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Sun Pharmaceuticals (SUNP)
Pharmaceuticals
SUN gets go-ahead for product launch, but uncertainty remains. As per the
Appeals Court ruling (1) the stay preventing SUN from selling generic Eloxatin has been
lifted, and (2) the case has been remanded back to lower court. This implies SUN could
launch it; however, given the case will continue at lower court, this would imply an atrisk launch. According to SUN, there may be a clause in settlements signed by Sanofi
allowing re-entry of other generics in case SUN launches it, before a pre-specified date,
which may reduce the incentive for SUN to launch at risk. In case of no competition, we
think SUN can garner US$50-60 mn of sales/quarter on a conservative basis. We await
SUN’s product launch before revising our estimates. Maintain BUY, PT of Rs482.
Background to the SUN-Sanofi case over generic Eloxatin
In October 2009, the US District Court of New Jersey signed off on Sanofi-Aventis' settlement
agreement with SUNP. Sanofi then appealed regarding the enforceability of this agreement. In
March 2010, the District Court ruled that the agreement with SUNP resolving the patent dispute
over Eloxatin was enforceable. Based on this judgment, SUNP launched generic Eloxatin on March
11, 2010. However, under this settlement, Sanofi believed that SUNP can continue to market until
other generics enter the market, i.e. till June 2010. Sanofi therefore asked the court to enter a
judgment reflecting the same. On April 23, 2010 the District court ruled that SUN would have to
stop selling beyond June 2010. This was appealed by SUN.
Appeals Court overturns lower court order banning SUN from selling Eloxatin beyond June 2010
As per Appeals Court ruling, (1) the stay preventing SUN from selling generic Eloxatin beyond June
2010 has been lifted, and (2) the case has been remanded back to lower court. The above implies
that SUN is free to launch generic Eloxatin; however, given that the case is to continue at lower
court, this would imply an at-risk launch.
Uncertainty over launch remains, we present scenario analysis (see inside)
According to SUN, there may be a clause in settlements signed by Sanofi with other generic
companies allowing re-entry in case of a generic launch, before a pre-specified date, which may
reduce the incentive for SUN to launch at risk. We believe SUN re-launching generic Eloxatin
depends on (1) this pre-specified date which will determine the exclusivity to be enjoyed by SUNP
(we estimate US$50-60 mn of sales/quarter translating into EPS of Rs1.5-2/quarter in case of no
competition on a conservative basis), and (2) SUN’s risk-taking ability to launch at risk immediately
versus launching post-settlement with Sanofi with a later date, but before Aug 2012. We present
a scenario analysis in the note. We await SUN’s product launch before revising our estimates.
Sequence of events on generic Eloxatin case
` June 2009. The US District Court for the District of New Jersey granted summary
judgment of non-infringement of Eloxatin patent in favor of TEVA, HSP and SUNP.
` July 2009. SNY promptly appealed against the above decision at the US Court of Appeals
for the Federal Circuit and on July 1, 2009, the Federal Circuit temporarily stayed the
district court judgment.
` August 2009. FDA approved ANDAs for oxaliplatin for the above three companies despite
the stay. On August 11, 2009 HSP and TEVA launched their products while SUNP did not.
` September 2009. In the ruling on September 10, 2009, The US Court of Appeals for the
Federal Circuit reversed the lower court ruling that generic manufacturers did not infringe
the patent on Sanofi's drug. The Court of Appeals for the Federal Circuit remanded the
case back to the district court.
` October 2009. The US District Court for the District of New Jersey approved SanofiAventis' settlement agreement with SUNP. The agreement ended the litigation over
generic Eloxatin. This was appealed By Sanofi.
` March 2010. In early March 2010, a decision was issued in favor of SUNP. Based on this
judgment, SUNP launched the product on March 11, 2010.
` April 2010. However, under this settlement, Sanofi believed that SUNP can continue to
market until other generics enter the market, i.e. till June 2010. Sanofi therefore asked
the court to enter a judgment reflecting the same. On April 23, 2010 the district court
ruled that SUN would have to stop selling beyond June 2010. This was appealed by SUN.
In April, Sanofi also signed settlement agreements resolving litigation over generic
Eloxatin with Teva, Fresenius, Hospira, Sandoz, Par, Actavis. Under the terms of the
proposed settlement, the generic manufacturers would resume selling generic oxaliplatin
products on August 9, 2012.
` June 2010. As per lower court ruling above, SUN along with the other generic companies
stop selling generic Eloxatin beyond June 30, 2010.
` December 2010. Appeals Court overturns lower court order banning SUN from selling
Eloxatin beyond June 2010.
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