The Hindu Business Line : Pact: Sun Pharma to save on legal costs

Sun Pharma’s settlement with Novartis over the US lawsuits over the generic version of Alzheimer drug Exelon has probably saved the domestic company significant litigation costs. Para-IV challenges, when prolonged, can lead to substantial legal costs, without assurance of revenues.

The stock market appears to have perceived this only as a loss of opportunity for Sun Pharma; the product registered annual sales of $200 million (Rs 800 crore) in the US. The settlement may actually turn out to be a positive, as it opens up an opportunity for Sun Pharma to launch its generic capsules a few months before the scheduled patent expiry, when no other generic company is present in the market. Competitors who are reportedly targeting Novartis’s Exelon (Watson Pharmaceuticals, Ranbaxy and Dr Reddy’s), are yet to come clean on their plans to market the generic version.

Potential Profits

For shareholders of Sun Pharma, this out-of-court settlement actually translates into certainty of revenues from this drug, without uncertainties regarding legal costs denting potential profits from the launch.

In the recent past, Ranbaxy has settled cases related to drugs such as Valtrex, while Dr Reddy’s has been successful in settling for the drug Imitrex. While the specific date on which Sun may launch its drug is still unclear, the company is likely to have reaped some monetary benefits from this deal which are as yet unannounced.

The active ingredient in Exelon is covered by a compound patent that was slated to expire in August 2007 in the US, but has seen its patent qualify for extension to 2012 by the FDA.

Another key patent expires in 2011-13 in the major markets.

Patent Litigation

Novartis also holds another patent on Exelon that expires in 2012-14. A generic can only be launched once patent litigation is concluded in favour of a generic producer.

This kind of settlement also reduces the probability of higher damages at a later date, if patent litigation is resolved in favour of the holder.

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