Rivals threaten to take wind from Watson’s generic Lipitor sales

Watson Pharmaceuticals (NYSE:WPI) has launched its generic version of Pfizer’s (NYSE:PFE) blockbuster cholesterol drug Lipitor, as part of an agreement for what it calls the largest generic drug launch in U.S. history.

The launch of the generic Lipitor follows the end of Pfizer’s exclusive patent on the drug, but how much market share it will be able to secure for the drug, which had sales of more than $10 billion last year, remains to be seen, such is the level of potential competition.

Under the terms of Watson’s supply and distribution agreement with Pfizer, the New York pharmaceutical company manufactures and supplies Watson with all dosage strengths of the authorized generic product. Watson markets and distributes the product in the United States. Pfizer gets a share of the net sales from Watson’s sales of generic Lipitor. The agreement runs until Nov. 30, 2016.

Lipitor was launched in 1997 and at its peak had sales of $13 billion.


As Barrons puts it, citing Canaccord Genuity analyst Randall Stanicky, with no less than three companies entering or hoping to enter the generic Lipitor market, there’s plenty of room for surprises.

“The bottom line here is that we think both the event and anticipated profit-and-loss impact to parties involved are at this point well understood under a base case scenario that has both Watson and Ranbaxy launching. That said, potential for surprise remains on varying levels given FDA uncertainty and lack of transparency into settlement agreements (particularly for TEVA, given its early settlement date).”

Here’s a look at some of the competition.

Ranbaxy Laboratories. The Indian pharmaceutical company reached a settlement with Pfizer in 2008 to sell a generic version of Lipitor, but selling it in the United States would require the U.S. Food and Drug Administration to lift a ban imposed on imports of some Ranbaxy generic products over quality-control issues. A decision is expected imminently, but its share price, which fell 3.8 percent today, is suffering from the wait.

Teva Pharmaceuticals (NASDAQ:TEVA). The Israeli pharmaceutical company, which has U.S. headquarters in Pennsylvania, has been selling a generic version of Lipitor in Canada since 2010. There is also some speculation as to whether it will collaborate with Ranbaxy to sell a generic Lipitor and how that would happen.

Pfizer. Despite a pipeline of drugs and the agreement with Watson, the firm is not turning its back on Lipitor. The company told reporters in New York that one-third of people taking Lipitor want to continue taking the branded drug, so it is working with drugstores and mail-order providers to provide discounts on Lipitor. Medco Health Solutions, for example, a pharmacy benefit manager, is supplying Lipitor for 180 days through its direct-mail service, according to The Wall Street Journal.  In Pennsylvania and New Jersey, where laws instruct pharmacies to use cheaper generic drugs when available, physicians will have to specify that their patients get Lipitor if they are to receive the branded drug.

Although Watson has calculated its potential sales of the drug with the assumption that Pfizer will retain 40 percent market share and that it will also be competing with Ranbaxy, Teva could change the sales dynamics.

In The New York Times, Adam J. Fein, a pharmaceutical consultant and blogger, said what is happening with Lipitor is one example of many battles that will be unfolding over the next few years as pharmaceutical companies lose their exclusive patents.

Fein said: “You have over $80 billion in drugs that are going to go generic. Say $80 billion settles to $10 billion eventually. That’s $70 billion savings. But during that period going from 80 to 10, there’s going to be a lot of money made by the various channel intermediaries, and they all want a piece of that pie.”

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