Zacks_Analysts' Blog : Watson Pharma Faces Lawsuit Heat - Analyst Blog

Momenta Pharmaceuticals, Inc. (MNTA) and Novartis AG (NVS) filed a lawsuit against Amphastar Pharmaceuticals, Inc. and Watson Pharmaceuticals Inc. (WPI) regarding the generic version of Sanofi-Aventis’ (SNY) Lovenox. The lawsuit was filed in United States District Court for the District of Massachusetts.

The lawsuit claims that Amphastar Pharma's generic Lovenox, which was approved by the US Food and Administration (FDA) on September 19, infringes two of Momenta's US patents. Amphastar Pharma plans to launch generic Lovenox in the US in the fourth quarter of 2011.

Lovenox is indicated for the prophylaxis and treatment of deep vein thrombosis and prophylaxis of ischemic complications in unstable angina and non-Q-wave myocardial infarction. According to IMS Health, US sales of Lovenox and its generic equivalents amounted to about $2.6 billion for the twelve months ended July 30, 2011.

Watson Pharma has an exclusive distribution agreement with Amphastar Pharma, under which the latter will supply generic Lovenox to Watson Pharma. Thereafter, Watson Pharma will market, sell and distribute the product to US retail pharmacy channels.

Amphastar Pharma will market, sell and distribute the product to all other channels, and receive 50-55% of Watson Pharma's gross profits on product sales, depending on the number of competitors in the market.

Our Take

We currently have a Neutral recommendation on Watson Pharma. The stock carries Zacks #2 Rank (Buy rating) in the short-run. We expect new generic product launches over regular intervals to help drive the company’s Global Generic segment’s sales.

Additionally, the acquisition of Specifar Pharmaceuticals in May 2011 is expected to contribute to Watson Pharma’s earnings through its commercial presence in key European markets.

Moreover, through this acquisition, Watson Pharma acquired the rights to certain ex-US markets of the generic version of AstraZeneca plc’s (AZN) gastroesophageal reflux disease drug, Nexium (esomeprazole).