Depomed scores a win in its epic struggle to fend off Gralise copycats

Judge Joel Pisano

Patent litigation is so common in pharma it often goes unnoticed on Wall Street, but Depomed's ($DEPO) most recent victory is a notable exception. On Tuesday, the company announced that it won its patent lawsuit against Actavis ($ACT), which wanted to market a generic version of Depomed's shingles pain drug Gralise. Depomed's shares surged more than 13% in after-hours trading to $14.94.

Judge Joel Pisano of the U.S. District Court in New Jersey ruled that Actavis's filing for FDA approval of generic Gralise infringes all seven of Depomed's patents on the product. With this ruling, Depomed's market exclusivity will be protected until 2024. In a statement from the company, CEO Jim Schoeneck said the ruling "confirms the innovation of Gralise and the strength of our patents."

Protecting Gralise has been a long, hard challenge for Depomed. The drug, which won FDA approval for the management of postshingles pain in January 2011, is a once-daily version of Neurontin (gabapentin), an off-patent Pfizer ($PFE) product. Generics makers started challenging Depomed's patents almost immediately. Depomed sued 6 companies that filed for FDA approval of generic Gralise, including Actavis, and by the spring of 2012 it had successfully fended off the other 5 copycats.

Simultaneously, Depomed has been in a war with the FDA, which approved Gralise under its Orphan Drug program but did not grant the company the 7 years of market exclusivity that normally goes along with orphan designation. Depomed sued the FDA in September 2012 seeking that exclusivity and is still awaiting a decision from a federal district court judge, according to the company's latest quarterly filing.

The Actavis win is certainly a positive for Depomed, but one Wall Street ratings house is already warning investors not to get overly giddy. TheStreet slapped a "hold" rating on Depomed's stock citing potential earnings weakness. In the second quarter, the company recorded EPS of 21 cents, up from a penny in the same quarter a year ago, but TheStreet analysts predict the company will struggle to maintain that growth going forward.

As for Actavis, it's not backing down from its ongoing effort to invalidate the patents on brand-name drugs. In May, it filed for FDA approval of a generic version of Vivus's ($VVUS) high-profile obesity drug, Qsymia. Vivus sued Actavis in June.

- get the release from Depomed
- here's TheStreet's story

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