Teva Pharmaceutical Industries ($TEVA) knew it was taking a gamble in 2007 when it launched a generic version of Protonix before its patent expiration--just not a $2 billion gamble. Teva originally set aside $670 million to compensate Pfizer for lost profits on the drug, but with a settlement announced today, the company is finding itself $1.6 billion short.
The $2.15 billion settlement is the result of a legal battle waged by Pfizer ($PFE) and Nycomed, now part of Takeda, over infringement on the 2011 patent for the acid reflux medication. Teva was riding on hopes it could win a patent challenge against the drug's then-marketer Wyeth, but a 2010 jury nixed that possibility with the decision that the Protonix patent was valid.
The total damages due won't all fall on the Israeli company. Indian generics maker Sun Pharma also launched an at-risk generic and will be picking up some of the tab with $550 million in 2013. The rest will fall on Teva, which will make $800 million payments this year and next. Pfizer and Takeda will split the settlement's proceeds, with Pfizer taking 64%.
Pfizer and Takeda can use the money to offset the 80% sales dive Protonix took against generic competition. In 2008, the year after Teva launched its copycat version, the once-blockbuster netted just $395 million.
"We are pleased with today's settlement, which recognizes the validity and value of the innovation that led to Protonix," Amy W. Schulman, Pfizer's executive vice president and general counsel, said in a statement. "Protecting intellectual property is vital as we develop new medicines that save and enhance patients' lives."
Pfizer, too, has had some costly issues with Protonix since it acquired Wyeth. Last December, the drug giant was charged $55 million plus interest to settle charges that Wyeth promoted Protonix for unapproved uses and made unproven claims about the treatment.
- here's the release