Pfizer may lose billions in Lipitor sales
Patent on world's top-selling drug cut short by 15 months in judge's ruling.
By Aaron Smith, CNNMoney.com staff writer

NEW YORK (CNNMoney.com) -- Pfizer's basic patent on its top-selling drug Lipitor was upheld in federal court Wednesday, but a second, longer-running patent was ruled invalid, possibly eliminating billions of dollars in potential sales.

Pfizer, the world's biggest drugmaker, said the federal Court of Appeals ruled that the basic patent on Lipitor, the world's top-selling drug, is valid. This means that Pfizer has patent protection on the cholesterol-cutting drug until March of 2010.

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But the court also ruled that Pfizer's second patent on Lipitor, which would have protected the drug until June of 2011, is invalid. This chops 15 months off the Pfizer patent, which is critical, considering that Lipitor sales totaled $12.2 billion in 2005. If Pfizer can't find a way to reverse the decision, the New York-based company could miss out on billions of dollars in potential sales.

Pfizer (Charts) stock fell about 1.5 percent in heavy New York Stock Exchange trading after the ruling.

Pfizer spokesman Bryant Haskins said his company has a "good case to make" in trying to reverse the decision.

"It was a highly technical conclusion that [focused on] the issue of how you draft a patent," said Haskins. He added that Pfizer would try to "correct some technicalities in the patent" with the patent office and, if that doesn't work, will seek a review in the Court of Appeals.

The ruling is the result of a patent infringement suit from Pfizer against Ranbaxy Laboratories Ltd., the Indian maker of generic drugs that filed an application with the Food and Drug Administration to produce a generic version of Lipitor. It's common for generic drugmakers like Ranbaxy to challenge the patents on blockbuster drugs to try and win the right to produce nonbranded versions.

When a drug company loses patent protection on a brand-name drug, the price plunges in the face of generic competition, and sales typically sink to a fraction of the original level.

"Effectively, this translates to generic competition from Ranbaxy 15 months earlier than was expected based upon the initial court decision, which we believes translates into a $1 hit to Pfizer's" stock, Barbara Ryan, analyst for Deutsche Bank North America, wrote in a note to clients after the ruling.

Les Funtleyder, analyst for Miller Tabak, said the problem is not an immediate one for Pfizer, which has nearly four years to address the issue before the patent that was upheld expires.

"It's a longer term potential negative; in the short term it probably won't change anything," said Funtleyder. "There are so many things that can happen between now and then for everybody in pharma. Pfizer could discover a cure for cancer. Anything could happen."

The analysts both said the timing of an experimental Pfizer drug combo that includes Lipitor is crucial to whether the patent ruling will affect future sales.

Pfizer is experimenting with a Lipitor combination drug that could potentially increase annual sales by billions of dollars. Pfizer wants to add Lipitor, which lowers LDL or "bad" cholesterol, with the experimental drug torcetrapib, which could raise HDL, or "good" cholesterol.

The timing of torcetrapib's potential release into the market is essential. If Pfizer can get the drug combo on the market before the Lipitor patent expires in 2010, that means it has a better chance of switching Lipitor users over to the new combination drug.

Pfizer believes the Lipitor-torcetrapib combo could be lucrative for the company.

The analysts interviewed for this story do not own Pfizer stock, but Deutsche Bank does.

A to-do list for Pfizer's Kindler Top 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.