being launched. Investors fear a repeat of the sales disaster which befell Eli Lilly, the US giant, when its drug Prozac faced competitors in 2001. Prozac lost 70 per cent of its sales in a fortnight because doctors and medical insurers in the US demanded patients use the cheaper version.

GSK has tried to switch as many patients as possible to a new controlled-release version of Paxil before rivals become established. About 30 per cent of new Paxil prescriptions in the US are now for the new version, called Paxil CR.

The company said yesterday that it remains committed to marketing Paxil CR, and is also launching a new version of its other anti-depressant Wellbutrin. It stands by its patent claims and will continue to pursue Apotex through the US courts. And it hopes to take a slice of the market for generic Paxil, having licensed the product to Par Pharmaceuticals, which will pay royalties to GSK when it launches its own copycat version.

GSK has already said it will meet forecasts for percentage growth in earnings of "high single digits or better" this year regardless of generic competition to Paxil. Its shares were down only 4p yesterday, to 1,271p.

Vikram Sahu, analyst at Goldman Sachs, said: "The potential rationale for Apotex's launch was GSK's imminent launch of Wellbutrin XL, which will target the entire anti-depressant class, as well as the successful roll out of Paxil CR. Its sense of urgency would have been heightened by GSK's recent hiring of 500 more sales reps to support the switch, leaving Apotex with the prospect of a rapidly diminishing generic Paxil opportunity."