>GLOBAL PHARMACEUTICALS: Who are the Key Players Affected by the $5.6B U.S. Lipitor LOE?

Conclusion: We assume 3 companies divide branded US Lipitor sales during the 180- day exclusivity period starting Nov 30th, incl. PFE, WPI’s authorized generic (AG) & Ranbaxy. We assume PFE retains 40%-50% of branded Lipitor share ($5.6B last 12 months) by continuing to pass along 40%+ discounts/rebates to mail order/PBM segment, with WPI & Ranbaxy dividing the remaining share at a 50-60% discount. At the end of the 180-day exclusivity period, we assume MYL/TEVA launch along with Dr. Reddy's, Aurobindo, & others, lowering pricing for generic Lipitor to pennies/day. Distributors are expected to benefit from the generic Lipitor mix shift contributing ~$0.03 in EPS for both ABC & CAH in C2011, & adding ~$0.06 to MCK. We expect full generic penetration following the exclusivity period, similar to the Zocor LOE (loss of

exclusivity) in 2006. Our US cholesterol U.S. market model assumes ~80% of ~350M TRx’s are generic by 2012E, making it challenging for remaining branded marketers (AZN’s Crestor & MRK’s Vytorin franchise) to raise price & gain share (see Figure 1).

 What is the Impact on PFE & WPI Results? We maintain our PFE 4Q11E/‘12E Lipitor sales/EPS contribution at $930M/$640M & $0.07-$0.09 (14%-18% of 4Q EPS)/ ~$0.05

(2% of ’12 EPS). We estimate that every month delay to Ranbaxy’s launch could add <$0.01 to PFE’s ‘12E EPS (see Figure 2). We estimate WPI contribution to sales/EPS at ~$300M-$400M/~$0.48-$0.53 during the 180 days; if Ranbaxy is delayed by 1-2 months, the EPS benefit could double (see Figure 3). Each $100M in additional generic Lipitor sales (~25-35% GM) adds ~$0.13-$0.17 to WPI’s EPS (see Figure 4).

 What is the Benefit to Ranbaxy if It Launches on Nov. 30? Our analyst in India expects generic Lipitor to add cRs30/share to the company's earnings during the 180- day period. This assumes c60% price erosion (higher than what we expected earlier) & 30% share. Post the exclusivity period, we expect higher price erosion (c95%) and lower market share (c20%), translating to full year recurring EPS upside of cRs2/share.

 What is the Opportunity for Daiichi Sankyo (DS)? Ranbaxy's issues with FDA/DOJ had been regarded as a major negative factor in the DS’s stock price. Our Japanese analyst expects resolutions with several hundred million dollars in fines. Once resolved, investors will take a look at DS’s fundamentals rather than simply avoiding the company due to its uncertainty. Generic Lipitor upside is no longer recognized as a huge earnings opportunity given low contribution to Eisai in the generic Aricept case.

 What is the Benefit to Drug Wholesalers? We expect the introduction of generic Lipitor to be an incremental positive for the drug wholesalers, with the mix shift contributing ~$0.03 in EPS for both ABC and CAH in C2011, and adding $0.06 to MCK. Generic Lipitor should then add $0.13, $0.08 and $0.17 in C2012 for ABC, CAH and MCK respectively, as the wholesalers generate larger profits during the exclusivity period. This will create tougher Lipitor EPS comparisons in C2013, where we estimate generic Lipitor will contribute $0.05 to ABC, $0.03 to CAH, and $0.07 to MCK.

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