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The World’s Largest Blockbuster Drug Just Went Generic — Here Are The Winners And Losers (PFE, WPI, ABC, TEVA, MRK, MYL, CVS, WAG)

Source: http://www.businessinsider.com/the-nations-largest-blockbuster-drug-just-went-generic-2011-11


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With the expiration of Pfizer’s patent exclusivity on Lipitor, the nation’s top selling drug will go generic and see a market share split that will force manufacturers into a share race.

Lipitor, a cholesterol drug that reduces cholesterol, came to market in 1997 and ultimately peaked with sales of $13 billion. Last year, it contributed $10.7 billion in revenue to Pfizer.

Analysts remain divided over how much market share Pfizer will be able to hold on to. The company is aggressively discounting the drug through a program to entice patients to remain on Lipitor. Over the coming 180 days, Watson Pharmaceuticals and Ranbaxy Laboratories of India will enter the market.

Eight Citi analysts poured over data and see Pfizer retaining 40-50% of market share over the next half year. Delays out of Ranbaxy, which were prompted by U.S. regulatory bans over questionable quality concerns, will aid Pfizer.

But after the 180 days, when another round of pharmaceuticals like Teva and Aurobindo are allowed entry, the cost of Lipitor will drop to “pennies a day,” Citi analyst John Boris writes.

However, most of Lipitor’s decline has already been priced into Pfizer stock over the past year. “We maintain our Pfizer 4Q11E/2012E Lipitor sales/EPS contribution at $930M/$640M,” Boris continues. That represents a Lipitor sales contribution of 14-18% of fourth EPS, before falling to just 2% of earnings in 2012.

The largest to benefit from the change may be drug stores like CVS and Walgreens, which may see an uptick as more patients can afford to take cholesterol medications, even as average drug prices decline.

“In addition, we believe that the drugstores will be able to generate stronger gross profit dollars as the average gross margin for generic drugs is generally 50 to 60%, while the average gross margin for branded drugs is approximately 20%,” Boris says. 

Meanwhile, Pfizer is betting its name on smaller blockbusters in other drug categories to contribute $4 billion in new revenue by 2014 as it re-emerges in a world post-Lipitor.

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Wednesday, November 30th, 2011 news No Comments

Dr. Augustine Fou is Digital Consigliere to marketing executives, advising them on digital strategy and Unified Marketing(tm). Dr Fou has over 17 years of in-the-trenches, hands-on experience, which enables him to provide objective, in-depth assessments of their current marketing programs and recommendations for improving business impact and ROI using digital insights.

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