Lilly Wins Favorable Ruling From U.S. Court In Alimta Row

Eli Lilly & Company (NYSE:LLY) has received a favorable ruling from a U.S. district court in a patent dispute against India’s generic drugmaker Dr. Reddy's Laboratories Limited (NYSE:RDY) . The case was related to the vitamin regimen patent on Lilly’s key cancer drug, Alimta (pemetrexed disodium).

The U.S. District Court for the Southern District of Indiana validated Alimta vitamin regimen patent, stating that it would be infringed by Dr Reddy’s proposed generic products, which are alternative salt forms of pemetrexed.

Concurrently, Lilly also informed that earlier this month, the district court also ruled in its favor in a lawsuit against Hospira, a subsidiary of Pfizer, Inc. (NYSE:PFE) . The court denied Hospira's motion for summary judgement and instead, granted Lilly's cross-motion for summary judgement.

Although the compound patent covering Alimta in the United States expired in January 2017, the vitamin regimen patent will remain valid till May 2022, if Alimta’s patent is ultimately upheld through all the remaining challenges. The compound patent already expired across major European countries and Japan in Dec 2015.

Other than Hospira and Dr Reddy’s, several other generic manufacturers including Teva (NYSE:TEVA) and Sandoz are seeking approvals in the United States for marketing generic forms of Alimta prior to the expiration of its vitamin regimen patents. We remind investors that last October, the U.S. Patent and Trademark Office had validated the Alimta vitamin regimen.

The latest wins against Hospira and Dr Reddy’s means these companies can launch their generic versions of Alimta only after the patent expires. However, both companies are expected to appeal against the district court’s decision.

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 first-quarter 2018, Alimta sales rose 2% to $499.6 million as higher sales in the United States offset sales decline in the international markets. Outside the United States, the sales of this cancer drug are being hurt due to loss of exclusivity in several countries as well as competitive pressure. Its U.S. sales are also being affected by an increased competition due to the entry of immuno-oncology agents in the market. The favourable patent decision lowers the chances of a generic competition for Alimta before patent expiration, which could have hampered its sales more.

Year to date, shares of Lilly have risen 2% against the industry’s decline of 4.4%.

Lilly currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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