Takeda to gain from Actos patent victories

News

The answer to the question posed by EP Vantage last month as to whether Actos could benefit from a stay of patent expiry execution (Can Takeda prolong Actos' life?, March 11, 2010) appears to be a resounding ‘yes’. Takeda announced after market yesterday that it has settled six out of eight patent challenges with generic companies, who agreed to delay the launch of their copycat versions by 19 months.

The Japanese market is closed for a public holiday today so Takeda’s shares will have a chance to respond to this news tomorrow and barring a wider market decline that reaction should be positive. As to how positive depends on how much the market has already priced in the news, but given that an extra 19 months of exclusivity for Actos in the US could add $1.94bn in future profits to Takeda, the share price gain could be significant (see tables below).

Compromise

Following the first settlement with Watson Pharmaceuticals on March 10, further deals have been struck with Ranbaxy Laboratories, Mylan, Torrent Pharmaceuticals and Sandoz.

The companies with first-to-file status, Watson, Mylan and Ranbaxy, will delay the launch of their generic versions of Actos from January 2011, when the main composition patent expires, to August 17, 2012. Torrent and Sandoz will therefore have to wait a further six months and launch in February 2013. The deals also cover Actoplus Met, a combination of Actos and metformin, with generic versions of the combination product set to launch on December 14, 2012.

The only other patents surrounding Actos listed in the FDA’s Orange Book, mainly concerning combination and formulation patents, all expire in 2016, so the August 2012 date is clearly a compromise between the merits of these patents and the chances of generics companies launching “at risk”.

The settlements over Actos follow a number of recent high profile “pay-for-delay” deals to resolve patent litigation, such as those over Eloxatin earlier this month (Sanofi's Eloxatin pact could join FTC's pay-for-delay tally, April 6, 2010), indicating a clear preference for generic companies to reach a settlement. The FTC will no doubt be reviewing the terms of these Actos settlements.

Upgrades

Two patent infringement lawsuits remain outstanding, against Teva Pharmaceutical Industries and Aurobindo Pharma, while Takeda is also aware of two further ANDA filings which will also need to be resolved.

Nevertheless, the Japanese pharma giant is now sufficiently confident that generic competition for Actos will not start until August 2012 that it will include these additional sales when it issues mid-term financial guidance on May 12.

The table below, extracted from EvaluatePharmaconsensus forecasts, illustrates the extent to which 19 months of extra exclusivity could boost US sales of Actos. For example, instead of $893m in sales in 2011 when generic competition had been expected to start, Actos sales could reach $3.16bn, an upside of $2.26bn in just one year.

Actos Sales Model - current and adjusted USA annual sales ($m)
2009 2010 2011 2012 2013 2014 2015 2016
 USA sales (assuming patent expiry Jan 11)  3,162  2,864  893  572  423  274  158  108
 USA sales (assuming patent expiry Aug 2012)  3,162  3,169  3,156  2,352  861  579  409  256
 Difference  -  +305  +2,263  +1,780  +438  +305  +251  +148

In terms of the extra profit or cash that Takeda will receive from these additional Actos sales, EvaluatePharma’s NPV Analyzer suggests $1.94bn could the added to the coffers, raising the value of the product to $4.72bn.

Actos: My NPV Analyzer
Default My NPV Change
 Share Price ($)  43.48  45.94  +5.7%
 Market Cap ($m)  34,338  36,280  +1,942
 NPV (after-tax) ($m)  2,780  4,722  +70%
 NPV Per Share ($)  3.5  6.0  2.4
 % of Share Price  8.1%  13.8%
 Share Price Date  28-Apr-10
 WW Peak Sales (adj) ($m)  3,974
 WW Peak Sales (unadj) ($m)  4,018  4,546
 Patent Expiry  17-Jan-11  17-Aug-12

This would rank Actos as Takeda’s third most valuable product behind cancer therapy Leuplin and hypertension agent Blopress.

Takeda’s shares, which closed at ¥3,920 yesterday, have declined 8% since reaching a 12-month high of ¥4,260 in the middle of March. As such, increased confidence in a longer market life for Actos should help Takeda recover some of those losses.

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