Allergan heads to federal court to defend Restasis against early generic rivals

In defense of a top seller, Allergan is squaring off against generics companies in Texas federal court, accusing copycat makers of violating its patent protections on blockbuster eye medication Restasis.

The trial started Monday at U.S. District Court in Marshall, Texas, where Allergan is challenging Mylan, Teva Pharmaceuticals, Akorn and Inno Pharma, a division of Pfizer. In a note late Monday, Evercore ISI analyst Umer Raffat said the testimony was "incrementally positive" for Allergan on Day 1.

But the trial is just getting started, as Raffat noted. Allergan filed the suit after Mylan and Teva applied for approval with their proposed Restasis generics.

Restasis was Allergan’s second-best selling drug last year with nearly $1.5 billion in global revenue. In the second quarter this year, though, the drug fell 9.4% versus last year to $354 million in sales, or $32 million short of analyst expectations. It's facing new competition from Shire eye therapy Xiidra.

While Allergan argues that the generics companies are infringing its patents, the defendants see the litigation as a "poorly veiled attempt to extend Restasis exclusivity," RBC Capital Markets analysts wrote after reviewing opening arguments from both sides.

Separately on Monday, Allergan settled with another generics firm, Famy Care, allowing Famy to market a Restasis copycat in February 2024, or earlier if certain undisclosed circumstances are met.

According to RBC Capital Markets, Allergan believes its worst-case generic entry will come in early 2019 and that generics would more likely be in 2020 or later. Early 2019 would obviously be several years earlier than Allergan agreed with Famy—and far earlier than the company prefers.

In addition to the District Court trial, Allergan faces an inter partes review at the U.S. Patent and Trademark Office next month. Bernstein analysts believe that, if Allergan loses both the District Court trial and the September review, generics will launch upon approval even if the branded drugmaker appeals. If the cases split, Bernstein analysts believe generics firms will wait for an appeal to launch. Restasis won its initial approval in 1983, according to the FDA.