“At first blush, it might seem like the wave of patent expirations could be enough to cut the entire health care sector off at the knees. But while the looming wave of expirations will affect the entire pharmaceutical chain — from drug makers to distributors to wholesalers and even some retail drug stores — the sector as a whole is actually being pulled down by a combination of issues including health care reform in the U.S. and pricing pressures in Europe. As those issues are resolved, the outlook for the sector could improve.
Meanwhile, as big pharmaceutical companies lose their patent protections, many are starting to adjust through consolidation and diversification.
It has been described as both a cliff and a wave, but whatever you call the unprecedented number of pharmaceutical drugs that will lose their patent protection in the next few years, it sets the stage for a host of investment opportunities — and potential pitfalls.
Between 2011 and 2013 more than $90 billion worth of annual pharmaceutical sales will lose their patent protection. Eli Lilly & Co. (LLY), for example, will lose Zyprexa next year. In 2012, Bristol-Myers Squibb Co. (BMY) will lose Plavix, Pfizer Inc. (PFE) will lose Lipitor and Merck & Co. Inc. (MRK) will lose Singular.
To be sure, drug patents expire all the time. But when large blocks of popular brand-name drugs move toward expiration all at once, it opens the doors for generic drug makers and causes investors to readjust their thinking about the whole pharmaceutical sector.”