Lilly Wins Favorable Ruling From U.S. PTO In Alimta Dispute

Eli Lilly & Company (NYSE:LLY) announced that it has received a favorable ruling from the U.S. Patent and Trademark Office (PTO) in a dispute related to the vitamin regimen patent on its key cancer drug, Alimta (pemetrexed disodium).

In an inter partes review (IPR) ruling, the U.S. PTO validated the Alimta vitamin regimen patent, thereby removing a major overhang for Lilly. Markedly, the IPR was initiated by Neptune Generics and Sandoz, the generic arm of Novartis AG (NYSE:NVS) .

We remind investors that in January this year, the U.S. Court of Appeals ruled in favor of Lilly in a lawsuit against generic drugmaker Teva Pharmaceuticals (NYSE:TEVA) regarding the validity and infringement of the same patent, confirming the earlier decisions by a district court. The U.S. PTO’s IPR ruling is consistent with these previous Alimta decisions.

So far this year, Lilly’s share price has risen 19.1% comparing favorably with industry’s growth of 17.9%.

Although the compound patent covering Alimta in the United States expired in January this year, the vitamin regimen patent will remain valid till June 2021 (plus pediatric exclusivity expiring in 2022), if Alimta’s patent is ultimately upheld through all the remaining challenges. The compound patent has already expired in major European countries and Japan in Dec 2015.

More than ten generic manufacturers including Teva and Sandoz are seeking approvals in the United States to market generic forms of Alimta prior to the expiration of its vitamin regimen patents.

Notably, Alimta is one of the top revenue grossers at Lilly and a longer commercial life for Alimta would provide top-line support as several products in Lilly’s portfolio are already facing patent expiration.

The entry of generic competition for Alimta following the loss of effective patent protection will cause a rapid decline in revenues for the product.

In the first half of 2017, Alimta sales declined 13% year over year to $1.02 billion. Outside the United States, the sales of this cancer drug are being hurt due to loss of exclusivity in several countries. However, its U.S. sales are being affected by increased competition owing to the entry of immuno-oncology agents in the market. The favourable IPR narrows down the chances of generic competition to Alimta, which could have hurt sales more.

Lilly carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

A better-ranked large cap drug company from the same space is Pfizer, Inc. (NYSE:PFE) holding a Zacks Rank #2 (Buy). In 2017, shares of the company have rallied 10.8%.

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