A federal judge Friday upheld the validity of two key U.S. patents on Pfizer Inc.'s (PFE) Lipitor cholesterol drug, blocking a generic version of the medicine that threatened the company's largest source of revenue.
The decision, which lifted Pfizer shares 10 percent, dealt a setback to Indian drug maker Ranbaxy Laboratories Ltd. , which had hoped to introduce the cheaper copycat as soon as 2008.
Pfizer will now have patent protection on the world's best-selling drug through June 2011.
Ranbaxy vowed to appeal the decision.
"We remain undeterred in our resolve on this issue and we will press our case in the U.S. court of appeals for the federal circuit," Malvinder Singh, president and executive director of Ranbaxy Laboratories, said in a statement.
Investors have been anxiously awaiting the federal court decision on whether a cheaper form of Pfizer's $12 billion-a-year Lipitor can come to market.
"This is as good as it gets for Pfizer. They won a victory on both patents -- well beyond our expectations," said Deutsche Bank analyst Barbara Ryan.
One of the patents blocks generics through March 2010 and the other through June 2011.
"The court will enter judgment in favor of Pfizer and against Ranbaxy on Pfizer's claims of infringement," Judge Joseph Farnan wrote in a 66-page decision.
In October, a British high court handed Pfizer a victory by upholding the basic U.K. patent on Lipitor that runs through November 2011.
In that case, the court ruled in favor of Ranbaxy on a more specific Lipitor patent that would have run out a year earlier, but the decision kept the more important Pfizer patent intact.
The Indian drug maker plans to appeal that decision as well.
The 8-year-old drug is Pfizer's pillar of strength as the company's revenue growth and earnings continue to dwindle due to a raft of problems.
The hardships, which had dragged Pfizer's share price to an eight-year low, include evaporating sales of its treatments for epilepsy, fungal infections and high blood pressure after patent expirations paved the way for cheaper drugs.
Sales of Pfizer's Celebrex arthritis drug, meanwhile, have been cut almost in half due to safety concerns, and revenue from Pfizer's newer arthritis drug Bextra vanished when it was withdrawn in April after being linked to a deadly skin condition.
But those setbacks would pale in gravity to the loss of Lipitor, the crown jewel in Pfizer's $114 billion acquisition of Warner-Lambert Co. five years ago.
"U.S. sales of Lipitor account for 15 percent of Pfizer's (global) revenue and perhaps 25 percent to 30 percent of its profit, so there were enormous stakes here," said Mehta Partners analyst Shaojing Tong.
"This should provide a catalyst for the sector to rally on Monday," said Tong, who predicted the ruling would ease concerns about the vulnerability of large drug makers to patent challenges from makers of generic medicines.
Pfizer shares rose to $24.95 on the Inet electronic brokerage in after hours trade from a close of $22.58 on the New York Stock Exchange, while shares of Eli Lilly and Co. (LLY) and Merck & Co. Inc. (MRK) rose slightly as well.