Lipitor Rulings Could Hurt Pfizer's Health

The decision could be weeks or months away, but investors expect a federal court to decide whether a copycat form of Pfizer Inc.'s $10 billion-a- year Lipitor cholesterol drug can come to market, threatening Pfizer's economic health.

Lipitor, the world's best-selling medicine, accounts for about 20 percent of Pfizer (PFE) sales. Launched 8 years ago, the drug's sales continue to explode and it is Pfizer's strongest bulwark as the company fights off revenue and earnings decline due to a raft of problems.

The hardships include evaporating sales for Pfizer treatments for epilepsy, fungal infections and high blood pressure after patent expirations paved the way for cheaper copycats. And patents will expire soon on other important Pfizer medicines, more in fact than any other major pharmaceutical company.

Sales of Pfizer's Celebrex (search) arthritis drug, meanwhile, have been cut almost in half due to heart-safety concerns and blockbuster revenue from Pfizer's newer arthritis drug, Bextra (search), vanished when it was withdrawn in April after being linked to a deadly skin condition and its own heart risks.

But those setbacks would pale in comparison with the loss of Lipitor, the crown jewel in Pfizer's $114 billion acquisition of Warner-Lambert Co. five years ago.

The threat comes from Indian drug maker Ranbaxy Laboratories Ltd. (search), which has challenged the validity of Lipitor patents in Delaware federal court and in a British court.

Rulings from the U.S. and British judges are expected at any time. But most of the focus has been on the far-more- lucrative U.S. market and the trial last December in Delaware, at which Pfizer insisted its patents bar generics until 2011.

Pfizer shares are currently about 40 percent lower than they were when it acquired Warner-Lambert, held low by uncertainty over whether the U.S. court will back Lipitor.

Although most industry analysts believe Pfizer will prevail in the Lipitor battle, none are dismissing the Ranbaxy threat.

"The loss of Lipitor's U.S. patent protection would badly hurt Pfizer's stock and bring the company's earnings down about 30 percent in 2007," said Oppenheimer & Co. analyst Scott Henry.

Henry noted that branded medicines can quickly lose more than 75 percent of their sales once cheaper generics reach drugstores, as Eli Lilly and Co. (LLY) learned in 2001 when its anti-depressant, Prozac, lost patent protection.

Deutsche Bank analyst Barbara Ryan believes Pfizer has an 80 percent chance of defeating Ranbaxy. If victorious, she forecasts Pfizer shares could jump to $33. But should it lose, shares could sink to $21.

At Pfizer's current share price of about $26, near the middle of that range, she said investors are betting Pfizer has only a 50 percent chance of victory.

Trading in Pfizer stock options was active on Wednesday, as the market focused on the Delaware court's pending decision. The stock closed 11 cents higher at $26.16 on the New York Stock Exchange.