Novartis Settles Litigation Agreement with Acura - Analyst Blog

Patent litigations are quite common in the pharmaceutical industry. The entry of generics in the industry adversely impacts the sales of the branded drugs. Sometimes, companies enter into settlement agreements - these usually allow the generic company to enter the market with its product on a specific date. At the same time, litigation costs are also involved.

Novartis NVS recently announced that its generic arm, Sandoz, entered into a settlement agreement with Acura Pharmaceuticals, Inc. ACUR regarding the latter's patent infringement suit against the former.

The suit was related to Sandoz's Abbreviated New Drug Application ANDA filing with the U.S. Food and Drug Administration (FDA) for a generic version of Acura's Aversion Oxycodone.

We note that Aversion Oxycodone addresses some common methods of product tampering associated with opioid abuse. Acura had alleged that the generic version infringes a U.S. patent owned by it.

As per the settlement agreement, Acura granted a non-exclusive license to Sandoz whereby the latter can launch a generic version of Aversion Oxycodone in the U.S subject to certain conditions.

The license will trigger after 180 days following the first sale of a generic version of Aversion Oxycodone by an entity that is entitled to the 180 day first-filer exclusivity under applicable law and FDA regulations.

On the other hand, Sandoz will not pay Acura any royalty if its current formulation of its generic of Aversion Oxycodone is approved by the FDA. If Sandoz changes or modifies the structure of its generic version filed for approval, it shall then pay Acura royalties to the tune of 7%.

The recent patent litigation settlements bode well for Novartis. Last week, Novartis settled another patent litigation. Novartis settled its litigation with Sun Pharmaceutical Industries Ltd.'s subsidiary in the U.S.

The litigation was related to patents covering the use of certain polymorphic forms of Novartis' oncology drug Gleevec (imatinib mesylate), which expires in 2019. The litigation settlement permits Sun Pharma's subsidiary to market a generic version of Gleevec in the U.S. in Feb 2016. Sun Pharma's subsidiary has received tentative approval from the U.S. Food and Drug Administration (FDA) to launch the generic version of Gleevec.

Meanwhile, we cautiously watch Novartis' efforts to realign its portfolio in order to focus on its core business of pharmaceuticals, eye care and generics. We believe the recent acquisition of oncology products from GlaxoSmithKline GSK and divestment of Vaccines business is a step in the right direction. It will broaden Novartis' portfolio and enable it to focus better on its core capabilities.

Novartis, a large-cap pharma, currently carries a Zacks Rank #3 (Hold). Right now, Allergan AGN looks attractive among the large cap pharmas with a Zacks Rank #1 (Strong Buy).

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