Allergan PLC’s April 1 launch of a generic version of AstraZeneca PLC’s Pulmicort Respules (budesonide inhalation suspension) after prevailing in a patent infringement lawsuit was a short-lived victory as a federal judge on April 2 ordered the company to stop selling and distributing its generic for 10 days.

The interval will allow AstraZeneca an opportunity to seek injunctive relief with the U.S. Court of Appeals for the Federal Circuit, U.S. District Judge Renee Marie Bumb of the District of New Jersey said in her order, which was issued late in the day on April 2.

The injunctive order is no small victory for AstraZeneca. The big pharma and licensing partner Teva Pharmaceutical Industries Ltd. faced market share losses on their inhaled corticosteroids with the launch of Actavis’s generic and the threat of more competition to follow.

Actavis launched the same day Judge Bumb ruled against AstraZeneca in its patent infringement case against three challengers – Actavis (formerly known as Watson Pharma Inc.) and its Breath Limited subsidiary, Apotex Inc. and Sandoz International GMBH.

Actavis’ quick entry created a three-player market, joining AstraZeneca’s branded product and Teva, which has been marketing a generic since December 2009 under a licensing agreement with the innovator.

While the additional competition was expected to cut into AstraZeneca’s branded sales, a more profound impact may be felt in the royalties the company receives on Teva’s product. As for Teva, the Actavis launch meant it faced generic competition on its largest unbranded product.

Teva Settles, Others Litigate

Approved in August 2000, Pulmicort Respules is indicated for maintenance treatment of asthma and prophylactic therapy in children ages 12 months to eight years old. FDA’s “Orange Book” lists two method-of-use patents – Nos. 6,598,603 and 6,899,099, which expire in June 2019 following a six-month pediatric extension – and a use and formulation patent, No. 7,524,834, for which pediatric exclusivity expires in May 2019.

In November 2008, AstraZeneca faced a surprise “at risk” generic launch from Teva, which came to market shortly after receiving ANDA approval despite pending patent litigation. Sales of Teva’s product were quickly halted by a temporary restraining order Also see "Teva’s At-Risk Launch Of Pulmicort Generics May Cost It Exclusivity" - Pink Sheet, 24 November, 2008..

AstraZeneca and Teva soon thereafter reached a settlement that allowed product already shipped by Teva to remain in the marketplace. The deal required Teva to pay AstraZeneca an undisclosed sum for damages resulting from the generic launch, and it allowed Teva to commence sales of budesonide inhalation suspension under an exclusive license with AstraZeneca beginning on Dec. 15, 2009 ([A#00700480021_b]).

In announcing the deal, AstraZeneca said it would receive a “significant undisclosed royalty” on sales of the Teva product, with a “marked step down” in payments if additional generics enter the market.

Meanwhile, patent litigation proceeded against ANDA filers Actavis, Apotex and Sandoz. Although Apotex’s ANDA received final approval in March 2009, the company was prohibited from launching under a preliminary injunction. Actavis’ ANDA received final approval on July 31, 2012; Sandoz has not yet received approval.

Following a bench trial in the U.S. District Court for the District of New Jersey, Judge Bumb ruled April 1 that the ‘603 patent is invalid as obvious and anticipated by the prior art, and the defendants’ ANDAs do not infringe the ‘834 patent. The court also dismissed certain claims related to the ‘099 patent, according to the order of judgment.

Judge Bumb’s 143-page written opinion was filed under seal so that the parties could request redactions of confidential information.

Actavis immediately launched its generic of the 0.25 and 0.5 mg dosage forms. The company’s ANDA for the 1 mg strength is pending.

The company’s April 1 press release announcing the court’s decision and its launch plans said that for the 12 months ended Jan. 31, 2013, total U.S. brand and generic sales of Pulmicort Respules were approximately $1.2 billion. Actavis plans to provide an update of its 2013 financial forecast during its first quarter earnings call on May 2.

AstraZeneca Seeks TRO

In an April 2 statement issued early in the day, AstraZeneca said it strongly disagrees with the New Jersey court’s decision.

“AstraZeneca has full confidence in the strength of its intellectual property rights protecting Pulmicort Respules,” Executive VP-North America Paul Hudson said. “AstraZeneca is considering next steps, including an appeal of the court’s decision.”

The company filed a motion for a temporary restraining order and injunction pending appeal, which is what Judge Bumb acted on late in the day. The motion argues that “such relief is warranted to protect against the permanent and irreparable harm that will necessarily result if defendants launch their generic [budesonide inhalation suspension] products before AstraZeneca’s appeal is heard and decided by the Court of Appeals for the Federal Circuit.” A memorandum supporting the motion was filed under seal.

Actavis and Sandoz filed briefs opposing the motion; Apotex submitted a response stating it would not oppose the request for a temporary restraining order or injunction provided AstraZeneca posts an adequate bond.

Under Judge Bumb’s April 2 order, all defendants in the litigation “are enjoined from launching and distributing their generic versions of Pulmicort Respules until April 12, 2013, for the purpose of permitting AstraZeneca an opportunity to seek injunctive relief with the Federal Circuit pursuant to Federal Rule of Appellate Procedure 8(a).”

Financial Impacts

The Pulmicort patent verdict adds to the financial woes facing AstraZeneca as it seeks to move beyond a host of recent exclusivity losses Also see "On Soriot’s List For AstraZeneca: Building A Decision-Making Culture" - Pink Sheet, 31 January, 2013..

AstraZeneca downplayed the financial impact of the decision, saying it would not change revenue guidance for 2013, which anticipates a mid- to high-single digit decline in revenue on a constant currency basis.

It appears the company may feel a bigger impact on the royalties it receives from Teva than on its own branded product sales.

U.S. sales of the branded product were $136 million in 2012, AstraZeneca said. “In the event that additional generics enter the market, this would materially impact royalties received on sales of Teva’s generic version of Pulmicort Respules. These royalties represented an annualized value of approximately $260 million in 2012,” which is recorded as core other income.

Subject to additional generics entering the market, AstraZeneca now believes core other income for the full year could be “significantly below” $600 million. The company previously projected that core other income would be “under $600 million” for 2013.

In an April 2 note on AstraZeneca, Leerink Swann analysts Seamus Fernandez and Swati Kumar estimated the court’s decision “puts EPS of approximately $0.15-$0.20 (~3% of EPS) at risk in 2013 primarily driven by the Teva royalty structure and other income that will be ‘significantly’ below guidance of $600M.”

Canaccord Genuity analysts Randall Stanicky and Dana Flanders said the court’s finding of non-infringement related to the ‘834 patent and invalidity of the ‘603 patent “implies that Apotex will also likely launch (and possibly an authorized generic).”

For Actavis, the decision adds approximately $0.13 of EPS (2%) for the remaining three quarters of 2013, with full-year follow-through to 2014, the Canaccord analysts said in their April 1 note. “We assume a four-player market with 75% price discount and 25% share.”

For Teva, the court decision amounts to a negative and a “realization of a well understood risk,” Stanicky and Flanders said. “This is Teva’s largest generic product at close to $500 million in sales (~$0.18 in EPS). We estimate a ~$0.10 hit this year (-2% to EPS) for three quarters and greater in 2014 softened by what is likely elimination of the royalty back to AZN.”

Actavis’ Launch Of Pulmicort Respules Generic Halted By Court

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