Negative Alimta News Disappointing For Eli Lilly

Morgan Stanley said the negative news on Alimta is disappointing for Eli Lilly and Co LLY as the patent was upheld in District Court last year.

The PTAB instituted a review of Alimta's '209 patent. A final ruling is expected within a year by June 3, 2017. The brokerage noted that the '209 patent expires May 2022, and the Street generally models Alimta U.S. exclusivity through 2022.

Morgan Stanley says the patent covers "[a] method of administering an antifolate to a mammal in need thereof" by using a methylmalonicacid ("MMA") lowering agent, such as vitamin B12, to the host undergoing treatment.

"By instituting a review, the PTAB believes there is a reasonable likelihood that the patent will be invalidated," analyst David Risinger wrote in a note.

Last August, Eli Lilly won its infringement and validity cases for Alimta in District Court against Teva Pharmaceutical Industries Ltd (ADR) TEVA. The decision has been appealed, and the appellate court ruling is a completely separate track than the current IPR case.

"While the IPR ruling is certainly a surprise given the District Court's decision, the hurdle for invalidation is lower for PTAB cases (preponderance of the evidence) than Federal Court cases(clear and convincing evidence)," Risinger highlighted.

Risinger noted Alimta only has one other Orange Book patent (5,344,932), although that expires imminently in January 2017.

However, Risinger and the Street assume Alimta exclusivity beyond 2020. The analyst expects 2020 sales of $843 million in the U.S. and $1.3 billion globally, representing about 3 and 5 percent of total estimated sales of $26.1 billion in 2020. Meanwhile, the analyst said consensus appears to be modeling Alimta revenue of about $1.5 billion in 2020.

Morgan Stanley has an Equal-Weight rating and $88 price target on the stock.