Who stands to gain when Zoloft goes generic?
Pfizer will lose billions in sales, but generic pharmaceutical-makers like Teva will likely come out ahead.
By Aaron Smith, CNNMoney.com staff writer

NEW YORK (CNNMoney.com) - Zoloft, the antidepressant with the household name, is going off patent this summer, forcing Pfizer to bid adieu to billions of dollars in annual sales.

Where will the money go?

Zoloft sales totaled $3.3 billion in 2005, its last full year on the market, but the drug's patent expires on June 23. The patent loss means that generic manufacturers can begin making generic versions of the drug, which in turn drives down the price of the name-brand version. In the year following a drug patent loss, sales of the name-brand version typically plunge by 80 percent.

This means that annual Zoloft sales will dip to $470 million for Pfizer (down $0.02 to $25.10, Research), according to Miller Tabak analyst Les Funtleyder. Sales of nearly half a billion might be plenty for smaller companies, but they don't mean much to Pfizer, which is the biggest drug maker in the world with $51.3 billion in 2005 revenue.

But although nearly $2 billion in revenue will vanish from Pfizer's balance sheet once Zoloft goes off patent, this won't necessarily translate into more sales for its brand-name competitors, analysts say.

"[The branded antidepressents] are not interchangeable," said Barbara Ryan, analyst for Deutsche Bank North America. "[This] is unlikely to have much of an effect on the category."

Zoloft has many competitors, including Effexor XR, a $3.5 billion drug from Wyeth (up $0.36 to $49.09, Research), Lexapro, a $1.9 billion drug from Forest Laboratories (unchanged at $44.40, Research), Paxil and Wellbutrin XL, each of them $1.1 billion drugs from GlaxoSmithKline (down $0.24 to $52.60, Research), and Cymbalta, a $680 million drug from Eli Lilly & Co (down $0.08 to $55.16, Research). Analysts tend to be particularly bullish on Cymbalta, a recently-launched and fast-growing drug.

But Zoloft patent's loss will translate into more sales for generic drug makers.

Teva moves in on Zoloft

Much of Pfizer's $2 billion in lost sales will translate into savings for patients who switch to generic versions of the drug. Also likely to benefit are companies like Israeli-based Teva Pharmaceuticals Industries (up $0.46 to $42.30, Research), the biggest generic drug maker in the world.

Kevin Mannix, U.S. spokesman for Teva, said his company has secured first rights to produce a generic version of Zoloft, though he would not provide sales projections. This means that only Pfizer and Teva would produce generic Zoloft for the first six months after patent loss, during which time the price would drop an estimated 40 percent. After that, it's open season for Zoloft, which will get produced by every generic drug maker under the sun, driving down the price another 40 percent.

Patent expiration and competition from generic drug makers are among the biggest threats to the branded drug industry. More than $20 billion in drug sales are going off patent in 2005, with a total of $100 billion expected to go off patent in five years.

But even a generic Zoloft is unlikely to have a lasting impact on the brand-name drug makers. Robert Hazlett, analyst for Suntrust Robinson Humphrey, said that generic Zoloft will cut into brand-name sales at first, but this will stabilize within three or four months as brand-name companies "step into the marketing vacuum that's left by Pfizer." Hazlett said that this is what happened to Prozac.

Lilly, the producer of fast-growing Cymbalta, continues to produce Prozac, a well-known antidepressant that lost patent protection and its blockbuster status in 2001. In 2005, Prozac sales totaled $453 million.

"We have a bit of proxy with Prozac," said Funtleyder of Miller Tabak. "I think there's a better chance of Zoloft [sales] going to Zoloft generics, than Zoloft [sales] going to other brands. If you've got the right dosage, you're probably not going to mess with it, because you know how hard it is to get people the right timing and dosage."

The analysts interviewed for this story do not own stock in the companies mentioned here.

To read about Pfizer's plans for the future, click hereTop of page

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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.