Ardana: On the way up

Market Report: Shot in the arm for drug stocks on Pfizer ruling
By Michael Jivkov
Published: 20 December 2005

Pharmaceutical stocks received a shot in the arm yesterday after the US giant Pfizer drove out a challenge to the core patent to its cholesterol treatment Lipitor, the world's best-selling medicine. The audacious challenge by a copycat maker, the Indian company Ranbaxy, was turned down by an American court late last week. Investors reacted with delight yesterday, driving GlaxoSmithKline 23p higher to 1,483p, AstraZeneca 83p better to 2,830p and Shire 7p stronger to 732.5p.

Had Pfizer lost the case, share prices across the industry would have taken a pasting as it would have prompted fears that key patents held by giants such as GSK and AstraZeneca might also have been at risk. Analysts argued that AstraZeneca's own cholesterol-lowering drug, Crestor, is better off competing against a branded Lipitor sold by Pfizer than a series of generic versions produced by copycat manufacturers such as Ranbaxy.

Credit Suisse First Boston suggested the court win could spark a strong rally by the pharmaceutical sector. The broker said: "With the judgment coming so close to the end of the year and the Medicare Drug Benefit programme about to start in the US in January, there may be an attempt to create a sector rally in Europe or in the US or both that could run for a quarter or so."