Protonix Settlement Leaves Question Of How Jury Would Assess At-Risk Launch Damages
This article was originally published in PharmAsia News
Executive Summary
Teva and India’s Sun Pharma are to pay $2.15 billion for their at-risk launch in the U.S. of generic versions of Pfizer’s Protonix; Pfizer says figure represents lost profits and lost royalties from the three years the product faced premature generic competition.
Teva Pharmaceutical Industries Ltd. and India’s Sun Pharmaceutical Industries Ltd. decided not to leave it up to a jury to calculate the amount of damages they would have to pay for their at-risk launch in the U.S. of generic Protonix (pantoprazole) and instead reached a $2.15 billion settlement with Pfizer Inc.
Under the agreement Teva will pay $1.6 billion and Sun $550 million to Pfizer and , which owns the Protonix patent and provided an exclusive license to Pfizer subsidiary Wyeth for U.S. marketing. Pfizer will receive 64% of the settlement proceeds and Takeda will receive 36%.
The parties announced the settlement on June 12, as a jury trial was underway in New Jersey federal court to determine damages. The trial started on June 3.
Teva launched its generic version of the heartburn drug in December 2007 and Sun entered the market with its generic in January 2008. In April 2010 a jury found that the Protonix patent is valid, leaving the generic makers liable for damages. Pfizer sought a preliminary injunction to block Teva’s launch but a district court denied its motion and the U.S. Court of Appeals for the Federal Circuit affirmed the ruling. The Protonix patent expired in January 2011.
Pfizer said the settlement figure represents the lost profits and lost royalties suffered by Pfizer and Nycomed SPA, which is now part of Takeda.
“We are pleased with today’s settlement, which recognizes the validity and value of the innovation that led to Protonix,” Pfizer Executive Vice President and General Counsel Amy Schulman said in a release.
Protonix had been a blockbuster drug with annual U.S. sales of roughly $2.5 billion before Teva and Sun launched their generics. At the time of the jury verdict Sanford C. Bernstein analyst Timothy Anderson calculated that Pfizer had lost $2.89 billion in revenue and estimated that the damages for Teva could be around $1.2 billion (Also see "Teva Could Face Damages Of $1.2 Billion For At-Risk Launch Of Generic Protonix" - Pink Sheet, 26 Apr, 2010.).
Settlement Will Not Deter At-Risk Launches, Former Apotex Attorney Predicts
Teva said it expect to incur a charge of roughly $930 million in the second quarter, which is in addition to the $670 million provision previously recorded in its 2012 financial statements. The company said it believes it may have up to $560 million of net insurance coverage in connection with the settlement. BMO Capital Markets said in an analyst note that Teva’s $1.6 billion payment is approximately $1.87 per share, or about three quarters of cash flow.
Despite the hefty sum, Shashank Upadhye, former VP of global intellectual property at Apotex Inc., said he does not expect it to deter future at-risk launches or promote more settlements. Companies will use the case “as one more factor to consider in deciding whether to launch at risk or not,” he said.
Upadhye, a partner at Seyfarth Shaw, had viewed the case as offering the chance to show how a jury would assess damages for an at-risk launch. While there have been numerous such launches over the years, he noted that only one has resulted in a jury calculating damages. In January 2011, a jury awarded $16 million in damages to Abbott Laboratories Inc. for Glenmark Pharmaceuticals Ltd.’s at-risk launch of a generic version of its hypertension drug Tarka (trandolapril/verapamil) (Also see "At-Risk Launches: Three Cases May Determine How Damages Are Calculated" - Pink Sheet, 23 May, 2011.).
In 2010 a court ordered Apotex to pay $422.2 million in damages for its at-risk launch of a generic version of Sanofi’s blood thinner Plavix (clopidogrel). But that sum had been pre-determined by a settlement agreement between the two companies that set damages at 50% of Apotex’s net sales of clopidogrel.
In the Protonix case, Upadhye said the jury had several factors to consider in determining damages, such as Pfizer’s delay in introducing an authorized generic and the fact that when Sun launched its product there were already generics on the market.
Generic manufacturers continue to launch at-risk before a trial verdict or an appeals court decision. For example, in April Allergan PLC launched a generic version of AstraZeneca PLC’s Pulmicort Respules (budesonide inhalation suspension) after a district court ruling in its favor. A federal judge subsequently ordered the company to stop selling and distributing its product for 10 days to allow AstraZeneca time to seek injunctive relief from the U.S. Court of Appeals for the Federal Circuit (Also see "Actavis’ Launch Of Pulmicort Respules Generic Halted By Court" - Pink Sheet, 2 Apr, 2013.).
However, in recent years the number of at-risk launches has declined. Upadhye attributes this to so-called pay-for-delay settlements between brand and generic companies in which the brand provides compensation to the generic to delay marketing its product. The Supreme Court is to issue an opinion this month on the acceptability of such deals in Federal Trade Commission v. Actavis.
“You might see an uptick in the number of at-risk launches if the Supreme Court says pay-for-delay is bad because the generic would look at the launch for its revenue,” Upadhye stated.
[Editor’s note: This article also appeared in “The Pink Sheet” DAILY
, June 13, 2013.]