Teva shares fall after losing Protonix patent case

JERUSALEM Sun Apr 25, 2010 7:58am EDT

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JERUSALEM (Reuters) - Shares of Teva Pharmaceutical Industries (TEVA.TA) slid nearly 3 percent on Sunday after a jury ruled that Teva infringed on Pfizer Inc's (PFE.N) Protonix acid reflux drug patent.

Israel-based Teva TEVA.O has been selling a generic version of Protonix since 2007. It was considered an at-risk launch, with the original patent on Protonix held by Swiss drugmaker Nycomed NYCMD.UL and was licensed to Wyeth, which is now owned by Pfizer.

The announcement came shortly before U.S. markets closed on Friday and Teva's Nasdaq-listed shares rose 0.8 percent to $61.54. In after-hours trade, Teva shares fell to a low of $60.43 but closed at $61.20.

Shares of Teva, the world's biggest generic drugmaker, were down 2.9 percent at 225.3 shekels in afternoon trade in Tel Aviv. The broader bourse was up 1.2 percent.

Analysts were surprised at the steep decline in Teva's shares since Teva plans to appeal and there were still legal issued to be decided by the judge presiding over the case.

"It's not the final verdict," said Natali Gotlieb, an analyst at the IBI Investment House. "It's still too early to know if Teva will have to pay anything.

"Maybe in the end, they will reach a settlement with Pfizer so there are so many scenarios."

Pfizer has said it would seek "the full measure of its damages." In similar cases when a product's patent has been found to be infringed the company holding the patent may seek triple damages on lost sales and reimbursement of legal fees.

But analysts doubt it would come to that since Teva had won favorable rulings throughout the process.

Gotlieb said Teva would likely pay no less than $300 million.

Stephen Tepper, an analyst at Harel Finance, estimated damages to Wyeth from lost profit were as much as $1.5 billion in the last 2-1/2 years.

As a result, Tepper said Teva could be forced to pay about $1 billion.

"While this is negative news, we expect limited downside to Teva since the final decision is yet to come and the options of an appeal or settlement are still open," UBS analyst Marc Goodman said in a clients note. He rates Teva as a "buy" with a $74 price target.

Gotlieb said the case could make Teva rethink at-risk launches. In February, Teva signed an agreement with Novartis (NOVN.VX) to settle patent litigation involving Teva's U.S. generic version of Famvir tablets.

Teva said it would make an undisclosed one-time payment to Novartis in addition to an ongoing royalty on U.S. sales of its generic version, famciclovir.

"I don't think Teva will now launch at-risk drugs," said Gotlieb, who rates Teva a "buy" with a $73 target.

"All in all, investors will should now consider the risk," she said. "But Teva will report (first-quarter earnings) in a week and a half and we believe they will publish a very good report."

(Editing by Louise Heavens)

($1 = 3.74 shekels)

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