Biotech Values

[DewDiligence]

AZN Prevails in Crestor Patent Case

http://www.reuters.com/article/idCAN2917115320100629

›Tue Jun 29, 2010 6:07pm EDT
By Bill Berkrot and Tom Hals

NEW YORK/WILMINGTON, Del., June 29 (Reuters) - A U.S. judge handed AstraZeneca Plc (AZN) a huge victory on Tuesday, finding that the patent on its multibillion-dollar cholesterol fighter Crestor is valid, sending the the British drugmaker's shares up 9 percent.

While industry observers widely believed AstraZeneca was likely to win the case, billions of dollars were at stake [duh] since more than 80 percent of a branded drug's sales quickly evaporate when faced with generic competition.

Judge Joseph Farnan, of the U.S. District Court in Delaware, ruled that generic drugmakers who challenged the patent failed to prove it was invalid because it was an obvious invention. Farnan also ruled that "defendants have not established, by clear and convincing evidence, that the 314 patent is invalid as an improper reissue" of an older patent.

"Judgment will be entered in favor of Plaintiffs and against Defendants on the issues of invalidity and unenforceability of the 314 patent," Farnan concluded in his 44-page ruling.

Crestor, which belongs to the world's most widely used class of medicines called statins, had sales of $4.5 billion in 2009 and is forecast to reach global sales of $6.5 billion in 2013, according to estimates compiled by Thomson Reuters.

"AstraZeneca is pleased with the court's decision upholding the validity of the 314 substance patent," Chief Executive Officer David Brennan said in a statement.

"The court's decision reaffirms the strength of the intellectual property protecting Crestor," Brennan added.

The upheld U.S. patent protecting Crestor, known chemically as rosuvastatin, does not expire until 2016, meaning generic versions will likely not hit the U.S. market before then.

"They have more clarity on the sustainability of the $2 billion-plus of cash flow that the drug generates in the U.S.," said Leerink Swann analyst Seamus Fernandez.

AstraZeneca shares traded on the New York Stock Exchange closed up $4.02, or 9 percent, at $48.74 after the ruling.

The 9 percent jump "looks like a little bit of an overreaction to the positive news," said Morningstar analyst Damien Conover, noting that generic competition for top-selling Astra products still looms, such as its antipsychotic Seroquel next year and Nexium acid reflux drug around 2015.

"I still think there's some rocky waters ahead for the company," Conover said.

AstraZeneca brought the case against several companies seeking to sell cheap versions of Crestor. They included Mylan Inc (MYL.O: Quote, Profile, Research, Stock Buzz), Teva Pharmaceutical Industries Ltd (TEVA.TA: Quote, Profile, Research, Stock Buzz), Sun Pharmaceutical Industries Ltd (SUN.BO: Quote, Profile, Research, Stock Buzz), Aurobindo Pharma Ltd (ARBN.BO: Quote, Profile, Research, Stock Buzz), Par Pharmaceutical Cos (PRX.N: Quote, Profile, Research, Stock Buzz), Watson Pharmaceuticals Inc's (WPI.N: Quote, Profile, Research, Stock Buzz) Cobalt unit, Sandoz -- the generic division of Novartis AG (NOVN.VX: Quote, Profile, Research, Stock Buzz) -- and Toronto-based privately held Apotex.

They either could not immediately be reached or declined to comment on the ruling.

In attempting to prove the Crestor patent was invalid, the generic drugmakers attacked it on the grounds it was an obvious invention, was fraudulently obtained and improperly reissued. The rosuvastatin patent was originally obtained by Japan's Shionogi Seiyaku Kabushiki Kaisha.

The generic drugmakers argued that Shionogi's legal team withheld documents from the U.S. Patent and Trademark Office in order to obtain the patent through deception, but the judge did not buy that argument.

In his ruling, Farnan accepted AstraZeneca's evidence which he said showed instead "a time of confusion, personnel change, and overwork in the Shionogi Patent Department" that led to their lack of disclosures.‹