Lilly's Patents Stay in Bloom

For pharmaceutical companies, lawsuits related to their branded drug patents are simply a part of doing business in the industry. Generic drug manufacturers are always testing Big Pharma's patents by filing Abbreviated New Drug Applications to market generic versions of their drugs and triggering court battles over the validity of the branded drugs' patents.

Earlier this week, pharmaceutical firm Eli Lilly (NYSE: LLY) concluded its victorious defense of the validity of the patents for its top drug, the schizophrenia and bipolar disorder treatment Zyprexa, when an appeals court upheld its earlier victory against Zenith Goldline Pharmaceuticals.

Even though Zyprexa sales haven't grown in 2006, it is still by far Lilly's most important product, accounting for nearly 30% of revenues. Sales were $3 billion in just the first nine months of 2006 and $4.2 billion for all of last year.

This patent win buys Lilly some time until it has to deal with some major patent expirations on its top drugs in the coming years. Its Zyprexa patents will still expire in 2011, and other top drugs like Gemzar and Evista will also lose patent protection in the next few years.

Even with these patent expiries, Lilly isn't in nearly the same desperate situation that some of its large-cap pharma peers will be dealing with in the upcoming years. It is still forecasting sales growth in the 7%-9% range this year and in the high single or low double digits next year. Also, Lilly has stocked up its drug pipeline with 19 products in at least phase 2 clinical trial development.

The oncoming loss of such a large portion of sales partly explains why Lilly bought out its partner ICOS earlier this year and has made it a goal to bring to market at least one new drug every year this decade and two per year early next decade. Investors should make sure Lilly sticks to this goal, so that the loss of patent protection on Zyprexa in 2011 and its other products soon after doesn't bite them.

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Fool contributor Brian Lawler does not own shares of any company mentioned in this article. The Fool has a disclosure policy.