Cadila Shares Gain As U.S. Court Rules In Its Favour In Patent Battle Against Shire
Cadila won a favourable ruling in Lialda patent case against Shire
Cadila Healthcare Ltd. gained after the District court of Delaware ruled in its favour in an ongoing patent dispute with Shire Plc over colitis drug, Lialda.
Lialda is used to treat ulcerative colitis and has sales of around $650-700 million annually, according to Nomura and Deutsche Bank’s estimates. Shire’s patents for the product expires in June 2020.
Cadila has the sole first-to-file on the drug, which gives it 180-day exclusivity once the product is launched. However, Cadila has not yet received tentative or final approval from the U.S. Food and Drug Administration for its drug application. The drug regulator’s approval is a prerequisite for its commercialization and launch.
The proposed Zydus product launch infringes its patent, and the company will “continue to vigorously defend its intellectual property rights,” Shire said in its press statement. The UK based company has 30 days to file an appeal to the Court of Appeals to the Federal Circuit.
Brokerage Reaction
Lialda would be a significant opportunity for Cadila, if approved, according to a Nomura. They expect it to be a limited competition product and estimates annualised profit of $90 million or Rs 5.9 per share from the product.
Recently, Cadila launched an authorised generic of AsacolHD, another oral mesalamine product, rather than waiting for the approval of its own ANDA, which would have been more profitable. Even in the case of Lialda, there are stringent bioequivalence requirements that Cadila will need to establish. So even if the legal hurdles can be overcome, Nomura believes the regulatory hurdles will be tough to overcome. Hence, the brokerage is not factoring in any upside from Lialda as of now.
Nomura has retained their ‘buy’ rating on the stock with a price target of Rs 423 as they believe that at 19 times financial year 2017-18 estimates, the stock is trading at a marginal discount to its peers.
Deutsche Bank also said that product approval will be a key challenge for Cadila.
While this (Lialda patent win) is a positive development, product approval remains key for the generic launch given the impending warning letter at Moraiya facility (since December 2015) and the stringent FDA bioequivalence guidelines for the product approval. Also, the option for appeal by the innovator is available. We maintain our ‘hold’ rating with target price of Rs 326.Deutsche Bank Report
Shares of Cadila Healthcare rose as much as 1.37 percent to Rs 393.50 in Monday trading.