Eli Lilly and Company LLY received encouraging news with the UK Court of Appeal ruling in favor of the company in its patent infringement lawsuit against Allergan AGN (previously known as Actavis) for its lung cancer drug, Alimta (pemetrexed disodium). Eli Lilly’s shares were up 3.1% following the announcement.
We note that Allergan is looking to sell certain alternative salt forms of Eli Lilly’s Alimta in the UK and certain other European countries prior to the expiration of the patents.
The UK Court of Appeal reversed the High Court’s May 2014 decision. The Court ruled that the patent protecting Alimta vitamin regimen runs until 2021 and would be indirectly infringed by Allergan. In addition, the Court granted that this ruling covers laws in France, Italy and Spain and reversed prior High Court decisions that gave declarations of non-infringement regarding patents in those countries.
While the compound patents covering Alimta remains valid and exclusive through Dec 2015, the vitamin regimen patents for Alimta will provide exclusivity in the UK, France, Italy and Spain through Jun 2021 following the favorable ruling.
The Court, however, stated that Allergan may file an appeal to the UK Supreme Court. In addition, Allergan is looking to seek approval from the High Court related to whether a different proposed product would infringe the patent. The Court of Appeal ruled that the High Court will have to decide whether it will hear this new claim. Eli Lilly intends to defend the case strongly if the High Court decides to hear the case on the different proposed product.
We remind investors that Eli Lilly had received an unfavorable ruling from the German Court related to a similar lawsuit earlier this year. The German Court ruled that the Alimta vitamin regimen patent would not be infringed by Allergan in Germany after the compound patent expires in Dec 2015. Eli Lilly intends to appeal this decision. Meanwhile, patent infringement lawsuits related to Alimta in the U.S. are ongoing.
Our Take
The UK Court’s ruling is a major positive for the company considering that several key products in the company’s portfolio including Zyprexa, Cymbalta and Evista among others have already gone generic with others going off patent in the next few years. The loss of patent exclusivity in the coming years will make it challenging for the company to drive top-line growth.
With Alimta contributing around $2.8 billion to revenues in 2014 with $1.6 billion alone coming from ex-U.S. markets, the earlier-than-expected entry of generic versions of Alimta would be a major setback for the company.
Eli Lilly currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the health care sector are Gilead Sciences Inc. GILD and Hospira Inc. HSP. Both hold a Zacks Rank #1 (Strong Buy).
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