A patent is the right to ownership where by a person / organization discovers a lesser known concept or invents something new and holds sole intellectual ownership rights to that particular idea. These are usually published / granted after a lot of research and exhaustive verification. Pharmaceutical patents protect manufacturers of prescription drugs, prohibiting others from producing a drug during the length of its patent protection. The length of these patents varies in different countries, though they are usually between 15-20 years. In the U.S., a pharmaceutical patent is valid for 20 years. Drug companies usually apply for patent protection before they actually begin producing the drug, opting instead to secure their rights to a particular compound at the beginning of the testing process. By the time a drug comes to market, there may only be 8-10 years of patent protection remaining, which is significantly less than the 20 offered by the patent. Companies often attempt to extend these patents by making slight reformulations of the original compound or proving its effectiveness at treating a condition other than the one for which it was originally granted a patent. This is referred to as ”evergreening”, a practice which many criticize.

The next two to four years are an important time frame for many pharmaceutical companies. This is when many of the top selling drugs go off patent. Here is a list of the large pharmas with some of their top selling drugs that are set to ‘expire.’

 

  • AstraZeneca plc. Has the cholesterol drug Crestor, which is set to go off patent in the year 2012. This was recently ranked the 42nd best selling drug. It also has the asthma drug, Symbicort, which expires the same year. Seroquel, an antipsychotic used to treat schizophrenia and the 16th best selling drug, expires 2011. The stock has a PE of 11, a PEG of 2.77, and pays a yield of 4.6%.
  • Eli Lilly & Co. Has the eighth best selling drug, Zyprexa, which is used to treat schizophrenia, and has a patent expiration of 2011. It also has Actos for Type 2 diabetes which goes off patent the same year. Lilly has a PE of 19, a PEG of 1.81, and a yield of 3.6%.
  • Forest Laboratories Inc. Has the drug Lexapro, also known as Cipralex which expires in 2012. The drug is an antidepressant used to treat depression and anxiety disorders. The stock has a PE of 23, and a PEG of 1.1.
  • Glaxosmithkline plc. Has the asthma drug Advair, also known as Seretide which expires in 2010, and the diabetes drug Avandia expiring 2012. The stock has a PE of 12, a PEG of 4.21, and a yield of 5.6%.
  • Johnson & Johnson’s. Antibiotic drug, Levaquin, goes off patent in 2010. The stock has a PE of 18, a PEG of 1.99, and a yield of 2.5%.
  • Merck & Co. Inc. Has the asthma drug Singulair which expires in 2012, and Cozaar for hypertension which expires in 2010. The stock has a P/E of 27, a PEG of 1.21, and a yield of 4%.
  • Novartis AG. Has the Zometa cancer drug and the Diovan hypertension drug, both expiring 2012. The stock has a P/E of 10, a PEG of 1.22, and a yield of 2.9%.
  • Pfizer Inc. Has Lipitor for cholesterol, estimated to expire 2010, Aricept for Alzheimer’s, expiring 2010, and Xalatan for glaucoma, which goes off patent in 2011. The stock has a P/E of 18, a PEG of 2.03, and has a 6% yield.
  • Both Sanofi-Aventis and Bristol-Myers Squibb Co. Have Aprovel for high blood pressure expiring 2011, and the anticoagulant Plavix, expiring the same year.

    These expiration dates will bring significant financial impacts to pharmaceutical industries. As an example of this problem I will mention Pfizer. It is the largest pharmaceutical company in the world and owns the cholesterol-lowering drug Lipitor, which brings in a quarter of its revenue and was the best selling medicine in the world in 2009.

    In can be observed in the figure, that this drug is  accounting for more than 20% of the company’s total revenue and this could be a clear reason for drastic changes and restructures in the company: cutting costs, downsizing initiatives and reducing workforce and facilities. Actually, some of this initiatives are already being executed.Pharmaceutical Patents Expiring

  • Source: 2008 Pfizer Annual Report

    Pfizer has announced that it plans to shift its research and development focus away from heart disease drugs to cancer and biotechnology drugs, which it says are more profitable.

  • REFERENCES: http://www.wikinvest.com/wiki/Patents http://seekingalpha.com/article/71375-10-pharmaceutical-stocks-and-their-patent-expiration-drugs http://www.wikinvest.com/wiki/Pfizer_(PFE)