Michael Shulman

Pfizer: Seeking Alpha in Pharma

PFE has a $10-412 billion donut hole in revenues beginning sometime between November of 2010 and November of 2011. The Lipitor patent expires in 2010 and at the latest a generic version will be available one year later. The experience of Zocor, and other branded medicines coming off patent, widely used and not difficult to copy -- Prozac and Claritin come to mind - shows Lipitor will lose 75% or more of market share within 12-15 months of a generic hitting the market. That is roughly $9-$10 billion in revenue that in turn generates huge net profits. Barring some sort of magical acquisition -- nothing of size would currently be accretive - the stock is worth $8 in 2010/2011. It is being held up by the ultimate bribe - a 6.9% dividend. PFE is one of the good guys in the industry - these are serious, dedicated people -- but the stock price is unwarranted and will drift towards $8 over the next 2-3 years, propelled by the inevitable dividend cut. Anyone who thinks PFE can withstand the generic onslaught is being willfully blind - or can ask me for our survey data which shows how hard and fast Lipitor will fall to generic competition. It is a great drug -- I take it -- but insurers are already swtiching new and willing patients to generic Zocor, so the precedent is being set.