Lipitor Goes off the Cliff…Now What?

Well, it’s happened. Lipitor, the biggest blockbuster drug in history, went off patent in November, and Pfizer is feeling the pinch. Sales fell off by 42% immediately, and even with sales of other on-patent drugs like Celebrex and Lyrica soaring, overall pharmaceutical sales dropped a full 25%. The first quarter of 2012 saw Lipitor sales down 71%.

In June, the Lipitor exclusivity owned by Ranbaxy Laboratories will also expire, making it open season for generics to take a bigger share of the lucrative high-cholesterol market. None of this comes as a surprise. The industry has been buzzing about the astounding number of drugs going off patent over the next few years. The real question is, without new blockbuster drugs in the pipeline, can the big companies weather the storm – especially in today’s economy?

Pfizer has made some intriguing moves lately, selling off its nutrition and animal health units to concentrate strictly on the pharma business. It should be interesting to see whether they will beef up the product pipeline with surprising new developments. However, given the actions of the company head, it’s hard to predict just what will happen next.

Pfizer CEO, Ian Read isn’t letting grass grow under his feet. In his first year as chief, he slashed over 1.5 billion from Pfizer’s R&D budget and fired 4,200 people to cut expenses before Lipitor went off patent. As a reward for all this fiscal responsibility, Pfizer rewarded Read with a $25 million payday, which included a $1.7 million base salary, a $3.5 million cash bonus – really? a bonus that’s more than double base pay? – plus an assortment of stocks and other benefits.

So now, the word is that Read is on the hunt for M&A buyouts for cancer, diabetes and neurological disorders, and he’s looking to keep each acquisition under $4 billion…not like the $67 billion megamerger deal Pfizer cut with Wyeth a few years back. And he may find what he’s looking for. There are a few mid-level pharma operations currently on the market, including Amylin Pharmaceuticals and Warner Chilcott.

Amylin’s recent approval for a new diabetes drug, long-lasting Bydureon, may make the bidding fierce among pharmaceutical giants with deep pockets. If Bydureon proves to be popular and effective with the fast rising number of diabetics in the US, it could prove to be the next blockbuster drug. Amylin has already turned down a bid offered by Bristol-Meyers Squibb.

Sign of the times?
It seems that today’s trend is acquisition over R&D, and Pfizer is on point. Most of the big pharma operations are taking a hybrid approach – some in-house R&D, supplemented with mergers and acquisitions. It’s a fast-moving market with a lot of variables, and it’s hard to keep track of all the players. Will Pfizer, and other giants approaching the pharma cliff survive the leap?