Gerard Klauer downgraded Ribapharm (RNA) to neutral from outperform.
Ribaphram says Schering-Plough's decision to license ribavirin for hepatitis C to a generic manufacturer won't change its patent position; Ribapharm says will defend its ribavirin patents in court.
Schering markets Ribapharm's ribavirin in the U.S., Europe, and Japan under the brand name Rebetol for use in combination with its Intron A or Peg-Intron to treat chronic hepatitis C in adult patients with compensated liver disease.
However, analyst Larry Smith expressed concerns. He says he had thought there would be no generic competition in the U.S. for Rebetol until 2004 or 2005 at the earliest. He says Schering's decision to license its patents to Three Rivers Pharmaceutical will make generic competition likely in late 2003. He now projects the rapid erosion of Rebetol's U.S. sales: $865 million in 2002 to $429 million in 2003 to $35 million in 2004.
Smith notes European sales are protected from generics until 2009, and Japanese sales are protected until 2007. He sees 85 cents 2002 earnings per share, 65 cents for 2003, 47 cents for 2004, and 52 cents for 2005.