Sector Snap: Goldman looking for Teva patent suit updates

Following last week's Paragraph IV conference in New York, which covered a range of legal topics facing both generic and branded drugmakers, analyst Randall Stanicky said many significant cases remain, some of which involve Teva and Pomona, N.Y.-based Barr Pharmaceuticals Inc., who reports earnings Thursday.

He pointed to an upcoming appellate court decision on Teva's 180-days of exclusivity for the generic version of Johnson & Johnson's antipsychotic drug Risperdal (expected before June 29), the trial for Teva's challenge of Wyeth's blockbuster heartburn drug Protonix, an appellate court decision on Barr's district court ruling which invalidated Bayer's patent on oral contraceptive Yasmin, and the trial for Novartis' Famvir herpes drug which Teva launched an at-risk generic version of in September.

With generic drug developers now claiming more than two-thirds of all prescriptions, up from less than half 10 years ago, branded drugmakers are struggling to fend off the competition. Emboldened by favorable court rulings and the need to gain an early foothold in the market, generic drug developers are challenging lucrative drug patents with greater ferocity.

In some cases, companies are conducting at-risk launches, in which a generic version of a patented drug is sold before the patent expires. Teva, Barr and Mylan Pharmaceuticals Inc. have grown bolder at this strategy, as the risk of having to pay triple damages if they lose the Paragraph IV patent challenge is becoming less hurtful to these ever-larger companies.

Branded drug makers are settling patent challenges in increasing numbers, including British pharmaceutical company AstraZeneca PLC, which last month settled a patent lawsuit against Ranbaxy Laboratories Ltd. The company agreed to a deal that will delay the Indian company's release of a generic version of its best-selling heartburn drug Nexium, which generated $5.2 billion worth of U.S. sales for AstraZeneca last year.

Stanicky said he expects settlements to continue but there clearly remains Federal Trade Commission opposition to the trend.

"As expected, the FTC continues to stand opposed to the concept of settlements in paragraph IV litigation on the grounds that settlements fly in the face of the true intention of the Hatch-Waxman Act (1984 act designed to promote generics while leaving intact a financial incentive for research and development)," Stanicky wrote in a note to clients.

Stanicky anticipates a strong quarter for Teva driven by contributions from its generic Protonix launch and sales of multiple sclerosis Copaxone, which the company said last week rose 35 percent in the first quarter to a record $542 million. He estimates Teva's earnings per share at 70 cents, 7 cents ahead of the average Wall Street estimate.

In morning trading, shares of Teva slipped 20 cents to $46.96. Barr shares fell 94 cents to $50.32 and shares of Canonsburg, Pa.-based Mylan fell 26 cents to $12.96.