The big news lately in the pharmaceutical industry has been safety. Pfizer's (NYSE:PFE) recent move to suspend marketing of Bextra is just the latest in a series of dramatic stories on drug safety. With all this attention on the safety front, pharmaceutical companies' traditional operating challenge of keeping ahead of generic competitors has been relegated to the back burner.
Thanks to Eli Lilly (NYSE:LLY), that issue is back in the spotlight. The company announced yesterday that a federal court in Indiana ruled that the patent for Zyprexa, its drug for the treatment of schizophrenia and bipolar disorder, remains intact. The stakes for Eli Lilly in this battle were incredibly high: Zyprexa's $4.4 billion in sales accounted for roughly 32% of the firm's top line in 2004. With these kinds of numbers, the challengers, Ivax (AMEX:IVX), Dr. Reddy's Laboratories (NYSE:RDY), and Teva Pharmaceutical (NASDAQ:TEVA) had a significant interest in the outcome as well.
The consensus on Wall Street reportedly was that Eli Lilly would win the case. Nevertheless, the judgment has led to a collective sigh of relief among investors, with the stock up about 5% today on heavy volume. Should things run their course, Eli Lilly's patent on Zyprexa will be valid until 2011. Still, the celebration over Zyprexa may be a bit premature. The generic drug makers plan to appeal the case, according to Indystar.com. And it's not as if drug patent cases haven't been overturned on appeal. Back in 2000, Barr Laboratories (NYSE:BRL) successfully overturned Eli Lilly's patent for Prozac in an appeals court.
Fortunately, even if Lilly loses Zyprexa, its bench looks pretty deep. Its anti-depression drug Cymbalta, launched in the third quarter of 2004, achieved sales of $93.9 million in its first two quarters, and it is sure to keep growing fast. Meanwhile, its cancer treatment Alimta brought in $142.6 million in sales in 2004, the drug's first year on the market. Finally, the company is awaiting FDA approval for another potential winner -- exenatide for type 2 diabetes. While the Zyprexa victory was a positive development, the best news for Eli Lilly may be that its reliance on Zyprexa is likely to lessen.
Fool contributor Brian Gorman is a freelance writer in Chicago. He does not own shares of any companies mentioned in this article.
