Lung drug monopoly in jeopardy

NEW YORK (CNNMoney.com) -- The FDA approved one drug for a serious lung condition and is soon expected to announce a decision on a similar drug, threatening a rival's monopoly on this billion-dollar market.

Late Friday, the Food and Drug Administration approved Gilead Sciences' (up $0.19 to $80.83, Charts) ambrisentan, a treatment for pulmonary arterial hypertension (PAH), which can cause dangerous blood clots, works as a blood-thinner in patients suffering high blood pressure in arteries connecting the heart and lungs. The drug will be sold under the name Letairis.

The government agency was also expected to decide Friday whether to approve the drug Thelin by fellow biotech Encysive Therapeutics (down $0.50 to $4.10, Charts), already available in Germany and the U.K., but the drug is still pending approval.

Both those products are potential threats to Actelion's drug Tracleer, to date the only drug for the lung condition on the U.S. market. So Actelion's $850 million monopoly could face two new competitors within three days.

"It's unusual when you have two drugs entering the same class in one weekend," said John Michael Marino, vice president of U.S. marketing for Swiss-based Actelion, which trades on a Swiss exchange. Gilead's Ambrisentan "would be a direct competitor to Tracleer," he said.

Marino said that Tracleer, which has been on the market since 2001, is "well-entrenched in the marketplace." Tracleer sales totaled $850 million in 2006 and the company expects sales to reach $1 billion - making it a "blockbuster" drug - this year. There are 10,000 current patients taking Tracleer, which accounts for 90 percent of Actelion's revenue, he said.

Marino also noted that Actelion can back its product with strong results from clinical trials. But Hamed Khorsand, analyst for research firm BWS Financial, said that Gilead's ambrisentan could, in fact, be the strongest of the three products.

"Gilead's product is better," said Khorsand. "Gilead could become the dominant player in the market."

But Khorsand doesn't expect the market to grow past $1 billion, so the three companies could be fighting over a stagnant market. Khorsand projects that Gilead's ambrisentan annual sales will reach $300 million within three years. Joel Sendek, analyst for the financial research firm Lazard, projects that annual sales for ambrisentan could exceed $400 million by 2010.

For its part, the Houston-based Encysive could use some good news. The company lost money in 2006 and its stock has plunged more than 20 percent year-to-date while Gilead, based in Foster City, Calif., has seen its stock surge more than 20 percent this year. If Gilead disappoints with ambrisentan, it could fall back on its fast-growing HIV drug franchise, which exceeded $2 billion in 2006 sales. More than half of those sales come from the anti-viral Truvada.

As for Actelion's Tracleer, head of investor relations Roland Haefeli said the company is trying to get the drug FDA-approved as a treatment for an additional respiratory disease that could potentially double sales, according to Reuters. Also, the company plans to have five experimental drugs in late-stage studies by the end of 2007.

Analysts tend to be bullish on Gilead, a biotech in an industry dominated by Amgen (up $0.80 to $59.03, Charts, Fortune 500), the world's biggest biotech in terms of annual sales, and Genentech (up $0.75 to $77.00, Charts), the No. 2.

Khorsand does not own shares of companies mentioned here, and BWS does not conduct business with them. Lazard makes a market in Gilead and received compensation in the last 12 months for investment banking services.

CNNMoney.com staff writer David Ellis contributed to this report