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The Upside of Armageddon: As Lipitor's End Approaches, Pfizer's Rivals Are a Shambles

At Pfizer (PFE), armageddon approaches: In November its patent on Lipitor expires and $10.7 billion in sales will go into a swift decline as cheap copies of the world's most lucrative drug flood the market from competing companies.

That, at least, is the prophecy.

But things are currently looking rather rosy for Pfizer because the company that won the "first-to-file" rights to make generic Lipitor -- a six-month period in which it will be the only provider of Lipitor copies -- is Ranbaxy, the Indian company that cannot walk and chew gum at the same time.

Ranbaxy is currently the subject of an FDA ban on importing 30 of its generic medicines into the U.S. The FDA has also banned Ranbaxy from importing any drug from its Paonta Sahib and Dewas plants, where it plans to make a copy of Pfizer's cholesterol-lowering statin product.

For the six months after November, the only other company that has the right to make Lipitor before full-blown competition arrives is ... Pfizer! Pfizer will continue to make original name brand Lipitor and allow Watson Pharmaceuticals (WPI) to market its generic version, giving Pfizer an extended monopoly on both the branded and generic versions of the drug.

Ranbaxy is negotiating with the FDA to end the ban and regain its importation and manufacturing approvals. A must-read article in Fortune suggests that the feds want a $1 billion settlement from Ranbaxy to make that happen. That news staggered Ranbaxy stock overnight and left analysts blinking:

The reported settlement "seems too high" as it is more than half the company's sales of 85.5 billion rupees ($1.9 billion) last year, Priti Arora, a Mumbai-based analyst at Kotak Institutional Equities, said by phone today. Fortune didn't mention where it got the information.
"We believe the settlement amount of $1 billion is disproportionate to the profitability," of Ranbaxy's drug pipeline over the next three years, Goldman Sachs Group Inc.'s analysts Balaji Prasad, Rishi Jhunjhunwala and Baneesh Banwait wrote in a note today. "If correct, this could materially impact" the company's profitability, they wrote.
To give you an idea of the size of the opportunity that Ranbaxy is currently failing to take, consider that Pfizer U.S. president of primary care Adele Gulfo told a recent conference that once generic Lipitor arrived there would be no need for any other type of statin, because pharmacists would simply switch all their patients to generic Lipitor:
On this occasion, Ms. Gulfo made the point that once her company's own statin, Lipitor, went generic, the world (or her world, at least) would no longer need any more branded statin drugs. Not surprisingly, there was some pretty quick reaction to her statement, from the manufacturers of other branded statin drugs.
Related: Image by Flickr user furryscaly, CC.
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