Pfizer and Teva profits fall, with each company's result tied to the other

Pfizer and Teva are the largest branded and generic pharmaceutical companies, respectively, as measured by revenue and both reported lower profits Thursday morning. And, perhaps with some irony and connection of dots, each company's result is tied to the other's business.

Pfizer is headquartered in New York, but also has a big operation in Collegeville and other spots in the Philadelphia area.

Teva is based in Israel, but has its Americas headquarters in North Wales, Montgomery County.

Teva swung from a profit of $916 million in the third quarter of 2011 to a loss of $79 million in the same period this year. Teva chief executive officer Jeremy Levin told stock analysts on a conference call that it was mostly attributable to an accounting decision to take a $670 million charge related to potential costs in pending patent litigation and a $481 million impairment charge, mostly related to products in the research and development phase that were acquired from Cephalon.

Teva spent $6.8 billion to buy Frazer-based Cephalon in 2011. Teva has led the world in generic drug sales, but the Cephalon acquisition was meant to diversify the business so it was not so reliant on generic revenue.

Teva's best-selling branded drug, Copaxone, is used to treat a form of multiple sclerosis, and global sales revenue increased increased 13% to $1.05 billion compared to $928 million in the third quarter of 2011.

Patent litigation among pharmaceutical companies is almost as much a part of the business as making medicine.

Teva said in its press release on Thursday, "Provision for loss contingency in an amount of $670 million related to the pantoprazole patent infringement litigation, in light of a recent court ruling in an unrelated case pertaining to one of Teva's patent infringement defenses, which made management change its views regarding probability. However, Teva still vigorously disputes the plaintiffs' damage claims as well as the initial jury verdict of infringement."

That plaintiff is mainly Pfizer.

Pantoprazole is the chemical name for an acid reflux drug that originally carried the brand name Protonix. The Swiss drugmaker Nycomed held the original patent on Protonix and licensed it to Wyeth.

Teva and Sun Pharmaceuticals produced generic versions of pantoprazole.

In May 2004, Swiss drugmaker Nycomed and Wyeth sued Teva and Sun Pharmaceuticals for patent infringement in federal court in Newark. Pfizer bought Wyeth for $69 billion in 2009 and took over the litigation.

Patent law often takes longer to reach a verdict than other types of litigation and this is a good example. The case, with suits and counter-suits, remains alive - despite that jury verdict in 2010 that went in Pfizer's favor.

Meanwhile, Pfizer reported Thursday that its third-quarter profit fell 14 percent and attributed the decline to competition from generic competitors.

Pfizer's blockbuster cholesterol medicine Lipitor lost patent protection in the U.S. on Nov. 30, 2011, so generic versions began to appear right away and then proliferated in May. Lipitor revenue dropped 71 percent to $749 million compared to the third quarter in 2011, which was the last full quarter before generic competition began. But, as the Associated Press noted, sales for more than two-thirds of Pfizer's medicines declined, most by 10 percent or more and mainly because of generic competition.

“Overall, our results this quarter reflect continued product losses of exclusivity, most notably Lipitor in all major markets," Pfizer chairman and chief executive officer Ian Read said in a statement. "Despite a challenging and dynamic environment, worldwide revenues from many of our key medicines, including Enbrel, Celebrex and Lyrica, continued to grow operationally."

The second bit of irony is that Lipitor was so successful and so many companies wanted to sell generic copies of it that even Teva decided in May it could not make enough profit on its version to launch full-scale production and sales in the United States.