) recently announced a $2.15 billion settlement agreement related
to the "at-risk" launch of generic versions of its blockbuster
acid reflux drug Protonix in the US. The agreement follows a
10-year legal battle which saw Pfizer and
) fighting to enforce the Protonix patent.
) and Indian generic company, Sun Pharmaceutical Industries, had
launched their generic versions of Protonix before the loss of
Teva had launched its generic version of Protonix in Dec 2007,
well ahead of the patent expiry date of Jan 2011. Teva's sales of
generic Protonix prior to Jan 2011 were about $1.1 billion.
While Teva will make a payment of $1.6 billion, Sun Pharma
will pay the remaining $550 million. Teva intends to pay 50% of
its dues this year and the balance by Oct 2014. Meanwhile, Sun
Pharma will pay the entire amount this year. Pfizer will receive
64% of the proceeds with Takeda getting the balance.
Teva had set aside a $670 million provision related to this
lawsuit in 2012 and expects a charge of about $930 million in the
second quarter of 2013. The company expects net insurance
coverage of up to $560 million related to this settlement.
We do not expect this settlement agreement to have a major
impact on Teva's shares as the company had already set aside $670
million last year for such an outcome. Moreover, Teva had
estimated that in addition to this amount, it could incur a loss
of up to $1.4 billion for the Protonix settlement. Therefore, the
$1.6 billion settlement amount was within Teva's
Teva currently carries a Zacks Rank #3 (Hold). At present,
) looks well placed with a Zacks Rank #2 (Buy).
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