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Daniel B. Ravicher
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Daniel B. Ravicher is a registered patent attorney who frequently consults with investment banks, hedge funds, and individual investors on legal issues that may materially affect the value of publicly traded companies. In addition to private consulting, Mr. Ravicher also regularly publishes... More
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  • Analysis of Generic Taxotere Patent Fight Between Aventis and Hospira / Apotex 0 comments
    Jul 27, 2010 5:11 PM | about stocks: SNY, HSP

    Hospira (NYSE:HSP) and Apotex want to make generic docetaxel, a $3B/year (globally) blockbuster chemotherapy drug used to treat breast cancer, prostate cancer, and other types of cancers, sold under the brand name Taxotere by Sanofi-Aventis (NYSE:SNY).  Here are my thoughts about the case, who might win, when a decision will likely be issued, and what effect it could have on the parties.

    Sanofi has 5 patents listed in the FDA's Orange Book for Taxotere, but only two are at issue in this case.  The generics concede the oldest patent is valid and infringed, so they can't enter the market until November of this year, at the earliest.  One of the other patents is not involved because SNY waived their right to sue the defendants over it.  As for the third patent not involved, one can assume it will not be asserted by SNY, otherwise they would have done so in this litigation.  They could be holding it back to assert in the future, but that would be quite unusual.  In fact, I've personally kicked the tires on that patent and there are good arguments it's invalid and that, even if valid, it could be designed around.  So, I'm not surprised it isn't involved here, because it's not that strong of a patent.

    Thus, SNY only has two patents to try to keep a generic competitor to Taxotere off the market, patents 5,750,561 and 5,714,512 (both have FDA market exclusivity through Jan 2013).  This isn't all too unusual. It's frequently the case that a generic will concede validity and infringement of the oldest active ingredient patent, while a brand will concede non-infringement of later patents on delivery mechanisms, etc., leaving the parties to argue over just one or two patents in the middle (on particular formulations, etc).  Note, for a generic to win, it must only prove either that the patent(s) is invalid OR not infringed.  For the brand to win, it must prove both that its patent(s) is valid and infringed.  The burden of proof, though, is broken up between the parties, in that the burden to prove a patent invalid falls on the generic (patents are presumed valid), while the burden to prove the patent is infringed is on the brand.  Frequently, in order to achieve bioequivalence, a generic will concede infringement and, thus, only dispute the patent's validity.  That's not the case here, where Hopsira and Apotex are arguing that both the '561 patent and the '512 patent are each invalid and not infringed.

    The 7 day trial took place in a Delaware federal court last fall.  No decision has yet been made by the judge, who is quite familiar with patent law, but I expect one by the end of August (this is an average amount of time for the judge to issue such opinions and there is also frequently turn over of law clerks in August, which forces the old clerks who are leaving to complete their work before the new clerks take over).  This case is quite complex, with many different issues being debated, so the time it has taken for the court to decide this case shouldn't be a cause for concern or seen as unusual.

    My review of the matter, including the trial transcripts and post-trial briefs submitted by the parties, leads me to predict the judge is leaning in favor of SNY, but the generics have some very solid arguments and could quite possibly get a win.  Frequently generics have their arguments rejected by the judge without even holding a trial.  The judge here didn't do that, which signals that their arguments are stronger than average.  Generics are generally huge underdogs, but here HSP's version is significantly different than SNY's (it is much more stable than SNY's which has to be delivered in two separate vials and mixed by a clinician before delivery), and that could make all the difference.  Sanofi is still the favorite, but not by as much as in a typical brand versus generic patent fight.  If the generics can pull out a win from the trial court (remember, they need only win on either invalidity or non-infringement, not both), I wouldn't be surprised if HSP jumps significantly higher and SNY drops meaningfully lower on the news.  If SNY wins, the effect will likely be more muted, since that's the expectation I think a rational market would have at this point.  To put (some) money where my mouth is, I own Aug. 21 calls on HSP.

    Disclosure: HSP Aug 21 calls

    Stocks: SNY, HSP
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