Analysis: Pfizer post-Lipitor twists could cushion blow
(Reuters) - Pfizer Inc's loss this November of exclusive U.S. rights to its best-selling Lipitor cholesterol treatment is one of the most anticipated events in the drug industry's history, but the initial blow to Pfizer may be less severe than many investors might expect.
Pfizer's ability to secure patents for Lipitor, which is the world's biggest-selling drug, could allow it to retain more revenue than is often the case when generic competition arrives for a brand medicine.
One boost would come if India's Ranbaxy Laboratories Ltd, which has been long slated as the first to sell a generic Lipitor, is forced to delay its launch as it tries to resolve regulatory issues.
Another scenario outlined by analysts is that only a few companies could be marketing generic Lipitor within the first year of its launch because of Pfizer's patents.
The limited competition could help Pfizer retain more sales in part through a generic version for which it will receive royalties. With a drug Lipitor's size -- set for more than $5 billion in the U.S. sales for 2010 -- that is significant.
Pfizer could hang onto $1 billion in Lipitor sales during the first year after generics arrive, according to Leerink Swann analyst Seamus Fernandez.
"This may be a longer opportunity than people are modeling currently," Fernandez said.
Pfizer still will endure a huge hit when Lipitor goes generic, and eventually is likely to see most Lipitor U.S. sales evaporate. And no one is suggesting the initial softer blow is reason alone to invest in the drugmaker, whose shares have struggled for years and which spent about $67 billion to acquire Wyeth to help cope with the Lipitor loss.
But the situation could leave the world's largest drugmaker with stronger earnings and cash flow next year than some investors expect, a bonus that could soothe shareholders until some of Pfizer's experimental drugs come to market.
"It's a highly profitable product and therefore you're going to generate excess cash flows than you normally would have," said David Heupel, a portfolio manager with Thrivent Investment Management. "It's all gravy. The perception is 'Poof!' it goes away when the patent expires."
Globally, Lipitor sales are expected to still be $4 billion in 2012, down from nearly $11 billion in 2010, while falling to $2.4 billion in 2015, according to Cowen & Co. Pfizer may hang onto sales in other geographies such as emerging markets.
ROAD TO GENERIC LIPITOR
The expectation of a November 30, 2011 U.S. launch for generic Lipitor has been set since June 2008, when Pfizer and Ranbaxy announced they had ended years of court fights and settled patent infringement litigation.
As the first to seek a generic, Ranbaxy is expected to have 180 days as the lone seller of generic Lipitor, whose chemical name is atorvastatin. Such exclusivity periods are granted under U.S. law as an incentive to challenge patents and can be lucrative for generic drugmakers.
Pfizer also settled patent litigation with Cobalt, a generic drugmaker now owned by Watson Pharmaceuticals Inc, in which Watson has the right to launch a generic authorized by Pfizer also on November 30.
Feb 03, 2011