Lilly shares fall after court invalidates patent

BOSTON (Reuters) - Shares of Eli Lilly & Co (LLY.N) fell 1.4 percent in premarket trading on Tuesday after a court invalidated a key patent governing its cancer drug Gemzar.

The Indianapolis-based drugmaker said late Monday that the U.S. District Court for the Eastern District of Michigan had granted a motion by the Indian generic drugmaker Sun Pharmaceuticals (SUN.BO) for partial summary judgment.

The ruling invalidates Lilly's '826 method-of-use patent for Gemzar, also known as gemcitabine, which had been set to expire in 2013.

The ruling does not affect Gemzar's compound patent, which remains valid until November 2010, Lilly said, which means generic copies may be kept at bay for the immediate future.

Lilly said it intended to appeal the ruling.

Seamus Fernandez, an analyst at Leerink Swann, said he expected the ruling to place 25 cents to 30 cents a share of Lilly's earnings at risk in 2011 and 2012.

The ruling compounds the already dire patent expiration cliff facing Lilly over the next few years.

"With over 70 percent of sales at risk to patent expirations in 2010-2016, risk of a disappointing launch of Effient, and a lackluster pipeline, we continue to see little reason to own Lilly shares," Fernandez said in a research note.

Effient, Lilly's new blood clot-preventer also known as prasugrel, posted second-quarter European sales of just $300,000, raising concern about its long-term sales prospects in the United States. It became available in the United States earlier this month.

"We strongly disagree with the Court's ruling," said Robert Armitage, general counsel for Lilly. "We continue to believe that our Gemzar method-of-use patent is valid and will be upheld by the courts."

Lilly's shares fell 1.1 percent to $32.35 from Monday's close of $32.71 on the New York Stock Exchange.

(Reporting by Toni Clarke; Editing by Lisa Von Ahn)