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U.S. FTC case against Cephalon back to square one

NEW YORK, July 28 (Reuters) - Litigation against Cephalon Corp CEPH.O by the U.S. Federal Trade Commission and others over the drugmaker's payments to delay generic versions of its top-selling medicine will essentially start over after a new judge took over the case.

The delay, which should help keep the sleep disorder drug Provigil free of generic competition for the foreseeable future, helped push Cephalon shares up more than 3 percent.

Judge Mitchell Goldberg of the District Court for the Eastern District of Pennsylvania told all parties that he needed to be brought up to speed on the consolidated case and asked them to to refile all their motions in concise form before restarting the discovery process.

“We must start over,” Goldberg said, adding that there had been “way too much paper filed so far and I don’t want to be inundated.”

One of the first motions that will be refiled will be Cephalon’s motion to dismiss the case, the company said.

“Although we cannot conclude anything new about the merits of the case, it is clear to us that nothing could go against Cephalon soon,” Natixis Bleichroeder analyst Corey Davis said in an analyst note following the status conference in Goldberg’s Philadelphia courtroom.

“And the longer the case takes to develop, the less relevant any outcome is, since it gets closer to the 2012 exclusivity expiration for Provigil,” Davis said.

Provigil had global sales of $988.4 million in 2008, or roughly half of the company’s total revenue.

At the heart of the litigation, which has been kicking around for more than three years, is Cephalon’s payments to four generic drugmakers in late 2005 and early 2006 to settle patent infringement lawsuits.

Under terms of the settlements, the four companies -- Ranbaxy Laboratories RANB.BO, Teva Pharmaceutical Industries Ltd TEVA.TA, Mylan Inc MYL.O and Barr Pharmaceuticals, which has since been acquired by Teva -- agreed to wait until 2012 to sell generic versions of Provigil.

The so-called “pay to delay” deals drew the ire of the FTC, Congress and health care reformists looking to make cheaper generic drugs more readily available. Cephalon has maintained all along that the settlements were legal and proper.

Privately held Canadian drugmaker Apotex, which is looking to sell generic Provigil, is also involved in the litigation now under Goldberg’s jurisdiction.

Tuesday’s hearing was Goldberg’s first opportunity to meet with all sides, Cephalon said.

No timelines were set for the refiling of motions or discovery hearings, but the judge said he considered the case to be of high priority.

Cephalon shares were up $2.04, or 3.5 percent, at $59.70 in afternoon trade on Nasdaq. (Reporting by Bill Berkrot; Editing by Tim Dobbyn)

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