Patent protection for Lipitor excites Pfizer's investors

Some analysts were surprised by the stock's jump.
NEW YORK (AP) -- A patent victory on its biggest-selling drug, Lipitor, boosted Pfizer Inc.'s shares nearly 8 percent Monday as a major uncertainty was eliminated, even though other significant challenges remain.
Most analysts had expected Pfizer would defeat the challenge to its cholesterol-lowering drug from Indian pharmaceutical company Ranbaxy Laboratories Ltd. Still, some investors remained wary of the stock, opting not to risk a negative surprise, analysts said.
The ruling Friday means it is unlikely Lipitor will see generic competition before 2010 when one of the two patents under challenge expires.
Pfizer shares rose $1.74, or 7.7 percent, to close at $24.32 on the New York Stock Exchange, near the midpoint of its 52-week trading range. The gain was the second time in a week Pfizer shares have jumped notably.
On Dec. 12, Pfizer hiked its cash dividend for the first quarter by 26 percent, driving the stock nearly 2 percent higher. If the company retains the dividend for the year, the stock will have a yield of about 4.5 percent.
Challenges remain
Nonetheless, some analysts were mystified by Monday's stock's jump because once the patent celebration dissipates, Pfizer still faces numerous hurdles including patent expirations, stagnating sales, competition for key products and a pipeline some fear may not be strong enough to propel growth.
"It's not like they [Pfizer] got a huge windfall of revenues we didn't expect," said Jason Napodano, an analyst at Zacks Investment Research. He predicts Pfizer's revenue will decline this year and jump only 1 percent in each of the next two years.
"Why is that exciting?" Napodano asked.
Pfizer acknowledged some analysts' concerns and said it would outline strategies to revitalize sales of key product as well as its pipeline potential at a meeting in February.
Despite Lipitor's recent good news, its outlook remains somewhat cloudy. Last year, sales of the world's top-selling drug rose 18 percent to $10.9 billion. However, for the third quarter, Lipitor sales rose only 6 percent overall and a mere 1 percent in the U.S. market, the world's largest. The slowdown in growth was one reason Pfizer opted to cut profit estimates for this year and withdraw earnings guidance for 2006 and 2007.
Uncertain future
Analysts said Vytorin, a drug made by Schering-Plough Corp. and Merck & amp; Co., is grabbing market share from Lipitor. Meanwhile, Merck's Zocor will lose patent protection next year, and health plans and pharmacy benefit manager Express Scripts has said it plans financial incentives to make the generic version of the drug more attractive.
Lipitor isn't the only Pfizer product with an uncertain future. Sales of pain reliever Celebrex plunged 45 percent for the nine months to $1.3 billion. Celebrex belongs to the same class of drugs as the now withdrawn Vioxx and has also been linked to heart problems. Meanwhile, earlier this year, Pfizer withdrew Bextra, another drug in the class, because of safety concerns.
Sales of erectile dysfunction drug Viagra dropped 4 percent to $386 million in the third quarter as two competitors pressured revenues and failed to expand the market as predicted.
And as sales of key drugs stagnate, Pfizer is losing patent protection on several important products including antidepressant Zoloft, antibiotic Zithromax and blood pressure medicine Norvasc. Patent expirations in the next few years will cost the company 22 percent of 2004 revenues, according to Catherine Arnold, an analyst at Credit Suisse First Boston.
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