King Pharma settles patent dispute, shares jump
CHICAGO Jan 8 (Reuters) - King Pharmaceuticals Inc KG.N said on Tuesday it ended a patent dispute with a generic drugmaker over one of King's biggest drugs, the muscle relaxant Skelaxin, sending its stock soaring 16 percent.
King said it agreed to dismiss its patent infringement lawsuit against CorePharma and would allow the company to create authorized generic versions of Skelaxin in two dosages.
Analysts had expected a ruling against King, and some noted that other generic threats loom.
"While KG can breathe a small sigh of relief on its settlement agreement with CorePharma on Skelaxin, the market has overreacted to this minor stay of execution," CIBC World Markets analyst Elliot Wilbur wrote in a note to clients.
Wilbur said the FDA still could allow for a broad generic launch of the drug, or a legal ruling in Eon's favor could trigger an immediate launch by Eon.
CorePharma, Eon Labs Inc and Mutual Pharmaceutical Co each filed for permission from the U.S. Food and Drug Administration to launch generic Skelaxin in 400 milligram tablets. Eon Labs is also seeking to launch its version in an 800-milligram dose. King filed patent suits against all three.
Eon Labs is part of Sandoz Inc, which is a division of Novartis AG (NOVN.VX).
Natixis Bleichroeder analyst Corey Davis said Sandoz is likely to receive a favorable ruling in the 800-milligram case. "In our view, while this removes the nearest-term threat, 800 mg Skelaxin (the only marketed strength) and its case with Sandoz still remains the key," Davis wrote in a note.
Morgan Stanley analyst Michael Rockefeller upgraded King to "overweight" from "equal-weight" after the settlement.
"The settlement increases the likelihood that generic versions of Skelaxin will be delayed beyond (first-half 2009) vs. the market's expectation that it would go generic imminently," he said in a note.
Shares of King Pharmaceuticals closed up $1.70, or 16.38 percent, at $12.08 on the New York Stock Exchange.
(Reporting by Susan Kelly, editing by Richard Chang)
((Reuters Messaging susan.kelly.reuters.com@reuters.net; susan.kelly@reuters.com, phone 312 408 8134)) Keywords: KING COREPHARMA/
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