I'm pretty sure investors in Barr Pharmaceuticals (NYSE:BRL) have instituted a new motto for the company: "A lawsuit a week, that's all we ask."
Coming off of two lawsuits filed against it in as many weeks, this week Barr announced that it was being sued again. This time it's drug maker Schering-Plough (NYSE:SGP) that's suing Barr over patent infringement of its brain cancer treatment drug, TEMODAR. Cancer Research Technology joined Schering in the lawsuit, since it owns the patent on the compound.
Barr filed an abbreviated New Drug Application for generic TEMODAR last March, and the FDA notified Barr of the application's acceptance for filing last month. Barr believes it's the first to file an aNDA for generic TEMODAR, giving it a six-month window of exclusive sales before other generic drugmakers can join in the fun.
TEMODAR is approved as a first-line treatment of glioblastoma multiforme, a type of brain tumor, in combination with radiation and then as a maintenance therapy. It's also approved as a secondary treatment for patients who have failed to respond to other therapies. The product had $703 million in sales last year, almost half of which were in the U.S. If Barr could grab half of the market share at 40%-45% of brand-name cost, that's a substantial boost in sales during the exclusivity period.
For investors (at least those who don't practice patent law), the problem with these cases is that there's almost never enough information upon which to base a rational decision. Schering claims that the patent protecting TEMODAR doesn't expire until 2014, which is also the patent expiry date listed in the FDA's Orange Book. But courts often overturn patent claims, as was the case for Eli Lilly's (NYSE:LLY) patent on Prozac, which Barr broke in 2000. Other times, the generic drugmaker loses the challenge, as was the case for Eisai, which successfully sued Teva Pharmaceutical (NASDAQ:TEVA) and Dr. Reddy Labs (NYSE:RDY) for infringing on its patent of Aciphex, a heartburn medication.
Investors just need to trust that the generic drugmakers -- and their lawyers -- know what they're doing. As long as the companies are spending less on the court cases than they can make during the exclusivity period they acquire by breaking the patent, these lawsuits are surely good moves. Two quarters of exclusive sales can do wonderful things for a company's bottom line, so I say: Keep the lawsuits coming, Barr. One a week is all we ask.
Barr Pharmaceuticals is a recommendation of Motley Fool Stock Advisor. Would you like to know the other potentially lucrative picks from David and Tom Gardner? Click here to start your 30-day risk-free trial. It's free.
Fool contributor Brian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. Eli Lilly is an Income Investor recommendation. The Fool's disclosure policy is rock-solid.
