Salix Pharmaceuticals Ltd. (SLXP) and partner Norgine BV recently announced that they settled a patent litigation with Novel Laboratories, which was looking to bring a generic version of MoviPrep to market. MoviPrep is a liquid bowel cleansing agent. The case is currently pending in the US District Court for the District of New Jersey.
Upon the court’s approval, Novel Labs will dismiss its claim of invalid patents for MoviPrep while Salix and Norgine will drop their lawsuit against Novel Labs. As per the terms of the agreement, Salix and Norgine will grant Novel Labs a license to the patents covering MoviPrep, effective latest by September 24, 2018.
Novel Labs agreed to manufacture and supply MoviPrep to Salix, in a completely separate agreement, along with providing Salix with a domestic supplier.
Salix licensed the rights of MoviPrep from Norgine BV in 2005. MoviPrep (approved in 2006), OsmoPrep and Visicol together comprise the company’s bowel cleansing franchise, which contributed 33% to revenues in fiscal 2009.
At the second quarter conference call, Salix said that it expects its bowel cleansing products to generate revenue of $88 million during fiscal 2010.
We currently have a Neutral recommendation on Salix, which is supported by a Zacks #3 Rank (short-term Hold rating). We view this patent litigation settlement as a positive for the company, given the fact that it will help delay the entry of generic versions of MoviPrep.
We believe the main potential for Salix lies in gaining approval for additional indications for lead product Xifaxan (rifaximin). We believe the company will also seek suitable in-licensing opportunities in order to grow revenues. In the meantime we remain concerned about the possibility of a generic company initiating a patent challenge for Xifaxan.
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