Updated from 9:34 a.m. EDT
shares rose Tuesday after a judge in New York upheld the patent on Plavix, the anticoagulant that serves as its biggest-selling drug.
Plavix is licensed in the U.S. to Bristol-Myers by France's
. The ruling, which protects the Plavix patent until November 2011, is a major win for both companies.
Canada's Apotex, a generic-drug maker, was attempting to invalidate the patent, but the court sided with the Plavix sellers. Bristol-Myers climbed $1.55, or 5.1%, to $31.85 in heavy trading. Sanofi-Aventis rose 32 cents to $41.67 on greater-than-average volume.
Plavix provided $3.26 billion in sales last year for Bristol-Myers, or 18% of total revenue. In 2005, Plavix accounted for $3.82 billion, or 20% of total revenue. Last year, Plavix contributed $3 billion to Sanofi-Aventis. It's the French company's second-largest drug.
Federal Judge Sidney Stein ruled that Apotex "failed to prove by clear and convincing evidence that
the Plavix patent is invalid or unenforceable."
In deciding for Bristol-Myers and Sanofi-Aventis, the judge permanently blocked Apotex from selling a generic version during the life of the patent. He will assess damages at a later date. Apotex said it will appeal.
Due to a
complex series of events, Apotex sold generic copies of Plavix
for three weeks last August before being blocked by a court injunction. The injunction remained in effect, pending the patent-infringement trial for which oral arguments were held in early 2007.
Even though a federal judge prevented additional generic shipments by Apotex, he didn't order a recall of the product already held by wholesalers or retailers. As a result, sales and earnings for Bristol-Myers and Sanofi-Aventis took a hit.
Bristol-Myers had tried to dissuade Apotex from selling generic Plavix until mid-2011, but when an agreement fell apart, Apotex started selling generic versions. The botched deal led to investigations by the Justice Department and the Federal Trade Commission. After the Apotex deal blew up, Bristol-Myers' CEO Peter Dolan and General Counsel Richard Willard
lost their jobs in September.
Bristol-Myers has since
settled a Justice Department's complaint by pleading guilty to two counts of providing false statements to the FTC and paying a $1 million fine.
Apotex's sale of generic Plavix was considered an "at-risk" launch -- a legal term describing the sale of a generic product before a patent has expired. Companies that make at-risk launches and are later ruled to have infringed on patents could be hit with triple damages. Bristol-Myers's deal with Apotex waived the triple-damages requirement.
"We believe some damages are likely," says Joseph Tooley, of A.G. Edwards, in a note to clients. "This is a clear victory for Bristol-Myers Squibb and Sanofi-Aventis." He doesn't own shares, but his firm has had a non-investment banking relationship with Bristol-Myers.
Tooley said the Plavix verdict "will ignite speculation" that Bristol-Myers is a takeover target and that Sanofi-Aventis is a logical buyer. However, he remains "cool" to the idea of Bristol-Myers being acquired, thanks to recent development and marketing deals it signed with
for a pair experimental diabetes drugs and with
for an experimental drug to prevent blood clots and strokes.
Anyone buying Bristol-Myers would have to share these drugs' profits with the other companies.
"While we agree that Bristol-Myers Squibb is possibly a more attractive acquisition with the Plavix ruling in hand," the company's "lofty" valuation -- 29% over Big Pharma peers -- has convinced Tooley to keep his hold rating.