Sun Pharma may make $320-mn provision

Analysts base figure on Teva's provisioning Sun Pharma says will take a call on ongoing case filed by US drug maker Wyeth

Sun Pharmaceutical Industries is expected to make a provisioning of around $320 million towards a liability claimed by American drug maker Wyeth  in a long-running patent dispute over gastrointestinal drug Protonix, market sources said.

The estimate is based on provisioning recently made by Teva, which may also be liable for some of the damages. When asked if Sun Pharma was planning to make any such provisioning towards the claims made by Wyeth, the spokesperson of the domestic drug maker said, “We will study the matter and decide.”

In 2004, Wyeth, which is now part of Pfizer, had filed a lawsuit in the US District Court against Sun Pharma and Teva for alleged patent infringement of its drug Protonix. Earlier this year, Wyeth also filed a claim seeking $960 million in damages from Sun and $2.1 billion from Teva for loss of profit due to generic launches. Analysts see Sun Pharma’s current stand as contrary to its previous disagreements on the claim made by Wyeth. In the past, Sun Pharma had said it had “sound reasons to disagree with these overstated claims of Wyeth.” It had also argued that it continued to believe the patent was invalid and unenforceable and would “pursue all available legal remedies including appeals”.

GENERICS BATTLE

• US drug maker Wyeth was acquired by Pfizer in 2009 in a long-running patent dispute over gastrointestinal drug Protonix
• In 2004, Wyeth, which is now part of Pfizer, had filed a lawsuit in the US District Court against Sun Pharma and Teva for alleged patent infringement of Protonix
• Teva, which may also be liable for some of the damages, recently made provisioning
• Based on provisioning made by Teva, Sun is expected to make a provisioning of around $320 million

Analysts suggest that following Teva’s provisioning, Sun is also likely to be liable to pay in a similar ratio for the alleged patent infringement for launching a generic version of the drug.

Recently, while reporting its financial results for the July-September quarter, the Israeli drug maker made a provision of $670 million for loss contingency related to the Protonix patent infringement litigation. Teva said that it had made the provisioning in light of a recent court ruling in an unrelated case pertaining to one of Teva’s patent infringement defences, which made management change its views regarding probability. “However, Teva still vigorously disputes the plaintiffs’ damage claims as well as the initial jury verdict of infringement,” it said in a statement.

“Given that Teva has made a provision for around one-third of the penalty claimed by Wyeth, we are expecting that Sun would also make space for near about one-third of the claims made against it,” said a pharma sector analyst.

However, the market is not certain whether Sun Pharma, like Teva, would also make the provisioning during its July-September earnings. “Sun is expected to report good numbers for the July-September quarter, so it may not do the provisioning towards Protonix in this quarter itself. Instead, they may show it in a quarter when their results are not expected to be on the positive side, putting the blame on the ongoing litigation,” the analyst said.

Shares of Sun Pharmaceutical Industries Ltd on Tuesday closed at Rs 698.10 on the Bombay Stock Exchange, down 0.1 per cent from their close on Monday. The company will announce its July-September earnings on November 9.

Sun launched its generic version of Protonix tablets in January 2008, while Teva and its US subsidiary began selling the drug in December 2007. However, following the lawsuit by Wyeth, a US federal court in April 2010 ordered that the sale of the generic version must stop.

In cases of at-risk launch of generic drugs in the US, the innovator companies generally claim a liability based on the loss of profit due to the sale of generic version of the drug. Generics are low-cost version of a drug and are not allowed to enter the market during the patent period of the innovator drug.

According to an analyst, Sun Pharma is expected to have earned a revenue of around $400 million and a profit of $300 million from the sale of the generic version in the limited period.

The original patent relating to Protonix, based on pantoprazole sodium formulation, is held by Swiss pharmaceutical company Nycomed and was licensed to Wyeth.