AstraZeneca plc (AZN) announced that the US court has declared the formulation patent of Seroquel XR to be valid. The patent covering the formulation of Seroquel XR expires in 2017 in both the EU and the US. The court ruled that the patent was infringed by Anchen Pharmaceuticals, Inc., Osmotica Pharmaceutical Corporation, Torrent Pharmaceuticals Limited, Torrent Pharma Inc., Mylan Pharmaceuticals Inc. and Mylan Inc. (MYL).
A similar verdict was made by the District Court in The Hague, Netherlands, which ruled in favor of AstraZeneca and found Seroquel XR’s formulation patent to be valid.
However, the decision comes as a contrast to the UK High Court’s judgment, which ruled against the formulation patent protecting Seroquel XR and rendered it invalid. Seroquel XR is marketed as Seroquel XL in the UK. Teva UK Limited and Teva Pharmaceuticals Limited (TEVA) had challenged AstraZeneca’s Seroquel XR patent in December 2010. Similar patent challenges were made by Accord Healthcare Limited, Intas Pharmaceuticals Limited, Hexal AG and Sandoz Ltd. in March and April 2011.
Mylan Inc., Dr Reddy’s Laboratories (RDY) and Teva have launched their generic version of Seroquel in late March 2012. The Seroquel franchise generated sales of $5.8 billion in 2011. The entry of generic drugs in the market will hit AstraZeneca’s top line.
Neutral on AstraZeneca
We are encouraged by the company’s focus on the high-potential emerging markets and are pleased with the company’s effort to drive the bottom line through cost-cutting initiatives and share buybacks.
However, we remain concerned about the generic competition faced by its key products. In 2011, the company lost revenues worth almost $2 billion to generic competition. The weak late-stage pipeline coupled with the slow Brilinta uptake also bothers us. We currently have a Neutral recommendation on AstraZeneca. The stock carries a Zacks #3 Rank (Hold rating) in the short run.
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