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Heartburn For Sun Pharma

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Sun Pharma has been slapped with a $960 million damage claim by Pfizer's arm Wyeth in a patent dispute over a generic version of the heartburn (acid-reflux) drug Protonix (pantoprazole sodium).

The Hatch-Waxman Act, which regulates sale of generic drugs in the US, allows a 30-month stay on approving a generic marketing application (abbreviated new drug application or Anda), if the innovator company sues the generic maker for patent violation. In some cases, the generic companies launch their product ‘at risk' before the court's final ruling on the patent challenge, once they get the US Food and Drug Administration (FDA) approval for Anda. Recently, Apotex had to pay $450 million to Sanofi and BMS as penalty for ‘at risk' generic launch of Plavix, a drug used to prevent blood clots after a heart attack or stroke.

It was in 2004 that Wyeth and Nycomed (which developed Protonix) first filed patent-infringement suits against Teva and Sun Pharma. In June 2007, Wyeth moved court to prevent Sun and Teva from launching their generics. The court denied the motion, though it did not conclude that the patent was invalid. Based on that ruling, Sun Pharma launched its generic in January 2008, a month after Teva launched its version. But in April 2010, the US District Court of New Jersey ruled Wyeth's 4,758, 579 patent is valid. The drug had patent protection till January 2011. Following the court ruling, Sun Pharma discontinued sale of the drug.

"Sun Pharma believes that it has sound reasons to disagree with these overstated claims of Wyeth, and also continues to believe that the patent is invalid and unenforceable and will pursue all available legal remedies including appeals," Sun Pharma said in a statement.

However, analysts feel the New Jersey court's ruling on patent validity makes the claims of Wyeth stronger and Sun Pharma should seek an out-of-court settlement, which is common in drug patent litigations.

"We expect the claims could be in the range of $300-500 million, if Sun Pharma is unable to get a favourable judgment on the patent litigation," says an analyst at Pinc Research. The analyst estimates Sun Pharma could have made profits of $240-280 million from sales between January 2008 and April 2010.

Protonix was a $2-billion brand for Wyeth before the launch of generics. Wyeth generated revenues of $806 million from Protonix in 2008, even after the "at-risk" launches by Sun and Teva. Sun Pharma launched its version after the launch by Teva and Watson.

Experts note that the litigation is not going to hurt Sun Pharma deeply, since the company is sitting on a cash balance of over $1 billion. But it is facing trouble in the US, due to manufacturing quality issues of its US subsidiary, Caraco Pharmaceuticals.

"The company could go slow on acquisitions over the next two to three years so as to conserve cash for damage claims, if any," says an analyst with Elara Capital.

(This story was published in Businessworld Issue Dated 05-03-2012)