Pfizer patent cliff dwarfs peers as loss of Lipitor looms

Lipitor, which generated $11bn in sales last year, is both a blessing and a curse for Pfizer. Being at the end of its branded life the cholesterol-lowering agent is hugely profitable - estimated annual cash flow exceeds $5bn - but when generic copies appear in the US later this year its decline will be spectacular.

This is probably going to be the last year that Pfizer can claim the title of the world’s biggest drug maker, and the expiry of  Lipitor’s US patent in November is largely to blame. This event means the size of the patent cliff facing Pfizer is more than double that of any other pharma major – drugs that generated global sales of $22.7bn in 2010 could be exposed to cheap copycats in the next three years, data from  EvaluatePharmashows (see tables). In terms of the proportion of a company's sales at risk, Eli Lilly and  Bristol-Myers Squibb are looking no less precarious, although this will be little comfort to  Pfizer as it heads into a momentous period.

Source: EvaluatePharma

Gloomy picture

Pfizer confirmed widely-held fears today as it painted a notably gloomier picture of the next couple of years than it has previously. Many believed some of the company’s projections for 2011 and 2012 were optimistic given the looming loss of  Lipitor; revenue guidance for the next two years was edged lower today as the company reported annual results.

A huge cut in Pfizer’s R&D budget next year and a massive $9bn share buyback programme can be thanked for propping up earnings guidance, which was largely left intact. But the company at best expects earnings per share to be flat this year, possibly edging higher in 2012.

Unfortunately for Pfizer, it is not just Lipitor under threat -  Pfizer has four of the fifteen biggest patent expiries in the US in the next two years, a recent analysis by  EP Vantage revealed (Patent storm gathering strength, January 28, 2011). Heart burn medicine Protonix, Viagra for erectile dysfunction and anti-psychotic  Geodon will all face generic competition by the end of 2012.

All of which means Pfizer's reign as the world's biggest drug maker will soon be over. Analysts expect Novartis to become the world's biggest seller of prescription and over-the-counter drugs next year, embarking on its own period of dominance.

Source: EvaluatePharma

Equal threats

Although the size of Eli Lilly’s patent cliff is less than half that of Pfizer’s, the threat to the company is no less severe. The damage started last year with the loss of cancer chemotherapy Gemzar and hyperactivity pill  Strattera in the US, but will accelerate when $5bn anti-psychotic  Zyprexa faces generics in October.

Not too far behind is Bristol-Myers Squibb, for which blood thinner Plavix carries the majority of the burden.

At the bottom of the table companies like Roche and  GlaxoSmithKline are looking comparatively stronger, in terms of the proportion of their drug sales at risk.  Roche's portfolio of biotechnology products are not likely to suffer biosimilar competition in the US for a few years yet. Glaxo's big patent expiries are mostly behind them and the company is benefitting hugely from the almost complete removal of a generic threat to asthma/COPD drug  Advair in the US.

Those companies least diversified and most exposed to the fate of a few blockbuster medicines – Eli Lilly, Bristol-Myers and  AstraZeneca – are certainly bearing the brunt of this period of unprecedented patent expiry.

Shifting picture

Of course, this analysis is only an accurate picture at this moment in time. Patent litigation cases are won and lost and can have huge implications for projections such as these. For example many analysts believe that Pfizer has a good chance of extending patent protection for  Viagra out to 2017 in the US.

At the same time, patent expiry dates mean a lot more for some drugs than others. Complex biotechnology products in particular will be much more insulated than simple small molecules. For example Amgen is in reality much less precarious than this table suggests. Even if biosimilars do launch against its stable of biotech-based franchises, which in itself is not certain, the erosion will be nowhere near as painful as seen with traditional medicines.

Without doubt the pharma industry is facing a period of unprecedented challenges; the challenge that Lipitor presents to  Pfizer’s is perhaps the biggest of all.