Teva Expected to Lose Patent Infringement Suit to Pfizer

Teva Pharmaceutical's business strategy in the United States is based largely on selling generic versions of blockbuster drugs even though the company is liable to lose patent infringement suits filed subsequently by the makers of the propriety versions. Teva assumes a calculated risk that it will lose these cases, and in many instances has amassed profits of hundreds of millions of dollars from the six-month exclusive marketing of new generics.

The strategy, which is known as launch-at-risk, will probably cost Teva heavily for the first time, following a legal defeat last Friday in a lawsuit with Pfizer.

A New Jersey jury arrived at a verdict on Friday upholding Pfizer's patent through January 2011 on Protonix, an acid reflux medication, rejecting Teva's argument that the patent was an attempt to cover an obvious variation of another drug.

The judge in the case might reverse the jury's verdict, but the chances of such an outcome are considered low. If the verdict is upheld, this would be Teva's first legal defeat involving a launch-at-risk blockbuster drug.

Teva's position in the New Jersey case was that the patent held by Pfizer's subsidiary Wyeth was not valid because it didn't involve advanced innovation and was therefore obvious, and because Wyeth, which Pfizer acquired in 2009, had filed double patents in an attempt to extend the length of its exclusive right to sell the drug.

Teva, which is expected to appeal the verdict, also contends that the judge in the case and not the jury should decide on the issue of double patenting.

Senior analyst Ronny Gal of Bernstein Research assessed that if a settlement with Pfizer isn't reached, Teva could find itself paying $1.2 billion in damages. He says Pfizer's loss of revenues in the past nine quarters as a result of generic versions of Protonix was $2.9 billion, and lost profits amounted to $1.5 billion.

Gal puts Teva's share of the damage incurred by Pfizer at 80%, based on Teva's average market share. Sun Pharmaceuticals of India has also sold its own generic version of the drug.

Gal says Teva might prefer a settlement that would not only include Protonix but also Lipitor, the most widely sold cholesterol-reducing drug in the world. In the United States alone, $5.7 billion of the product was sold in 2009.

Other drugs that might be included in a settlement between Teva and Pfizer and which are the subject of patent infringement claims are Detrol and Detrol LA, for the treatment of an overactive bladder (under patent until 2012 with $811 million in sales in the U.S. last year); Zyvox, an antibiotic with $634 million in U.S. sales last year, which is under patent until 2015; and the impotence drug Viagra, with $962 million in American sales in 2009.

Teva launched its generic version of Protonix DR in time-release tablets in December 2007, but stopped sales the following February and resumed them in the third quarter of 2008 after winning a prior legal round with Wyeth and following an assessment that the risk associated with marketing the product had declined. Teva also won an appeal in a New Jersey court in 2009, rejecting Wyeth's request for a preliminary injunction against Teva's sales of generic Protonix.