For Pfizer (NYSE:PFE), pharmaceuticals represent the company’s most profitable segment. It has had remarkable success with blockbuster drugs ranging from neurological treatments to cardiovascular medications. However, Pfizer’s revenue growth will be significantly reduced this year because of a patent expiration. Therefore, which drugs the company has in its pipeline is of utmost importance.
Lipitor is Pfizer’s best-selling drug to date. It generated $9.6 billion in sales in 2011, representing 14 percent of the company’s total sales. But Pfizer’s patent on the cholesterol-lowering drug expired in November 2011 the company will face a significant decline in revenue in 2012 as a result.
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According to the healthcare information company IMS Health, more than 80 percent of its prescription sales are replaced by generics within six months. To stave off potential losses, The Los Angeles Times reported in January that Pfizer had cut deals with insurers and with companies that process prescriptions as “part of an elaborate effort to keep Lipitor available at prices that are just as cheap as — or even cheaper than — the generic competition.” The company also began a program that makes Lipitor available for as little as $4 for a 30 day supply. However, when a drug’s patent protection ends, typically insurers force patients to switch to the generic.
Pfizer’s loss of exclusivity caused a huge stir in the pharmaceutical sector late last year and early this year as competition for the rights to the generic grew. Normal procedure dictates that one drug maker gets exclusive rights to make the low-cost generic version in the first six months after it goes off patent. In the case of Lipitor, two companies began offering the generic version after the patent expired. Ranbaxy Pharmaceuticals received first approval by the FDA, while Watson Pharmaceuticals (NYSE:WPI) distributed a generic version that was manufactured by Pfizer. Mylan (NASDAQ:MYL), Novartis (NYSE:NVS) and Apotex received regulatory approval to sell their generic versions of the drug in June.
For Pfizer’s continued success, according to Seeking Alpha, the key drivers are the new drug applications that are pending the approval of the FDA and recently approved drugs. Sales of Pfizer’s new drugs are “expected to partially offset lost revenues.” These included Prevnar-13, a vaccine for the prevention of pneumococcal disease, Sutent, which treats renal cell carcinoma, and Eliquis, a treatment for blood clots the company developed with Bristol-Myers Squibb (NYSE:BMY).
The combined sales for all new drugs were $5.4 billion in 2011. If sales are similar to that figure this year, they will not offset the lost revenue from Lipitor. Therefore, Seeking Alpha predicts that Pfizer will “see a significant reduction in revenues in 2012 compared to 2011.” Already, in the first quarter of 2012, sales from Lipitor fell 40 percent, to $1.4 billion.
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