May 14, 2007 / 7:22 AM / 13 years ago

Eisai shares soar after winning patent ruling

(Updates with closing share price)

TOKYO, May 14 (Reuters) - Shares in Japan’s Eisai Co. Ltd. (4523.T) surged more than 12 percent on Monday after a U.S. court upheld a patent protecting Eisai Co. Ltd.’s (4523.T) Aciphex acid reflux drug, ruling it had been infringed by generic drug companies seeking to sell cheap versions of the medicine.

The court decision was a major victory for Eisai, the nation’s fourth-biggest drug maker, which derives nearly half of its U.S. drug sales from Aciphex. The disputed patent runs until May 2013.

Johnson & Johnson Inc. (JNJ.N), which co-markets Aciphex with Eisai, reported $1.24 billion in 2006 sales of the drug worldwide.

Aciphex is Eisai’s second-biggest selling drug after Aricept, which is used to treat Alzheimer’s disease. Aricept’s U.S. sales are estimated by Nikko Citigroup to have accounted for roughly a fifth of Eisai’s operating profit in the business year that ended in March.

Eisai’s shares closed at 6,230 yen, up 12.7 percent. The stock had been depressed since late February on fears that it would not win the case, losing some 18 percent in value and falling as low as 5,470.

Deutsche Securities lifted its rating on Eisai to “hold” from “sell” after the ruling.

“Eisai’s stock has bounced back over the 6,000 yen mark on short-covering but in the mid to long-term the premium attached to Eisai’s stock will erode as it doesn’t have a blockbuster drug to replace Aricept,” said Mayo Mita, pharmaceuticals analyst at Morgan Stanley.

Aricept’s U.S. patent expires in 2010.

Generic drug makers Teva Pharmaceutical Industries Ltd. TEVA.O(TEVA.TA) of Israel and Dr. Reddy’s Laboratories Ltd. (REDY.BO)(RDY.N) of India had argued that Eisai’s patent should not be enforced because Eisai engaged in inequitable conduct in seeking its patent.

U.S. District Judge Gerard Lynch in Manhattan said in his ruling that “plaintiffs (Eisai) have established that defendants have infringed a valid patent.”

Aciphex, known chemically as rabeprazole sodium, belongs to a lucrative class of drugs known as proton pump inhibitors designed to suppress production of stomach acid that can burn and damage the esophagus, a condition known as gastroesophageal reflux disease.

It competes with other popular medicines such as Nexium and Prilosec from AstraZeneca (AZN.L), Wyeth’s WYE.N Protonix and Prevacid from TAP Pharmaceuticals, a joint venture of Abbott Laboratories Inc. (ABT.N) and Japan’s Takeda Pharmaceutical Co. (4502.T).

((Reporting by Edwina Gibbs, editing by Malcolm Whittaker; Reuters messaging: edwina.gibbs.reuters.com@reuters.net; email edwina.gibbs.@reuters.com; +81 3 3432-8720)) Keywords: EISAI ACIPHEX/PATENT SHARES

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