Patent expirations continue to be a problem for the United States’ largest pharmaceutical manufacturers. Since Pfizer’s (NYSE:PFE) patent for its blockbuster cholesterol medicine Lipitor — which for nearly a decade was the world’s top selling drug — expired in 2011, earnings and revenue have struggled to grow. Like many large drug manufacturers, cheaper generic versions of its once top selling pharmaceuticals are eroding sales for drugs, no longer protected by patents that once earned Pfizer billions annually. It is for that reason that the company is pursuing a so-called method of use patent for its arthritis pill Celebrex. The drug belongs to a class of drugs called COX-2 that helps lower pain for arthritis patients by blocking a chemical reaction in the body that causes inflammation.
A method of use patent covers the use of a product to treat certain health problems or diseases, and Pfizer argued in the United States District Court for the Eastern District of Virginia that the company should be able to retain marketing exclusivity and an additional 18 months of a market monopoly because the reissued patent covers methods of treating osteoarthritis and other approved conditions with celecoxib, the active ingredient in Celebrex. The reissued patent was intended to extend market exclusivity for the drug to December 2, 2015 from May 20, 2014, when the original patent covering the basic chemical compound in Celebrex is due to expire. The issue reached the courts after Pfizer sued generic companies — Teva Pharmaceuticals (NYSE:TEVA), Mylan Pharmaceuticals, Watson Laboratories, Lupin Pharmaceuticals, and Apotex — for infringement of the reissued patent. Those competitors filed abbreviated new drug applications with the U.S. Food and Drug Administration for approval to market a generic form of celecoxib in the United States beginning on May 30, 2014.
However, the generic drug makers successfully argued that the patent Pfizer accused them of infringing upon was not significantly different from the one nearing expiration, and the Virginia District Court ruled that the reissued patent was invalid. Pfizer has already indicated it will appeal the summary judgement, confirming Wednesday in a press release that the company “disagrees with the ruling and will pursue all available remedies” to overturn it. But for now, Celebrex is set to face tough generic competition beginning at the end of May.
Celebrex has global annual sales of $3 billion, making it the fourth biggest product for Pfizer, which generates approximately $52 billion in sales per year. Of that total, $2 billion in sales come from the United States. If the court’s decision is not overturned on appeal, the ruling will cost Pfizer an estimated $1 billion in revenue this year and $2 billion in revenue next year. But even with the possibility of losing patent protection, the company assumed in its 2014 profit forecast that Celebrex would maintain its U.S. marketing exclusivity through late 2015 based the method of use patent, as Morningstar analyst Damien Conover told Reuters. To the analyst, it was surprising that Pfizer has remained confident the court would uphold the validity of that patent because U.S. courts so rarely do so.
“It seems likely that odds are in favor of generics launching early,” Sanford C. Bernstein & Co. analyst Timothy Anderson told Bloomberg. He calculated that Pfizer’s earnings per share will decline by 4 percent this year and 8 percent in 2015 if patent exclusivity is lost, as he wrote in a note to clients.
After the summary judgement was handed down by the court, investors — who have bid shares up a little more than 14 percent in the past 12 months — pushed shares down by as much as 1.4 percent, with the stock closing at $31.98 on Wednesday.
Still, Pfizer did receive some good news this week. At a Wednesday conference on infectious disease in India, Marc Bonten — an epidemiologist from Netherlands’ Utrecht University — presented results from a giant study Pfizer conducted of its vaccine, Prevnar 13, in adults over 65. The preliminary results suggested that its Prevenar 13 vaccine prevents community-acquired pneumonia, or pneumonia spread from normal social contact rather than a hospital, as well as invasive bacterial infection in adults aged 65 and older.
Bonten confirmed that finding at the conference, telling Forbes contributor Matthew Herper that, “Now, for the first time, we know that a vaccine can prevent pneumonia in the elderly.” After a summary of the results was released last month, Pfizer’s senior vice president of Vaccine Research and Development, Dr. Emilio A. Emini, explained the importance of the results. “Pneumococcal pneumonia is a significant cause of illness and death in adults around the world, and the potential to reduce the burden of this disease through direct vaccination of adults represents a meaningful public health benefit,” he said in a February 24 press release.
According to Pfizer, the Netherlands-based study was the largest double-blind, randomized, placebo-controlled vaccine efficacy trial ever conducted in adults.
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