Gap Analysis

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KING MAY NEED TO RESTATE RESULTS; MYLAN MERGER COULD BE IN JEOPARDY ___________________________________________________________________________ King Pharmaceuticals Inc. released its third-quarter financial results Thursday, but said the figures should be considered preliminary until the firm completes an internal evaluation of its returns reserve.

"The company is now considering whether any of its returns reserve accrued during the first nine months of 2004 should have been recognized in years prior to 2004. . . . If material, such amounts would likely result in a restatement of previously issued financial statements and revisions of the preliminary financial results for the third quarter and first nine months of 2004," King said in a statement. King noted that these issues are unrelated to ongoing investigations of the company being conducted by the Securities and Exchange Commission and the Office of the Inspector General of the U.S. Department of Health and Human Services.

In July, King entered into an agreement to be acquired by Mylan Laboratories Inc. in a stock transaction valued at approximately $4 billion. However, the agreement states that Mylan may terminate the merger if King restates its financial results. The King acquisition was already controversial among Mylan shareholders, particularly Carl Icahn, the firm's largest shareholder, who has initiated a proxy fight asking shareholders to oppose the deal.

"Although a restatement would result in a failure to satisfy a condition to close the pending Mylan-King transaction, the company has made no decisions and intends to evaluate the issue as additional information becomes available," Mylan said in a press release that also included its second-quarter financial results. Mylan Chief Executive Officer Robert Coury told analysts in a conference call that he could not provide a timeline for resolving the matter, TheStreet.com reported.

Mylan's revenue for the second quarter of this year totaled approximately $307.0 million, down from $360.1 million in the same period of last year. Net earnings dropped from $91.28 million, or $0.33 per share, to $48.7 million, or $0.18 per share.

King, meanwhile, reported third-quarter revenue of $353.5 million, down from $423.1 million in the prior-year period, and net income of $27.6 million, or $0.11 per diluted share, down from $106.1 million, or $0.44 per share, in the third quarter of 2003.

King shares closed at $10.84, down $0.97, or 8.2 percent, while Mylan shares closed at $17.38, up $0.20, or 1.3 percent, both in heavy trading on the New York Stock Exchange.

ALTANA DELAYS U.S. FILING OF COPD, ASTHMA DRUG ___________________________________________________________________________ Altana AG said the filing of a U.S. marketing application for asthma and chronic obstructive pulmonary disease drug Daxas (roflumilast) has been delayed because of difficulty recruiting patients for Phase III studies.

The firm's most recent guidance had projected a filing in the first half of next year. The firm declined to forecast a new filing date Thursday.

"According to the communication policy of our partner Pfizer [Inc.], we will not communicate any timelines with respect to Daxas," an Altana spokesman said, Reuters reported. Reuters noted that Altana has "a rather bad track record about their timelines," according to Sal Oppenheim analyst Peter Duellmann, who estimated a six-month filing delay for Daxas.

Thus far, Daxas has been studied in 16 clinical studies involving more than 4,400 patients with asthma and COPD. Altana intends to submit data to the Food and Drug Administration from an additional 10 Phase III studies including a total of approximately 4,100 patients.

Enrollment in these latest trials has been slower than anticipated, Altana's Thomas Gauly said, because other pharmaceutical firms developing similar drugs are competing for study subjects.

He added that neither safety issues nor negative efficacy data were involved in the decision to postpone submission of the application.

"We are happy with the quality of the existing clinical data set on [Daxas]," said Altana Pharma Chief Executive Dr. Hans-Joachim Lohrisch. "We are convinced that we are in a position to launch this breakthrough innovation, likely as [a] first-in-class phosphodiesterase 4 inhibitor."

Shares of Altana closed at $51.47, down $4.00, or 7.2 percent, in heavy trading on the New York Stock Exchange.

AETNA OPERATING EARNINGS UP 38 PERCENT IN THIRD QUARTER; COMPANY RAISES FY GUIDANCE ___________________________________________________________________________ Aetna Inc. reported third-quarter earnings that exceeded Wall Street expectations and raised its earnings guidance for fiscal year 2004.

