Pfizer (NYSE:PFE) has settled two separate suits over the generic version of its bladder control drug, Detrol LA. The settlements have pushed competition for Detrol until the beginning of 2014 and come at an opportune time as the company continues to grapple with various lawsuits. This could help the company fend off a decline in revenues from its alimentary drugs division. Below we take a look at how this could impact the company’s value. 
Detrol LA is an extended and longer-acting version of bladder control drug Detrol. While Detrol lost its patent exclusivity this July, patent protection for Detrol LA will expire next year. Pfizer had locked horns with Mylan and Impax Laboratories as they began to market generic version of Detrol LA and filed lawsuits against them. However, now the company has reached an agreement with both the companies, which should save Pfizer from the cumbersome process pertaining to lawsuits.
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While the terms of the deal between Pfizer and Impax Laboratories are unknown as to when Impax will be able to launch a generic Detrol LA, the former’s deal with Mylan (pending Federal Trade Commission approval) will enable Mylan to make a generic version from January 2014, but no later than March 2014.
Detrol and Detrol LA generated nearly $900 million dollars in revenues in 2011. While the settlement, in the short term, could limit the decline in revenues from the company’s alimentary franchise, we are still not confident about the segment due to its weak pipeline. Two major drugs Protonix and Detrol have lost patent protection. Pfizer has no substantial drugs in Phase III development in the pipeline within this segment. New drugs need positive data from various clinical trials and approvals from regulatory bodies like the FDA and the EMA before they can be launched. The process involves Stage I trials, Stage II trials, followed by Stage III trials and finally submission for regulatory approvals.
With drug development lead times falling in the range of 7-10 years, we don’t expect Pfizer to come out with a major drug in this segment for the next 3-4 years, though acquisitions can reduce that lead time. For the same reasons, Detrol and other alimentary drugs’ contribution to Pfizer’s value is below 5% even as the division contributed more than 5% to the company’s total revenue.
We currently have a $25 price estimate for Pfizer, which is 5% above the current market price. We are in the process of revising our price estimate to reflect the recent developments and the earnings.Notes:
- Mylan, Pfizer settle patent suit on generic Detrol LA, Reuters, Sept 04 2012 [↩]