AstraZeneca (AZN) recently announced that the US Court of Appeals for the Federal Circuit has issued a temporary injunction related to the distribution of generic versions of Pulmicort Respules (budesonide inhalation suspension) in the US.
The court’s injunction prevents generic manufactures to distribute generic Pulmicort Respules, until it reaches a final decision on AstraZeneca’s appeal of the verdict of the US District Court for the District of New Jersey. The injunction requires AstraZeneca to post a bond worth $72 million.
We note on Apr 1, 2013, the District Court had ruled that a patent (6,598,603) protecting Pulmicort Respules in the US is invalid. Additionally the court also ruled that the generic companies involved in the litigation, including Actavis, Inc. (ACT) did not infringe another patent (7,524,834) related to Pulmicort Respules in the US.
Pulmicort Respules is used as a maintenance therapy to control and prevent asthma symptoms in children between 12 months and 8 years of age. Pulmicort Respules generated US sales of $136 million in 2012.
Since 2009, AstraZeneca has an agreement with Teva Pharmaceutical Industries Limited (TEVA), whereby it has allowed the latter to sell its generic version of Pulmicort Respules.
AstraZeneca believes the launch of generic versions of Pulmicort Respules will not have any impact on its revenue guidance for 2013. Revenues are expected to decline in a mid-to-high, single-digit range from 2012 levels (at constant currency basis). However, it will have an impact on royalties received from Teva, which had an annualized value of approximately $260 million in 2012. For 2013, AstraZeneca expects core earnings to decline significantly more than revenue.
AstraZeneca carries a Zacks Rank #3 (Hold). Generic competition has adversely impacted AstraZeneca’s revenues over the past few quarters. This has put significant pressure on the company. Currently, companies like Santarus, Inc. (SNTS) look more attractive with a Zacks Rank #1 (Strong Buy).
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