Will Testosterone Fuel Biotech’s Next Great Race? – AbbVie Inc (ABBV), Eli Lilly & Co. (LLY)

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Boys will be boys. We fight, we apologize, and we enjoy some cold ones the next day like nothing happened. That fraternal feeling may never reach some feuding biotech companies, which seem to find the courtroom as familiar as the research lab. At the center of it all is the hormone that defines masculinity itself: testosterone. Feel the irony?

By now you’ve probably seen a commercial on TV or a full page print ad for AbbVie Inc‘s (NYSE:ABBV) AndroGel — the leading testosterone replacement therapy, or TRT, on the market. And you shouldn’t expect the marketing barrage to end any time soon. More and more companies are following demographics into the more than $2 billion U.S. market for TRTs, which is expected to grow to $5 billion by 2017 — roughly the same size as the erectile dysfunction market today.

AbbVie Inc (NYSE:ABBV)Does the rush to resupply the world’s manliness amount to opportunity or disaster for AbbVie Inc’s (NYSE:ABBV)? It may just depend on your timeline.

First to market, first to fall
AbbVie Inc’s (NYSE:ABBV) acquired AndroGel in its $6.2 billion acquisition of Solvay Pharmaceuticals in 2010. Given the drug’s $1.19 billion in sales last year, the acquisition could more than pay for itself. While the company and analysts expect double digit growth in 2013, the long term success of the franchise — 1% and 1.62% topical gels — may hinge on the success of generics eyeing the market. Being the first to market has its advantages, but it also gives your competitors a face to pin to the dart board.

Generic drug manufacturer Perrigo Company (NASDAQ:PRGO) recently received FDA approval for an AndroGel 1% bioequivalent. The situation got worse for AbbVie Inc’s (NYSE:ABBV) a week later when Perrigo filed an Abbreviated New Drug Application for an AndroGel 1.62% bioequivalent, effectively putting the company’s entire franchise at risk or future risk. Perrigo will be granted generic exclusivity for 6 months upon FDA approval as the first to file a challenge to AbbVie Inc’s (NYSE:ABBV) patent.

There is more indirect competition for AbbVie Inc’s (NYSE:ABBV) to fend off as well. Eli Lilly & Co. (NYSE:LLY) has pushed into the testosterone market with muted results thus far. The company’s Androderm patch and Axiron topical gel only contributed $135 million to total sales in 2012 – hardly a major threat to AndroGel.

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