Judge Rules Sanofi's Patent For Plavix Is Valid

A federal judge on Tuesday rejected a bid by Canadian drug maker Apotex Inc. to invalidate the key U.S. patent for Sanofi-Aventis' (SNY) popular blood thinner Plavix.

However, Apotex said Tuesday that it plans to immediately appeal the ruling with the U.S. Court of Appeals for the Federal Circuit in Washington, which typically handles appeals involving patent cases.

In an opinion Tuesday, U.S. District Judge Sidney H. Stein in Manhattan upheld that patent and said Sanofi is entitled to a permanent injunction to prevent Apotex from marketing its own generic version of the drug. Plavix is co-marketed by France's Sanofi and Bristol-Myers Squibb Co. (BMY).

The decision essentially prohibits a generic version of the drug from being introduced into the market for another four years.

"This court now finds that Apotex has failed to prove by clear and convincing evidence that the (key Plavix) patent is invalid or unenforceable, and Sanofi is entitled to a permanent injunction prohibiting Apotex from further infringement," the judge said.

Shares of Bristol-Myers set a 52-week high of $32.07 on Tuesday. They recently were up $1.44, or 4.8%, to $31.75, while Sanofi's shares in the U.S. recently traded up 14 cents, or 0.3%, to $41.49.

In his ruling, the judge said he will determine damages in the case at a later date.

"Despite today's decision, we are unwavering in our belief that the (Plavix) patent will ultimately be held invalid, and that the court will find inequitable conduct on the part of Sanofi," Apotex Chief Executive Barry Sherman said in a prepared statement.

Sherman noted that Apotex believes the issues in the Plavix case are similar to those in a patent case involving Pfizer's hypertension drug Norvasc. Apotex began selling a generic version of Norvasc last month after prevailing on appeal.

Sanofi and Bristol-Myers issued a joint statement announcing the Plavix ruling on Tuesday, but didn't make any further comment on the decision.

Dresdner Kleinwort analyst Ben Yeoh said Tuesday that Sanofi's win in the Plavix patent case "is quite a big deal" and he was surprised the shares aren't up more on the news.

"The market may be missing the fact that Sanofi could be due damages worth 50% of net sales, which would add up to hundreds of millions of dollars," Yeoh said.

Last August, Stein halted Apotex from selling its generic version until he could hear the patent case. The Canadian company introduced its generic in early August after state antitrust regulators rejected a proposed settlement in a long-running legal dispute between the companies.

Plavix was the second-biggest-selling drug in the world behind Pfizer Inc.'s (PFE) cholesterol drug Lipitor. The blood thinner generated global sales of $5.9 billion, in 2005, the last full year for which figures are available.

Joseph F. Tooley, an A.G. Edwards Inc. (AGE) analyst, said Tuesday that Bristol-Myers investors seem to be anticipating an increased chance the company could be acquired, given the Plavix ruling and the conclusion of other recent legal issues. Tooley noted the company's stock is trading at a roughly 29% premium to group.

"I think the stock-price reaction to today's ruling reflects the higher likelihood of a takeout now that the Plavix decision is in hand," said Tooley, whose firm had cooled to the idea of Bristol-Myers takeout.

Earlier this month, Bristol-Myers pleaded guilty to two counts of making false statements to the Federal Trade Commission regarding the proposed settlement in the Plavix case and agreed to pay a $1 million fine.

The company also recently completed the terms of a two-year deferred prosecution agreement with federal prosecutors in New Jersey in a separate accounting scandal at the drug maker.

Tooley doesn't own the stock; his firm or an affiliate received compensation from Bristol-Myers in the past 12 months for products or services other than investment banking.

In a research note Tuesday, Chris Schott, a Banc of America Securities analyst, said speculation that Bristol-Myers will be acquired is likely to increase as the Plavix ruling removes "a major overhang for both companies."

"We view the news today as refueling takeout speculation that has been part of the Bristol story since early January when the media - La Lettre de L'Expansion - broached news of talks between Sanofi and Bristol," said Schott, who raised his price target for Bristol-Myers by $2 to $29 a share on Tuesday.

Schott doesn't own Bristol-Myers or Sanofi stock; his firm has performed investment-banking services for Bristol-Myers and Sanofi in the past 12 months.

Tooley and Schott both said they believe the patent will be upheld on appeal. "We estimate that an appellate hearing could occur in late 2008, with a ruling during 2009," Schott said.

In reviewing the patent, Tooley said A.G. Edwards doesn't believe the issues in the Norvasc case and the Plavix case are "exactly the same" and there is "sufficient difference" in the cases for Bristol-Myers and Sanofi to prevail on appeal.

At trial earlier this year, Apotex argued that the key patent for Plavix was invalid because it was anticipated in a prior patent held by Sanofi, and that its development would have been obvious to a person of ordinary skill in the field who examined the prior patent.

Sanofi and Bristol-Myers had claimed Apotex's generic version of the drug infringes on Sanofi's key U.S. patent, which runs through November 2011.

A Sanofi lawyer argued at trial that Plavix was an "extraordinary breakthrough" and wasn't an obvious development. It required a good deal of experimentation by Sanofi's scientists, he said.