Irvine-based generic drug maker Sicor Inc. is gearing up for what’s expected to be a wave of biotechnology drugs coming off patent in the next five years.
The company is building a new plant in central Mexico where it plans to make generic versions of biotech drugs. The facility, in the state of Toluca, is set to be up and running by 2002, in time to sell generic biotech drugs to global markets that don’t have patent restrictions. The company plans to sell into the U.S. and Europe as more patents expire and regulatory issues become clear.
“We believe (biotech) is going to be the next marketplace to be genericized,” said Laurie Little, a Sicor spokeswoman. “As those (drugs) come off patent, they will (create) great opportunities for us, as well as for end users, because they’ll be able to get some of these products at a more inexpensive price.”
The plant, which Sicor is building to U.S. specifications, is set to produce finished, bottled versions of biotech drugs. Among the products to be made there is interferon alpha. That’s a generic version of Schering Plough Corp.’s Interon, which is used in combination with Costa Mesa-based ICN Pharmaceutical Inc.’s Ribavirin to treat hepatitis C.
Sicor also plans to make GCSF, a generic version of the cancer drug Neupogen from Amgen Inc., and a version of human growth hormone, which is secreted by the pituitary gland. Eli Lilly and Co.’s growth hormone Humatrope is set to go off patent in 2003.
Sicor is among the first generic drug makers to ready for biotech production. Another is Israel’s Teva Pharmaceutical Industries Ltd. For generic drug makers, time to market with a copycat product is key. The first company to file with the Food and Drug Administration to market a generic version gains a 180-day exclusivity period,a window offering the best prospect for profits.
But Sicor faces challenges. Biotechs are harder to produce than traditional drugs, and the regulatory process for getting them approved isn’t as easy.
Shares of Sicor hit new highs late last year in part on investor expectations about generic biotechs. In early December, Sicor’s stock hit a high of 17, up from 6 at the start of 2000. It pulled back to around 12 as of last week, but still ended up doubling for the year. The company counted a market capitalization of $1.2 billion last week.
Interestingly, Sicor got its start as a San Diego biotech development company in 1986. Then known as Gensia Pharmaceuticals Inc., the company became San Diego’s flagship biotech through development of Protara, a cardiovascular drug. Like most biotechs, the company poured time and money into research without turning a profit.
In 1994, Gensia halted work on Protara after the drug failed a key clinical test. In 1997, the company shifted its focus to generic drugs and relocated its headquarters to Irvine, where its generic business already was based. That same year, Europe’s Rakepoll Holding merged with Gensia to form Gensia Sicor, which shortened its name to Sicor in 1999.
Sicor has grown profitable. In the third quarter, the company saw revenue grow 29% to $71 million from the year-ago period, while earnings surged 181% to $8.4 million. When Sicor reports fourth-quarter results next month, analysts expect the company to earn 9 cents a share, vs. 5 cents a share in the year-ago period, according to consensus figures from First Call Corp.
Citigroup, Sicor’s biggest shareholder, upped its stake in the company to 15.6% from 8.3% at the start of 2000.
Elliot Wilbur of CIBC World Markets began coverage of Sicor in October with a “buy” rating.
“Gross margin for the (third) quarter reached 45.1% compared with 38.2% in Q3 ‘99,110 basis points ahead of our projections,” Wilbur said in a recent report.
North Aurora, Ill.-based Oberweis Asset Management Inc. has added Sicor to two of its funds: the $15 million Mid-Cap Portfolio and the $100 million Emerging Growth Portfolio. Jim Oberweis Jr., who manages Mid-Cap, picked up Sicor shares for his fund in early March at around 10.
“Back in 1998, Sicor was losing money and the company’s management was able to turn it around, make it profitable and grow sales from $178 million to $229 million in 1999,” he said. “They’re on track for substantially more than that (in 2000) when they report. Those are the things that we really look for.”
Analysts expect Sicor to earn 29 cents a share for 2000 when the company reports year-end results and 39 cents in 2001, according to First Call. Analysts see earnings growing 30% a year for the next five years.
Sicor has three business lines: active pharmaceutical ingredients, finished dosage products and contract manufacturing.
The company sells pharmaceutical ingredients to major drug makers, a business that accounts for 45% of Sicor’s annual sales. More than half of Sicor’s business, 52%, comes from the finished dosage unit, which makes and sells ready-to-inject drugs to healthcare providers. The contract manufacturing business makes up the rest of sales. n
