Pfizer (PFE) reported first-quarter revenues of $15.4 billion that were down 7% when compared with $16.5 billion in the same quarter of the previous year. Net income for the quarter fell by $430 million to $1.79 billion, a decline of over 19 % on a year on year basis. However, earnings per share at $.58 per share were just ahead of the consensus estimate of $.56 per share and this is the fourth consecutive quarter in which Pfizer has beaten the consensus estimates. The company noted that the performance for the quarter was driven by the sales growth in brands such as Celebrex, Enbrel and Lyrica, key geographical regions such as China and continued efforts to expand cost savings. These have served to mitigate the negative impact of $1.3 billion of revenue losses because of drugs like Lipitor in the US going off patent.

In discussing the world’s largest pharmaceutical company, we have a good opportunity to examine problems of drugs going off patent that any pharmaceutical company of any size faces. This is sometimes referred to as the “patent cliff.” Expiration of the drug patents hurt the company badly because of competition from low-cost generic drug producers.

Take the example of Pfizer and Lipitor its cholesterol lowering blockbuster drug. Watson Pharmaceuticals (WPI) has released a generic version of Lipitor and other manufacturers are waiting on the sidelines. Pfizer has tried to protect the sales of its branded drug by offering discounts to companies such as mail order services (which account for 40% of sales) to reject prescriptions for generic drugs and substitute Lipitor.To continue reading, click here.