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Friday, October 20, 2006

The Showdown At The OK Corral: Big Pharma And The Generics

Stocks: (PFE)(NVS)(WYE)(LLY)(TEVA)

Several big pharma firms announced excellent results for the third quarter. Pfizer's third quarter profits actually more than doubled to $3.36 billion. Other companies including Wyeth, Novartis, and Eli Lilly also did well.

But, it may not be able to go on forever. As a sign of this Pfizer's sales of Zoloft fell 43% as a generic version hit the market in mid-August.

Not only are generic drugs cheaper than the originals, but large companies like Wal-Mart are pushing them at especially low prices to bring in customers. As a matter of fact, the effort by Wal-Mart which is being matched by Target, may be the biggest thorn in the side of big pharma.

The other pesky problem is patents. A number of key patents on major drugs are expiring, opening the door for generic competition. In an effort to help save money for American citizens, the FDA has even said that it will "fast track" some generics as they come to market.

Companies like Pfizer are going to the court system to try to at least delay the marketing of generic versions of its most profitable drugs including Zoloft.

The legal battle continues to heat up as generics companies like Teva try to push the envelop to get generic versions of patented drugs to market faster to improve their bottom lines.

Teva and its counterparts are not going away. The battles at the FDA and in the courts are sitll in their early stages.

And, someone's stock price is going to get hurt.

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