Prepare for This $12 Billion Whoosh

September is National Cholesterol Education Month -- I kid you not. Always willing to do my part to celebrate random holidays and educate Fools at the same time, here's how to make money off the 65 million Americans -- and the ones overseas, as well -- who have high cholesterol levels.

The behemoth
Pfizer's (NYSE: PFE  ) Lipitor is the top-selling cholesterol drug -- in fact, it's the top selling drug period -- but it'll start to see generic competition in a little over a year.

How did Pfizer grow the franchise into a nearly $12 billion enterprise worldwide? Lipitor is a little better than what was available when it came on the market, but I also think marketing had a lot to do with building up sales as well. In the age of increasing price controls, I have a hard time seeing another drug getting anywhere close to the sales that Lipitor managed.

Guilt by association
When Lipitor goes off patent, sales of other cholesterol drugs could be hurt as well. There may be a reason to take AstraZeneca's (NYSE: AZN  ) Crestor over Lipitor when the drugs are close to the same price, but once cheap generic versions of Lipitor are available, the minor difference may be harder to justify.

How bad could it be? Look how much Lipitor fell after experiencing indirect generic competition when generic versions of Merck's (NYSE: MRK  ) Zocor hit the market in the middle of 2006.

 

2006

2007

2008

2009

2010 YTD

Lipitor U.S. sales (millions)

$7,849

$7,195

$6,332

$5,667

$2,623

Year-over-year increase (decrease)

6%

(8%)

(12%)

(10%)

(5%)*

Source: Company earnings releases. YTD = Year to date.
* Compared with the same period of 2009.

Good cholesterol is hot
In addition to statins -- Lipitor, Crestor, Zocor, and Bristol-Myers Squibb's (NYSE: BMY  ) Pravachol -- and other drugs such as Merck's Zetia that lower bad cholesterol, there's niacin, which raises HDL cholesterol -- that's the good kind.

But niacin has an annoying side effect that makes many people flush. The hot flashes are so bad that many patients go off the medication. Abbott Labs' (NYSE: ABT  ) Niaspan attempts to counteract the flushing by releasing the niacin slowly.

Merck has been working on a combination pill, Tredaptive, which includes niacin and a drug to counteract the flushing. The pill seems to work -- it's approved in more than 45 countries -- but the Food and Drug Administration turned down the marketing application in 2008 because the agency wanted more data. The ongoing trial should allow Merck to get approved in 2012.

Abbott also has another cholesterol drug, TriCor, which is used to increase good cholesterol and also has the advantage of lowering triglycerides, but it's also headed for generic competition soon. Abbott is busy trying to get patients to switch to its newer Trilipix, but the advantages aren't likely to be great enough for the franchise to take a hit once generic TriCor is available.

In the pipeline
There's a genetic disease called familial hypercholesterolemia, which causes patients to have insanely high cholesterol levels. Even with a cocktail of drugs described above, patients still have dangerously high cholesterol levels that can cause them to die from heart disease. That is until Isis Pharmaceuticals (Nasdaq: ISIS  ) developed mipomersen, which lowers patients' cholesterol levels substantially.

If it works that well for the really sick, might it work in the general population? In theory, yes, but the drug raises liver enzyme levels, which is often a sign of impending liver damage. The side effect isn't likely bad enough to keep Isis and marketing partner Genzyme (Nasdaq: GENZ  ) from gaining approval in the most-sick patients, but the potential for liver damage will scare away any doctors that are just looking for an alternative to statins.

Big market, stay away
Even though the cholesterol drug market is huge, the impending patent expirations are going to make it hard for investors to make serious money in the space. Sure drugs like Tredaptive and mipomersen will be able to find niche markets, but they'll never reach the sales levels obtained by Lipitor.

I'd suggest looking at anti-inflammatory market for a large market that's ripe for new drug alternatives.

Pfizer is a Motley Fool Inside Value selection. Try any of our Foolish newsletter services free for 30 days.

True to its name, The Motley Fool is made up of a motley assortment of writers and analysts, each with a unique perspective; sometimes we agree, sometimes we disagree, but we all believe in the power of learning from each other through our Foolish community.

Fool contributor Brian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. The Fool's disclosure policy wants you to know this lesson was brought to you by the letter C and the number 4.


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