Pfizer Wins Viagra Patent Trial

Pfizer wins Viagra US patent spat

Facing one of the most precipitous patent cliffs in the industry, Pfizer won an important law suit against Teva today over Viagra. The ruling could keep generic versions off the market until October 2019 in the US, a substantial prolongation considering the blockbuster erectile dysfunction pill was widely expected to fall to copy cat versions next year.

Assuming the ruling holds on appeal, this decision could double the cash flow that Viagra generates for Pfizer over the next seven years and potentially adds $1.4bn overall, EvaluatePharma data shows. Shares in the pharma giant were trading 2% higher at $18.26 in early trade; Teva was flat, underperforming the wider market, and no doubt ruing missing out on what could have been a sizeable opportunity.

Valid and enforceable

US sales of Viagra have knocked on the $1bn mark for the last two years and were expected to reach $985m this year. The entry of generics in March next year, following the expiry of the product’s composition of matter patent, was predicted to swiftly dent sales to the $300m-a-year mark. Approximately half of the product’s sales are generated in the US.

Teva was contesting the validity and enforceability of the Viagra method of use patent for erectile dysfunction, which runs to October 2019. These are normally viewed as weaker than a composition of matter patent and are therefore often attacked by generics firms, frequently successfully. The Israeli company can appeal the decision and is likely to do so.

The seven year gap between the composition of matter and method of use patents came about because Pfizer discovered the drug’s potential in erectile dysfunction quite late in the development process. Known generically as sildenafil, the agent was initially in trials for blood pressure.

Double cash flow

The fact that consensus prior to this ruling reflects so clearly an expectation of the entry of generics demonstrates how this is a surprising and welcome win for Pfizer.

Based on current sales forecasts, which are now likely to be adjusted higher, the product had a consensus net present value of $$2.52bn, according to EvaluatePharma’s NPV Analyzer. Extending the US patent date to October 2019 lifts the NPV by 55%, to $3.91bn.

The decision will also substantially boost future cash flows, almost doubling what Pfizer is likely to generate from the product between 2012 and 2019, from $1.53bn to $2.87bn, the NPV Analyzer shows.

Knock on

Pfizer will not be the only one happy with this ruling. As the first PDE5 inhibitor to reach the market and the most successful commercially, generic versions would have made life harder for the competition. Cialis from Eli Lilly in particular, which is patent protected until 2017, would have been impacted by the much cheaper competition.

Another group likely to be cheering this outcome is Vivus, which is in the process of seeking US approval and a commercialisation partner for avanafil, a latecomer to the PDE5 inhibitor class. As potentially the fourth to market the commercial challenges facing the product were looking daunting, exacerbated by the prospect of Viagra generics next year (Avanafil faces serious challenges to break into ED space, June 2, 2011).

Shares in the company were trading 6% higher at $7.49 in early trade today, perhaps reflecting that the company’s search for a partner might have just got a touch easier.