Allergan loses Latisse patent fight, jeopardizing up to $200M in sales

As Allergan ($AGN) tries to fend off Valeant's ($VRX) hostile advances, it's been touting its sales prospects as a standalone company. But with a Tuesday court ruling invalidating patents on its eyelash growth drug Latisse, its top-line potential could shrink a little down the line.

The U.S. Court of Appeals for the Federal Circuit in Washington has deemed a pair of Latisse patents invalid, paving the way for Novartis' ($NVS) Sandoz unit and the generics maker Apotex to sell their copies. The patents on Latisse--a variation of Allergan's Lumigan, used to treat glaucoma--cover ways to apply the drug to promote eyelash growth. But that growth is a "known potential side effect" of glaucoma treatments, the court ruled, rendering Allergan's patent claims obvious.

While Buckingham Research analyst David Buck called Latisse "a relatively small drug for Allergan," the patent invalidation could spell lost sales of $151 million in 2018, with peak sales falling in the $150 million-$200 million range, BMO Capital Markets analyst David Maris told FiercePharma.

Allergan's revenue haul has a lot to live up to over the next few years, thanks to the hype directors have been lavishing on the company's R&D operations. Management has pointed to Allergan's labs as part of the justification for twice-rejecting acquisition offers from Valeant, which prefers to serially buy drugmakers rather than develop its own meds.

Allergan CEO David Pyott

"Allergan's extensive R&D engine has a longstanding track record of producing a +25x sales return on cumulative R&D spend and has the potential to commercialize a rich pipeline with billions of dollars of revenue and profit potential," company CEO David Pyott wrote in a recent letter to Valeant chief J. Michael Pearson.

But investors may see things differently, and Pearson and takeover partner Bill Ackman intend to find out. The duo will take their latest bid--a $53 billion proposal comprising $72 cash and 0.83 shares of Valeant stock per Allergan share, unanimously rejected by the California company's board--directly to shareholders, Valeant said Tuesday.

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