Johnson & Johnson shares swoon as pharma giant loses yet another fight to protect Zytiga sales

Johnson & Johnson lost its latest effort to fend off Zytiga generics in court, sending investors reeling at the prospect of losing blockbuster sales. But the pharma giant says it’s now planning a last-ditch stand at the U.S. Supreme Court.

In two decisions during Thanksgiving week, the U.S. Court of Appeals for the Federal Circuit rejected J&J's request for an injunction that would block generic launches while a patent lawsuit plays out. Generics makers could now launch their copycats, albeit at risk of penalties if J&J wins in the long run. But analysts remain unsure just when the cheaper copies will launch.

The decisions follow an October district court ruling nixing a key Zytiga patent, the so-called ‘438 patent, but granting a temporary injunction blocking generics. J&J had appealed the lower court’s decision in hopes of protecting Zytiga’s $1.22 billion in U.S. sales.

Back in January, the U.S. Patent Trial and Appeal Board invalidated the same patent.

Now, analysts are mixed on whether generics are imminent. In a note seen by Bloomberg, Wells Fargo’s Lawrence Biegelsen wrote that copycats could enter the market "anytime now," but suggested generics companies may wait until a final court decision next year. But SunTrust analyst John Boris believes generics will roll before the end of this year, according to the news service.

If a drugmaker chooses to launch its copy before a final court ruling and J&J ends up winning, the generics company would face damages of up to two times its sales under the Hatch-Waxman Act.

Meanwhile, J&J said it’ll ask the Supreme Court for an injunction, according to reports. Arguments in the appeals case are set for next month. J&J’s shares are down about 3% after the news.

The temporary injunction granted by the district court last month is now lifted. In a recent securities filing, J&J said if the court "declines to extend the injunction," it expects a generic launch that’ll result in a "significant decline" in Zytiga sales.

Even though the latest developments spooked investors, J&J executives say they’re confident that the rest of the company’s drug offerings can make up for Zytiga losses. On a recent conference call, pharmaceutical chairman Jennifer Taubert told analysts the company is "pleased" with Zytiga’s performance, but "absolutely not dependent on it."  Excluding Zytiga, J&J’s pharma sales grew 6.6% operationally in the third quarter, J&J management said, demonstrating how the unit could perform without the key blockbuster.

Zytiga generated $2.5 billion in global sales last year, with more than half of the total coming from outside of the U.S. That fact will help protect the drug from full erosion if generics hit in the U.S.

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