For the quarter, Aetna reported operating earnings of $289.5 million, or $1.84 per share, up 38 percent and 40 percent, respectively, compared with operating earnings of $207.1 million, or $1.29 per share, in the same period of last year. Excluding a favorable reserve development, operating earnings per share reached $1.75 per share; analysts surveyed by Thomson First Call had predicted earnings of $1.73 per share.

Including a $740 million tax refund and $250 million in favorable tax reserve adjustments, Aetna realized net income of $1.29 billion, or $8.21 per share, in the quarter, compared with $215.9 million, or $1.35 per share, in the third quarter of 2003.

As a result of the strong quarter, Aetna increased its 2004 guidance to $7.00 per share, up from a previous range of $6.75 to $6.85 per share. Aetna projected operating earnings of approximately $8.40 per share for 2005, approximately 20 percent greater than in 2004.

Aetna accrued $5.0 billion in revenue during the third quarter of this year, up from $4.5 billion in the year-ago quarter.

Medical membership grew by 131,000 in the quarter to reach 13.6 million. During the first nine months of the year, medical membership grew by 586,000 members. In 2005, Aetna expects to add 700,000 to 800,000 new members, including approximately 450,000 in the first quarter.

Shares of Aetna closed at $95.30, up $3.55, or 3.9 percent, in heavy trading on the New York Stock Exchange.

PHASE III PROVENGE DATA SHOW SIGNIFICANT SURVIVAL BENEFIT ___________________________________________________________________________ Dendreon Corp. said Phase III data showed its investigational prostate cancer drug Provenge was associated with a survival benefit "greater than that observed with any type of treatment in any published Phase III study in late-stage prostate cancer." Shares of the company surged 23.9 percent on the news.

The three-year analysis included 127 patients with asymptomatic, metastatic, androgen-independent prostate cancer who were treated with the immunotherapy Provenge or placebo.

Dendreon did not release specific results of the trial, saying the data will be presented at an upcoming scientific meeting and in a peer-reviewed medical journal. The company reported, however, that there was a significant survival benefit observed with Provenge at 36 months; the proportion of patients still alive in the Provenge group is substantially greater than that in the placebo group; and Provenge elicited a significant survival benefit in patients who had a Gleason score of 7 or less. Provenge was well tolerated in the study.

Provenge is currently being evaluated in an additional Phase III study under a Special Protocol Assessment agreement with the Food and Drug Administration. The FDA has granted Provenge a fast track designation.

Shares of Dendreon closed at $9.85, up $1.90, in heavy Nasdaq trading.

GSK'S Q3 EARNINGS NEGATIVELY IMPACTED BY GENERIC PAXIL, WELLBUTRIN COMPETITION; FIRM ON TRACK TO MEET 2004 GUIDANCE ___________________________________________________________________________ GlaxoSmithKline Plc's third-quarter earnings were negatively affected by generic competition for depression therapies Paxil (paroxetine) and Wellbutrin (bupropion hydrochloride), but the company said it is in line to meet its 2004 guidance.

For the period ended Sept. 30, GSK generated nearly $9.2 billion in sales, including $7.72 billion in pharmaceutical sales, compared with approximately $10 billion in total sales in the comparable period last year. Paxil sales totaled $450.7 million, a 51 percent decrease from the 2003 period, while Wellbutrin sales slid 30 percent to $316.9 million.

However, sales of GSK's asthma therapy Advair (fluticasone propionate/salmeterol) increased 20 percent during the period to $1.12 billion.

The company's net income, including taxes, reached $1.95 billion, or $0.34 per share, in this year's third quarter, down from $2.19 billion, or $0.38 per share, in the third quarter of 2003.

"These results confirm GSK's success in managing to absorb over $2.2 billion in lost sales to generic Paxil IR and Wellbutrin SR during the first nine months of the year and keeping overall pharmaceutical sales level," noted JP Garnier, GSK's chief executive.

