Pfizer (NYSE:PFE) has yet another reason to smile as the company has won patent litigation over the generic version of Lyrica The litigation goes way back to 2009, when Pfizer sued many pharma companies including the world’s largest generic pharma company Teva Pharmaceuticals, arguing that their generic version of Lyrica would infringe the company’s patents.
The ruling has given Pfizer exclusive sales rights of its second largest selling drug until 2018, which could help the company fend off its market share in central nervous system (CNS) market. The drug generated nearly $3.7 billion dollars in revenues in 2011. 
Our price estimate for Pfizer stands at $25, implying a premium of 5% to the current market price. We will update our price estimate to reflect the current developments post its earnings announcement on July 31.
The win comes at an opportune time as the company continues to grapple with various lawsuits. It will also help douse concerns raised about the company’s CNS franchise after Lyrica was found ineffective for diabetes and HIV patients recently. However, the drug recently got the U.S. FDA approval for the expanded use to treat neuropathic pain from spinal cord injury. The drug is already approved to treat fibromyalgia, a diabetic nerve pain and seizures in adults having epilepsy.
Pfizer holds a strong position in the CNS drug market with nearly 10% market share mainly due to its blockbuster drug Lyrica. While the global central nervous system drug market is expected to decline at an annual rate of 2-3% in the near future, we expect Pfizer’s market share to grow gradually by the end of 2017 as the additional usage of current drugs hold the key for growth. Lyrica is in clinical-stage trials for additional uses, including epilepsy monotherapy and peripheral neuropathic pain. According to our estimate, Lyrica and other central nervous system drugs contribute nearly 12% value to the company’s value.
By tweaking the chart below, you can see how a change in Pfizer’s market share in central nervous system drug market impacts our price estimate for the stock.Notes:
- Pfizer Wins Patent Ruling, Exclusive Sales for Lyrica, Bloomberg Businessweek, July 20 2012 [↩]