Santarus, Inc. (SNTS) suffered a major setback recently when a US District Court ruled against the company in a patent infringement case. The U.S. District Court for the District of Delaware ruled that five patents covering the company’s flagship product, Zegerid, are invalid.
Santarus had initiated the patent infringement case against generic player Par Pharmaceutical, Inc. (PRX). Par is seeking to launch its versions of Zegerid capsules and powder for oral suspension.
This ruling is a huge blow for Santarus, which was looking to protect Zegerid from generic competition. The company is entirely dependent on Zegerid for growth and the entry of generic versions of the product will be devastating for the company. Zegerid accounted for 69% of total revenues in 2009.
Although Santarus has been exploring other avenues to drive growth, we note that these will not be enough to make up for the loss of revenues once Zegerid goes generic. Apart from Zegerid sales, Santarus generates revenues from its licensing agreements with GlaxoSmithKline (GSK), Merck (MRK) and Norgine. The company also earns revenues under its co-promotion agreement with Depomed (DEPO) for Glumetza.
Meanwhile, pipeline candidates budesonide MMX and rifamycin SV MMX, if successfully developed, are not likely to hit the market before 2012.
Santarus said that it intends to appeal the court’s decision. While the 30-month stay period on the capsule formulation expired in early February 2010, Par has yet to gain US Food and Drug Administration (FDA) approval for its abbreviated new drug applications for Zegerid. As such, there is some uncertainty as to when a generic version of the product will hit the market.
Santarus stated that it is unaware of any other companies that may be seeking approval for generic versions of Zegerid. We believe that Par will be ready to launch as soon as it receives FDA approval.
Santarus shares plunged 39% on the news in after-market trading Wednesday, and has only recovered to around $33.56 per share Thursday.
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