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Sun Pharmaceutical - Event Update - Elara Capital
Posted On : 2012-02-19 10:20:40( TIMEZONE : IST )
Protonix heartburn for Sun Pharma
Wyeth claims damage of USD960mn for generic launch
Wyeth has claim damages of USD960mn in a US court against Sun Pharma's launch of generic Protonix in January 2008. This is in continuation of the case in US District Court of New Jersey where a federal jury favoured Wyeth's 4,758, 579 patent valid in April 2010. Generic competitors including Teva and Sun claimed obviousness-type double patenting case against '579 patent. While Sun Pharma and Authorised Generic (AG) launched the drug in January 2008, Teva launched the drug in December 2007 post approval from US FDA.
Wyeth levelled triple infringement charges on loss of sales Wyeth claimed triple infringement damage against Sun Pharma and Teva due to the loss of sales suffered by Protonix DR, post generic launch. Protonix's 12-month sales were USD2.3bn in US when generics were launched by Sun Pharma and Teva in 2007-08. While Sun Pharma believes damage claims are unjustified, Teva has yet to clarify against Wyeth's claim of USD1.14bn. Protonix is an acid reflux drug, which treats indications of heartburn. The drug was globally patented by Altana (later acquired by Nycomed and then Takeda) and licensed out to Wyeth for US marketing.
Uncertainty over the outcome of case, not discounted in TP510 While we have not discounted the event in our forecast earnings, we expect Sun Pharma to adopt a more conservative strategy. The company could go slow on acquisitions over the next 2-3 years so as to conserve cash for damage claims, if any. Going by trends in the US, patent cases are often settled out of court at lower amount than the initial damage claim. We believe that prospects of future at-risk launches from product pipeline and conversion of current cash into profitable acquisitions like Taro would be scaled down significantly. If we have to quantify the impact of the damages, we could see an 8-10% drop in yield on current cash chest, with pressure to meet capex through debt putting additional pressure on margins and profitability. Hence, Sun Pharma's premium valuation over peers as well as cash per share would be eroded significantly. We maintain Sell.