Will Lipitor's Patent Expiration Give Pfizer a Heart Attack?

Pfizer PFE has lost its patent for blockbuster drug Lipitor, crippling a product line that accounts for 20% of the company's yearly revenue. The company has devoted significant resources into developing its pipeline to replace the lost revenue, as it is hoping that Eliquis, a blood thinner, and Prevnar, a bacterial infection vaccine can obtain FDA approval. While both drugs look promising, it remains to be seen whether they can win enough market success to replace Lipitor revenues. Pfizer has been in contact with regular patients, discussing the benefits that Lipitor has had for them and encouraged them not to switch. The company is also in negotiations with pharmacies in attempts to sell Lipitor at generic level prices to prevent market share from eroding. Some of these bargain priced drugs could be sold directly to patients, cutting out the added cost of dealing with pharmacies. This has the potential to affect the bottom line of major pharmacies such as Walgreens WAG and CVS Caremark CVS. CVS announced this month that it would continue to offer Lipitor to Medicare patients, as participants in the program sometimes avoid using generic drugs to avoid the "doughnut hole", in which Medicare does not cover total drug spending between $2,830 and $6,440 per patient annually. The pharmacy also plans to offer lower priced Lipitor in exchange for a promise not to sell generic versions. Pfizer has admitted that it wants to become a smaller, nimbler company. The company is looking to unload its animal nutrition and health businesses, preferring to focus on its primary care and medicine businesses. "We're not going to be a one product company," said Pfizer's president of specialty care Geno Germano in an interview with Bloomberg. "We're poised to deliver significant new pipeline assets in the coming year, and in the coming years." In a CNBC interview this morning, Deutsche Bank analyst Barbara Ryan stated that Pfizer was restructuring its business to account for lost Lipitor revenue. "Pfizer is focusing on maximizing cash flow from future Lipitor sales. They are developing their pipeline with a primary focus on their new stroke prevention drug and bacteria infection vaccine. Investors have also discounted the loss of Lipitor revenue in their valuations." As a medium to long term trade, Pfizer is hard to recommend, as its value has fallen dramatically from its early 21st Century highs. However, the stock offers a generous dividend at 4.30%, making it a solid long term holding for more passive investors.