Actavis plan to stop making original Namenda derailed by court

Actavis CEO Brent Saunders

A federal judge in New York has decided Actavis CEO Brent Saunders' plan to move patients to a new version of its Alzheimer's treatment Namenda IR by stopping production on the older, patent-threatened version is not so clever. The court will order the drugmaker to keep making it for now.

Actavis ($ACT) acknowledged today that this is the direction being taken by the court after the New York Attorney General challenged the company's methods. It said a hearing Monday would fill in the details like how long it must keep Namenda IR on the market but said it will appeal the decision immediately.

In a statement, Saunders called the ruling "disappointing" but said Actavis could handle the situation without much effect on its finances, a contention with which some analysts agree. He said the drugmaker would not only keep urging doctors to move their patients to the newer version but would take its message directly to patients with a direct-to-consumer advertising campaign for its new drug starting Jan. 5.

From the viewpoint of the New York Attorney General, the court's decision was one of those clear messages they often refer to. "Drug companies cannot illegally prioritize profits over patients," AG Eric Schneiderman said in a statement quoted by The New York Times.

The drama began in February, before Forest had been bought out by Actavis, when the drugmaker laid out its plan for moving patients from the twice daily Namenda IR, which is a blockbuster but will face generic competition come July 2015. It said it would just quit making the original in August, nearly a year ahead of generics, and urge doctors to move their patients to the once-daily Namenda XR, which is patent-protected until 2025. That would have left doctors with a decision of prescribing the new drug or moving patients to an entirely different treatment plan.

When the AG sued over the "forced switch," Actavis agreed in September to a 60-day extension for making the older version of the Alzheimer's drug. The drugmaker said in court filings that about 40% of users had already moved to the new drug. But the company had also acknowledged having trouble with production keeping up with demand, taking some of the sting out of the agreement.

In a note to investors today, Sterne Agee analyst Shibani Malhotra said the derailing of the switchover plan should have little impact on the drugmaker's revenues. "Namenda XR confers a genuine health outcome benefit to patients (due to improved compliance)," and so few are expected to be moved to generics of the older drug. The analysts said that she remains comfortable that in the 2015-2017 timeframe, the Namenda franchise can bring in $1.3 billion, with 95% coming from the new formulation.

- here's the announcement
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Special Report: Pharma's top 10 M&A deals of 2014's first half - Actavis/Forest Laboratories