Jazz Pharmaceuticals has been called out repeatedly for substantial price hikes on its leading product Xyrem. But now, the company’s cash cow could be in trouble.
Last week, the Irish drugmaker saw four patents on its most important asset upturned by the U.S. Patent and Trademark Office, through the inter partes review system pharma has come to dread. The PTO is due to rule on two more “imminently,” Bernstein’s Ronny Gal wrote in a note to clients, and given their similarity to those already tossed, they could well suffer the same fate.
The patent loss is a blow to Dublin-based Jazz, whose narcolepsy star generates more than 70% of its operating profit, Gal notes. The med has grown to that point somewhat controversially, as Jazz hiked its list price 841% over the 5 years ending in 2013.
As Gal pointed out, though, all is not lost for the small specialty pharma. Xyrem generics are not “'out of the woods’ yet,” he wrote; copycat drugmakers still have to contend with other IP protections in Jazz' portfolio, and the company will “certainly appeal” the recent verdict.
Still, the patent news has the company feeling the heat. The PTO’s move “raises the odds of an earlier generic entry” and will also make it harder for the company to settle with other patent challengers on a generic entry date--a move, he notes, that would offer some appealing certainty to investors.
Jazz has Amneal Pharmaceuticals and Endo’s Par Pharma to thank for its recent troubles. The pair filed IPR petitions with the PTO’s Patent Trial and Appeals board, which decided last July to institute a review.
IPR is a patent-challenge route that shortcuts the lengthy process of litigating patents, and it's a route that branded pharma companies don’t much like. Drugmakers such as Celgene have made that clear through their criticisms of Kyle Bass, a hedge fund manager who popularized the process by going up against companies with "low quality" patents while shorting their stocks.
For now, Deutsche Bank analyst Gregg Gilbert models Xyrem exclusivity through 2022, when all is said and done--a “middle” case that would see knockoffs hit the scene well ahead of Jazz’ last patent expiry, which is set for 2033. While the company “continues to explore lifecycle management initiatives that could protect the franchise,” the details and timelines on those initiatives are “murky,” he wrote to clients.
Special Reports: 10 big brands keep pumping out big bucks, with a little help from price hikes - The most influential people in biopharma today - 2016 - Kyle Bass - Hayman Capital
Related Articles:
Feds ask Gilead, Biogen, Jazz for info on ties to charities
Thanks, Turing. Your 5000% price hike puts pharma in the election hot seat
Sorry, Celgene, patent board says. Bass can challenge your IP, and profit, too
Big Pharma doesn't win the margin stakes. That's Jazz, Celgene, Regeneron and Alexion