Cephalon Settles Mylan Patent Matter

The deal is the third with generic-drug makers who have sued to break the U.S. Provigil patent.
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Three down, one to go.

Cephalon

(CEPH)

said Tuesday that it has agreed to settle a patent challenge

Mylan Laboratories

(MYL) - Get Report

lodged against the sleep-disorders drug Provigil.

The deal is Cephalon's third since December with generic-drug makers who have sued to break the Provigil patent in the U.S. Cephalon

previously signed similar treaties with India's

Ranbaxy Laboratories

and Israel's

Teva Pharmaceutical Industries

(TEVA) - Get Report

.

The agreement with Mylan calls for the companies to stop suing each other. Cephalon will grant Mylan a nonexclusive royalty-bearing right to market and sell generic Provigil in the U.S. starting between October 2011 and April 2012. Mylan could start selling generic Provigil sooner if another company's generic version of the drug reaches the market.

Still challenging the patent is

Barr Pharmaceuticals

(BRL)

, and the Mylan agreement has no impact on its activities vs. Cephalon.

Judging from its stock price, investors continue to reward Cephalon for its efforts to settle disputes over its best-selling drug rather than remain tangled in a bunch of lawsuits.

By midmorning, Cephalon's shares were up $1.56, or 2.2%, to $71.20, on heavier-than-average trading. The stock climbed as high as $71.74, the peak price for the last 52 weeks. Mylan rose 27 cents, or 1.3%, to $21.04.

In battling the generic-drug companies, Cephalon has argued that the key patent for Provigil remains in force to October 2014 and could run as long as April 2015. Meanwhile, the company has been developing a successor drug, Nuvigil, which is a chemical cousin of Provigil.

Cephalon had been hoping to get Food and Drug Administration approval for Nuvigil before the possibility of losing a Provigil patent challenge. But if Cephalon makes a deal with Barr, it will have a lot more breathing room and a lot more sales from Provigil, which accounted for $134.5 million, or 43%, of its third-quarter revenue. The FDA is expected to act on Nuvigil by the end of this month.