"As the impact from Paxil generics now diminishes, we look forward to improved earnings growth in the fourth quarter and in 2005," Garnier added.

GSK shares closed at $42.31, down $0.34, or 0.8 percent, in moderate trading on the New York Stock Exchange.

RESULTS SHOW VYTORIN SUPERIOR TO LIPITOR IN LOWERING LDL CHOLESTEROL ___________________________________________________________________________ New data presented in Venice, Italy, at the annual International Symposium on Drugs Affecting Lipid Metabolism indicate Merck/Schering-Plough Pharmaceuticals' Vytorin (ezetimibe/simvastatin) provides a greater reduction in LDL cholesterol levels than Pfizer Inc.'s Lipitor (atorvastatin).

In the trial, researchers randomized 1,902 patients with high cholesterol to receive Vytorin or Lipitor across various dosing ranges. They defined the study's primary endpoint as the percent change from baseline to the end of a six-week treatment period in LDL cholesterol averaged across all dosing ranges.

At the most commonly administered starting doses, Vytorin 10 mg/20 mg patients experienced a 51 percent reduction in LDL cholesterol compared with 36 percent for Lipitor 10 mg-treated patients.

Furthermore, in a subgroup analysis of patients at high risk for coronary heart disease, significant differences in LDL cholesterol reductions at these doses resulted in a greater number of patients achieving a goal of less than 100 mg/dL with Vytorin as compared with Lipitor. Specifically, 82 percent of Vytorin 10 mg/20 mg-treated patients achieved LDL cholesterol levels less than 100 mg/dL compared with 47 percent of Lipitor recipients.

Vytorin was well tolerated in the trial and demonstrated a lower incidence of liver function elevations than Lipitor, according to a company press release.

"This study gives further support to the new option that Vytorin, which reduces both the production and the absorption of cholesterol, provides to physicians in the treatment of high LDL cholesterol," said Dr. Christie Ballantyne, lead investigator and director of the Center for Cardiovascular Disease Prevention at the Methodist DeBakey Heart Center in Houston.

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SHIRE PHARMACEUTICALS GROUP PLC ___________________________________________________________________________ Shire Pharmaceuticals Group Plc obtained an additional six months of market exclusivity for its attention-deficit/hyperactivity disorder drug Adderall XR (mixed amphetamine salts) after completing pediatric studies requested by the Food and Drug Administration. The product generated $283 million in U.S. sales during the six months ended June 30.

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ORTHO-MCNEIL PHARMACEUTICAL INC. ___________________________________________________________________________ Ortho-McNeil Pharmaceutical Inc. received Food and Drug Administration approval to market a liquid formulation of its quinolone antibiotic Levaquin (levofloxacin). Levaquin Oral Solution 25 mg/mL provides an option for adult patients who have difficulty swallowing tablets, Ortho-McNeil said in a press release. The product is indicated for lung, sinus, skin and urinary tract infections.

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ISTA PHARMACEUTICALS INC. ___________________________________________________________________________ Ista Pharmaceuticals Inc. said the Food and Drug Administration extended the company's period of market exclusivity for Vitrase (hyaluronidase) from three years to five years. Ista's U.S. exclusivity now extends to May 5, 2009. Vitrase is indicated as a spreading agent to facilitate the dispersion and absorption of other drugs. Earlier this week, Ista said the FDA had determined its glaucoma drug Istalol (timolol maleate) is not bioequivalent to other commercially available timolol maleate solutions. The FDA, therefore, granted Istalol a BT rating, which means prescriptions for Istalol cannot be substituted with generic products.

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SAVIENT PHARMACEUTICALS INC. ___________________________________________________________________________ Savient Pharmaceuticals Inc. said it will reduce its global workforce by 9 percent in order to focus resources on advancing its Phase II products Puricase, for gout, and Prosaptide, for neuropathic pain associated with HIV/AIDS. According to Reuters, the job cuts will affect 40 employees in the United States, Israel and the United Kingdom.

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