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Executive Summary

Biocraft's generic cefaclor is "very likely" to reach the market in 1992, President and CEO Harold Snyder forecast April 16 at the Furman Selz Fourth Annual Generic Drugs Conference in New York City. "We look forward to . . . manufacturing our own cefaclor," Snyder told the analysts. "Maybe we won't have it in 1992 [but] I think we very likely will." He noted that Biocraft has sifted through the "200 plus" patents surrounding Lilly's Ceclor oral antibiotic at a cost of $ 450,000. Snyder said he believes the company is "ekeing" its way through without meeting any difficulties. While the U.S. patents for the top-selling oral antibiotic begin to expire in December 1992, Lilly has stressed in recent public presentations that the difficult production process for Ceclor and a patent covering an intermediate production step give the product de facto protection from generics. Ceclor, with sales of approximately $ 825 mil. in 1990, has been the top-selling oral antibiotic worldwide for the last six years and is Lilly's largest dollar volume product. For Biocraft to introduce a generic product in the U.S. in 1992, the generic firm would have to successfully challenge two of Lilly's patents. Lilly holds three U.S. patents for the cephalosporin antibiotic: no. 3,925,372, which expires on Dec. 9, 1992; no. 4,064,343, which expires on Dec. 20, 1994; and no. 4,081,440, which expires on March 28, 1995. The 3,925,372 patent covers alpha-aminoacyl-3-halo cephalosporins. The 4,064,343 patent is an intermediate patent covering 7-acylamido- and 7-amino-3-halo cephalosporins "provided by the reaction of 7-acylamido-3-hydroxy- 3-cephem-4-carboxylic acid ester or a 7-amino-3-hydroxy-3-cephem- 4-carboxylic acid ester with an iodinating, fluorinating, chlorinating or brominating reagent," according to the abstract to the U.S. patent. At a Feb. 28 meeting with securities analysts, Lilly Pharmaceutical President Eugene Step indicated the difficulty of producing cefaclor by pointing out that his company knows of no generic competition outside of the U.S. despite a lack of patent protection for the drug. Referring to the '343 patent, Lilly Research Labs President Mel Perelman, PhD, told the same meeting that a patented "key intermediate relatively late in the synthetic process" effectively chokes off competition ("The Pink Sheet" March 4, p. 15). Snyder said that Biocraft will "steer away" from a costly patent battle in the courts following the company's setback in disputing Bristol-Myers Squibb's cefadroxil patent. In March 1990, Biocraft agreed to pay Bristol-Myers Squibb $ 21 mil. to settle damages involving the generic firm's importation and marketing of cefadroxil. An anticipated settlement relating to Biocraft's successful patent challenge of Merck's Moduretic (amiloride/hydrochlorothiazide) may take some of the sting out of the cefadroxil loss, Snyder said. "We're in the midst of negotiating a settlement with Merck," he noted. Biocraft does not yet know when or how much money it will receive from Merck, the company said. Biocraft won a patent decision against Merck on May 10, 1989, and received 180 days of exclusivity. The decision was appealed by Merck and an injunction issued. However, in June Biocraft's challenge was upheld by the appeals court and the generic firm's 180-day exclusivity period was extended to December 1989 ("The Pink Sheet" Dec. 11, 1989, T&G-14). The settlement is for damage done to Biocraft's sales by Merck's appeal, Biocraft said. The 1992 date for cefaclor seems especially important to Biocraft. The firm's supply agreement with Lederle for Suprax (cefixime) "ends sometime in 1992," Snyder said. Lederle is "building their own plant in North Carolina" to produce the drug, he added. Biocraft plans to manufacture generic cefaclor as well as cephalexin at the company's new cephalosporin manufacturing plant in Mexico, Miss., Snyder said. He reported that the plant is "85% complete." Biocraft met with FDA on April 11 concerning GMP violations cited in an October 1989 reg letter relating to the manufacture of generic cephalexin at the firm's Waldwick, N.J. plant. Snyder told the analysts that Biocraft had met with FDA and "seems to have satisfied their questions." On April 17, Biocraft said it received a letter from the agency "to that effect." Snyder reported that Biocraft's regulatory problems appear to be behind the firm. In addition to issues covered in the reg letter, "our problems with labels are all relatively over," Snyder said. "Everything is now electronically verified." Biocraft had one Class I and two Class II recalls during 1990. The Class I recall, which was initiated in late 1989, involved 24 bottles of furosemide 50 mg that were mislabeled as the antimalarial chloroquine phosphate 250 mg. One Class II recall was for a package of 100 unit dose capsules of 500 mg amoxicillin trihydrate that was mislabeled as oxacillin 500 mg; the individual caps were properly labeled. The other Class II recall, for penicillin potassium tabs, was for subpotency. The company has had no recalls so far in 1991, according to FDA's weekly "Enforcement Report." Snyder, however, was not optimistic about an immediate increase in ANDA approvals. "If you think FDA is acting more expeditiously" in recent months, he said, "candidly, they're not - - they're just acting more carefully." As for the new allegations of FDA involvement in insider trading, Snyder added, "I don't believe that this will loosen up the purse strings of approval." In the current political atmosphere, he said, "its easier to say no than it is to say yes, and I expect a lot of no's."

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