Teva likely will have to pay a hefty price for its at-risk launch of a generic version of Pfizer's Protonix (pantoprazole) now that a jury has found that the patent on the heartburn drug is valid.

On April 23, a jury in the U.S. District Court for the District of New Jersey rejected Teva and Sun Pharmaceutical's claims that the patent was invalid based on obviousness or double-patenting. Teva launched its generic of the proton pump inhibitor in December 2007 after a district court denied Pfizer's motion for a preliminary injunction. Sun entered the market with its generic in January 2008. Last year, the U.S. Court of Appeals for the Federal Circuit affirmed the lower court's ruling against a preliminary injunction.

Pfizer gained Protonix through its acquisition of Wyeth, which has an exclusive license to market Protonix in the U.S. from German drug maker Nycomed.

Protonix had been a blockbuster drug with sales of $1.9 billion before Teva and Sun launched their generics. Pfizer won't have much time to benefit from recapturing the market. The basic patent, including the six-month pediatric exclusivity period, expires in January 2011.

Pfizer Lost An Estimated $2.9 Billion In Revenue

Sanford C. Bernstein analyst Timothy Anderson said in an April 23 note that Pfizer likely will re-establish control of the market through a preliminary injunction or settlement with the generics. If there is no settlement, he estimated that damages for Teva could be around $1.2 billion.

Anderson calculated that total revenue loss to Pfizer was $2.89 billion and that Teva probably was responsible for approximately 80 percent of that based on its market share. But he said the actual impact on Teva is likely to be smaller since Teva made approximately $500 million from Protonix and the company has an insurance policy on an undisclosed sum.

"As settlement will likely cut its exposure, we suspect the total capital Teva will lose on this decision is under $700 million," Anderson wrote. He predicted that Teva will settle and that the deal also may include resolution of litigation over Lipitor (atorvastatin).

Anderson also raised the possibility that Pfizer might be able to extend Protonix profitability through a late patent listed in the Orange Book that expires in 2017. Pfizer did not assert the patent against Teva or Sun, and Anderson said it could settle with them on a late entry, such as mid-2013, with the option for earlier entry if Pfizer does not reach a settlement with Schwarz and Dr. Reddy's, which also have approved or tentatively approved ANDAs.

Teva is aggressive in launching generics before a court issues a final ruling in a patent dispute. But the strategy is not always successful. In November, a jury found that Teva infringed the basic patent on Novartis' Famvir (famciclovir). Teva, which had launched its generic of the herpes drug in September 2007, subsequently agreed to make a one-time undisclosed payment to Novartis to resolve the litigation (Also see "Famvir Patent Settlement: 17 Months After At-Risk Launch, Teva Must Pay Novartis" - Pink Sheet, 16 February, 2010.).

Purchasers' Antitrust Class Actions Over Protonix Are Pending

Analysts at Goldman Sachs said the jury verdict could impact decisions by generic manufacturers to launch at risk.

"While the financial impact of this decision is generally incremental to Pfizer and Teva, the optics could be significant," they wrote in an April 26 note. "As the first major blockbuster damages award, it could be a meaningful win for pharma, which as been the target of a growing number of at-risk launches. For generics, a large damages award would be a deterrent for small manufacturers and a stark reminder of the franchise risk associated with launching at-risk."

Meanwhile, Pfizer faces other liability involving Protonix. Direct and indirect purchasers filed class actions against Pfizer and Nycomed alleging antitrust violations in the procurement and enforcement of Protonix patents. The actions, filed in New Jersey district court, were stayed pending resolution of the underlying patent litigation.

The Department of Justice also is conducting civil and criminal investigations of Pfizer's promotional practices relating to the pricing for Protonix and Premarin (which it also inherited via its acquisition of Wyeth) for Medicaid rebates. Last year, the DoJ and 16 states filed a civil complaint in the U.S. District Court for the District of Massachusetts alleging Wyeth offered steep discounts to hospitals that purchased both its oral and I.V. Protonix while reporting higher figures to the government (Also see "Bundling of Wyeth Protonix Sales to Hospitals Tied to Medicaid Fraud, DoJ Says" - Pink Sheet, 25 May, 2009.).

That is not the only government investigation Pfizer is facing. In its 2009 annual report, the company noted that the U.S. Attorney's Office for the Western District of Oklahoma is conducting a criminal investigation of promotional practices for its anti-transplant rejection drug Rapamune (sirolimus).

- Brenda Sandburg (b.sandburg@elsevier.com)

Teva Could Face Damages Of $1.2 Billion For At-Risk Launch Of Generic Protonix

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