" Timothy Anderson, an analyst at Prudential Equity Group, wrote yesterday in a note to investors that New York-based Pfizer, the world�s largest drug firm, is likely to win on both patents. He put the odds of a Pfizer win at 65% for the more critical of the two patents, and 50% on the second. Ranbaxy would probably have to win both to launch the drug soon. "
PFE loses if it loses both patents, i.e. respectively 35% chance and 50% chance.
The probability of losing both patents simultaneously is the product of 0.35*0.50 or 17,5%. Approx the same as getting a six on a dice.
I'm not saying that there's no chance of PFE losing, but the assumption that the management is rolling the dice seems far fetched. They had to have studied this to death and concluded that they were WAY BETTER OFF NOT SETTLING. To think otherwise is to think they are complete morons and that is almost impossible. What the real odds are I can't tell you, but I guarantee you that PFE management thinks the odds of winning everything are a hell of lot higher than 65% and 50% etc... Probably like 90% and 80%.
I notice a couple of sentences at the end of Prudential's comments were left out:
"Our attorneys believe that the odds are stacked in PFE�s favor (maybe 65/35 on the more critical �893 patent, and 50/50 on the less critical �995 patent) but consensus on these odds is mixed with some firms squarely appearing to believe that both Lipitor patents will soon be toppled. At current price levels, a 50/50 chance of a win appears discounted into the stock. Whatever the precise odds, because the potential downside is so tremendous, PFE should have been working to settle this patent challenge so as to not take on this risk, in our opinion. Unfortunately, with U.K. courts ruling this Wednesday it looks like the window of opportunity for a settlement is rapidly closing."