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Sunday, June 16, 2013

Sun to pay Pfizer, Takeda Rs 3K cr over Protonix patent

This story first appeared in DNA Money edition on Thursday, June 13, 2013.

Sun Pharmaceutical Industries will pay as much as Rs 3,178 crore ($550 million) this year as its share of the settlement reached with US-based Pfizer Inc and Japan’s Takeda Pharma in the case of patent infringement relating to generic Protonix, a blockbuster acid reflux medicine.

Israel’s Teva will pay a further $1.6 billion – half this year and half in the next – taking the total payout to $2.15 billion.

The patent on Protonix was held by Nycomed, now a Takeda subsidiary. Protonix was licensed to Wyeth, which is now owned by Pfizer.

Of the $2.15 billion, Pfizer will receive 64% ($1.38 billion) and Takeda the rest ($774 million).

The settlement comes after a nearly 10-year legal battle, Pfizer said in a statement.

While a jury in New Jersey federal court determined that the generic launches by Teva and Sun violated US patent, the parties in litigation reached the settlement shortly after the commencement of a trial to determine damages in the same court. 

As part of the settlement, both Teva and Sun admitted their sales of generic pantoprazole infringed the patent that was held valid by the court. As a result, Teva and Sun will now compensate Pfizer’s subsidiary Wyeth and Takeda for damages suffered.

Pfizer officials were not available to share further details.

Sun Pharma officials were also not available for comment. However, the company said in a statement that the New Jersey court began a jury trial on June 3. “This settlement now culminates the ongoing litigation. Sun Pharma can continue to sell its generic pantoprazole in the US,” it said.

In February, Teva had said it may face legal losses of up to $2.07 billion to resolve the case. Sun Pharma on its part had set aside Rs 584 crore ($100 million) towards potential damages to Pfizer. However, it will now have to pay additional $450 million in final settlement.

Analysts don’t see it as a positive out-of-court settlement for Sun Pharma.

“The agreed amount is way too high for such a settlement. It will also restrict Sun’s ability to look for acquisitions,” Daljeet Kohli, head of research at brokerage IndiaNivesh, told Reuters.

However, according to Suruchi Jain, equity research analyst - pharma, Morningstar India, paying up $550 million should not be an issue for Sun Pharma, considering it is sitting on $1 billion cash. “The company has enough cash as $740 million are with Sun Pharma and the balance is on Taro’s books. Sun may, however, have to raise more debt for any acquisitions it plans to do in this fiscal. Considering that Sun is practically a debt-free company, raising money should not be an issue as well.”

But with cash balance reducing by $550 million, Sun Pharma’s valuations are likely to take a hit.

“But it won’t be a huge hit. Rough estimates indicate reduction in its valuation by about 3%,” said Jain. With agencies

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