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NEW YORK/PARIS French drugmaker Sanofi sued Eli Lilly and Co for alleged patent infringements concerning its top-selling Lantus diabetes treatment, delaying the U.S. company's plans to produce its own version of the drug.
Lantus is the world's most prescribed insulin product, with annual worldwide sales of about $7 billion. It is set to lose patent protection in the United States, the world's largest pharmaceutical market, in February 2015.
Sanofi's lawsuit, filed on Thursday, triggers an automatic 30-month stay of approval by the U.S. Food and Drug Administration, keeping Lilly's biosimilar drug off the U.S. market until mid-2016, more than a year later than its previously expected launch date.
Sanofi's shares were higher in earlier trading, but ended down 0.8 percent at 72.80 euros. Shares in Denmark's Novo Nordisk, whose own rival to Lantus, called Levemir, accounts for 15 percent of its sales, rose 3.64 percent to 219 Danish crowns.
"Any delay provides Sanofi and Novo increased pricing power in the $6 billion U.S. basal insulin market," Citigroup analysts wrote.
Deutsche Bank analysts said the move also raised the possibility of a further, multiyear extension of exclusivity for Lantus if, in the end, the court found that Sanofi's patents had indeed been infringed.
The lawsuit, filed in the U.S. District Court for the District of Delaware, comes a month after Eli Lilly applied to the FDA for permission to sell a biosimilar version of Lantus, known chemically as insulin glargine.
Indianapolis-based Lilly, in its FDA submission, challenged the validity of several patents on Lantus. But it also said it would not launch its product before Sanofi's patent on the active ingredient in Lantus expires in February 2015.
But Sanofi hit back in its lawsuit on Thursday, alleging that Lilly had infringed on four of its patents. Lilly responded to the lawsuit on Friday, denying any patent infringement.
"Lilly respects the intellectual property of others and does not believe the application for approval of its new insulin glargine product infringes any valid claim of the asserted patents," Lilly's general patent counsel Doug Norman said in a statement.
Eli Lilly shares were up 21 cents, or 0.4 percent, at $53.48 in midday trading on the New York Stock Exchange.
Lantus accounts for close to a fifth of Sanofi's total sales and over a third of its operating profit. Analysts estimate U.S. sales of the drug grew by 22 percent in 2013 to 3.8 billion euros ($5.15 billion).
Sanofi, which publishes full-year results next Thursday, is striving to return to growth after a difficult 2013 that featured problems in Brazil and several product setbacks.
Chief Executive Chris Viehbacher told Reuters last month he was confident its diabetes business could grow beyond 2015.
Sanford Bernstein analyst Tim Anderson said in a research note that the 30-month delay would raise Sanofi's earnings per share from 2015 through 2020 by about 6 percent and reduce Lilly's EPS for the period by about 2 percent.
ISI Group analyst Mark Schoenebaum forecast annual sales of about $1 billion by 2020 for a Lantus biosimilar, half of which would go to Lilly's partner Boehringer Ingelheim.
"In the worst case scenario, Sanofi blocks Lilly completely and the FDA never approves the drug, effectively removing all sales," he wrote in a note.
The delayed launch of Lilly's biosimilar drug will also give Sanofi more time, before cheap competition for Lantus hits the market, to switch patients to a new long-acting follow-up product known as U300, which could get FDA approval in 2015.
"Time is important in any switching strategy, so any delay would be supportive to the franchise's long-term growth," Jefferies analysts wrote.
(Editing by Amanda Kwan, Greg Mahlich and G Crosse)