LONDON AstraZeneca (AZN.L) shares rose nearly 5 percent on Wednesday after the group won a key U.S. patent battle over its second-biggest selling drug, Seroquel, for schizophrenia and bipolar disorder.
The court decision to award summary judgment in its favour, thus avoiding the need for a lengthy trial, underpins future profits by making it highly unlikely generic copies of the $4 billion (2 billion pound)-a-year blockbuster will be launched before 2011 or 2012.
Although many investors had expected AstraZeneca to prevail in the case, analysts at Morgan Stanley said the news still removed a significant threat, since U.S. profits on Seroquel account for 25 percent of forecast 2009 earnings.
"We estimate yesterday's decision removes an overhang worth around 1.50 pounds per share in discounted cash flows," they wrote in a note, reiterating an "equal-weight" stance on the stock.
A court in New Jersey granted AstraZeneca's motion for summary judgment on the basis of no inequitable conduct, making unnecessary a trial that had been slated to begin on August 11.
AstraZeneca had sued both Teva Pharmaceutical Industries TEVA.O and Sandoz, the generics arm of Novartis NOVN.VX, alleging their plans to launch generic versions of Seroquel infringed its patents.
Teva and Sandoz had already conceded infringement and the validity of AstraZeneca's patent, so only the issue of inequitable conduct remained to be resolved.
"We are pleased with the court's decision to uphold our valid intellectual property. Seroquel remains an important part of our company's portfolio," AstraZeneca Chief Executive David Brennan said in a statement.
TEVA TO APPEAL
Teva, whose shares were unchanged in U.S. trading, said it planned to appeal against the decision, which was announced late on Tuesday, suggesting the legal tussles may not be over yet.
Deutsche Bank analysts, however, said they did not expect Teva to succeed, adding the appeal would likely take 12 months, plus a period of time for any retrial.
UBS analyst Gbola Amusa said the risks to Seroquel were fast evaporating and he predicted AstraZeneca now had a 95 percent chance of ultimate success in the dispute. He increased his price target for the shares to 22.25 pounds from 21.50 pounds, while maintaining a "neutral" rating.
Seroquel sold $4.03 billion worldwide last year and is a particularly profitable product for AstraZeneca, which has overall annual sales of $29.6 billion.
Winning the patent action should underpin a part of the group's profits at a time when sales of top-seller Nexium, for ulcers and acid reflux, are slowing and new drugs are still several years from the market.
Shares in the drugmaker ended 4.8 percent higher at 22.33 pounds, after hitting a high of 22.87 -- their biggest daily gain since the company settled a patent dispute over Nexium with India's Ranbaxy Laboratories Ltd RANB.BO in April.
The U.S. patent on Seroquel is due to expire in September 2011, although AstraZeneca is seeking a six-month extension for paediatric use, which would take it to March 2012.
By delaying the risk of generic competition until then, AstraZeneca gains valuable breathing-space to allow its new once-daily version of the medicine, Seroquel XR, to capture market share, Citi analysts said.
(Editing by Paul Bolding and David Holmes)