NEW YORK (Reuters) - Pfizer Inc (NYSE
FE - News) said on Wednesday that Ranbaxy Laboratories Ltd (Bombay:RANB.BO - News) can begin selling a U.S. generic form of its Lipitor cholesterol fighter by late 2011 under a settlement deal, some five months later than Wall Street expectations.
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Industry analysts have long expected Lipitor's U.S. marketing exclusivity to lapse no later than June 2011, and for cheaper generic forms of the world's best-selling drug to then immediately flood U.S. drugstores.
But under Pfizer's settlement with India's Ranbaxy, which has long challenged Lipitor's patents in the courts, U.S. patients will not have access to Ranbaxy's copycat product until November 30, 2011.
Pfizer's shares rose 3.8 percent to $18.40 in premarket trading. Ranbaxy closed up 2.9 percent at a three-year high of 598.20 rupees in Mumbai on speculation the company would reach a Lipitor settlement with Pfizer. Japan's Daiichi Sankyo Co (Tokyo:4568.T - News) last week said it would pay up to $4.6 billion for control of Ranbaxy.
The delay in Lipitor generics would buy a little extra time for Pfizer, whose earnings are expected to plunge once a copycat form of its $12 billion-a-year flagship product arrives and starts hammering away at Lipitor sales.
CONSUMER BACKLASH?
Asked if the delay could spark a backlash among patients and insurers who favor cheaper generics, David Reid, Pfizer's acting general counsel, said: "We're pleased with this settlement and we actually think it is pro-patient, pro-competitive and pro-intellectual property."
"It was best to bring certainty for both organizations," Ranbaxy Chief Executive Malvinder Singh said in an interview at Ranbaxy's London office. "The biggest part for us is in the United States where we will launch with certainty and without any risk."
Mike Krensavage, principal of Krensavage Asset Management LLC, said investors had been expecting Lipitor's marketing exclusivity to lapse as soon as March 2010, but no later than June 2011, depending on expiration times of two important Lipitor patents.
"Pfizer is a more attractive company today because this deal would delay Lipitor generics from five to 20 months, and spare Pfizer $3 billon to $11.7 billion in lost Lipitor sales over that period," Krensavage said, predicting the settlement would ease uncertainty among Pfizer investors.
Pfizer, whose shares are at a 10-year low due to anemic revenue from its other medicines and worries about Lipitor's looming patent expiration, also described the deal as a potential balm to its long-suffering shareholders.
Ranbaxy, as the first drugmaker to seek approval of generic Lipitor, would be entitled under federal law to 180 days of marketing exclusivity before other generics could be introduced, Reid said in an interview.
U.S. prices of branded medicines typically fall 20 percent or more once the first generic hits the market, and can tumble 80 percent or more after other generics are launched.
The deal, while ending Pfizer's long-standing attempts to block Ranbaxy's product in the United States, would leave Pfizer free to eventually launch its own authorized generic form of Lipitor, Reid said.
Reid said the agreement would benefit consumers because some less-well-known Lipitor patents extend as far out as 2017, and could have blocked generics until then. Analysts, however, have discounted that possibility.
DEAL RESOLVES OTHER ISSUES
The settlement will also entitle Ranbaxy to begin selling generic versions of Caduet -- a Pfizer drug that combines Lipitor with the company's Norvasc blood pressure treatment -- in the United States by November 2011.
Although Pfizer will not pay Ranbaxy any monies under the deal, Reid said Ranbaxy would profit because its U.S. generic now has a guaranteed path and because Pfizer will drop efforts to stop ongoing sales of its Lipitor generics in Malaysia, Brunei, Peru and Vietnam.
The arrangement would also allow Ranbaxy to sell generic Lipitor in Canada, Belgium, the Netherlands, Germany, Sweden, Italy and Australia near the time of respective patent expirations in those countries.
Patent battles between the companies over Lipitor would continue, however, in Finland, Spain, Portugal, Denmark and Romania, Pfizer said.
The deal would also end ongoing U.S. patent disputes between the companies relating to Pfizer's Accupril blood pressure drug, and a dispute in Ecuador involving Pfizer's Viagra anti-impotence pill.
Although Pfizer will submit the deal to the U.S. Federal Trade Commission, Reid said it does not require the agency's approval.
The FTC in February filed suit against Cephalon Inc (NasdaqGS:CEPH - News), alleging the U.S. biotechnology company broke the law by paying generic drug makers to keep copycat versions of its Provigil sleep disorder medicine off the market.
The agency has been battling similar agreements among drugmakers for years, arguing they violate antitrust law and keep drug prices high.
Reid said Pfizer's agreement with Ranbaxy should not raise such concerns at the FTC because it involves no payments and complies with all applicable laws.
Last week, India's Business Standard newspaper said Pfizer may bid for Ranbaxy, countering Daiichi's offer. Pfizer has declined to comment on the speculation.
