Mylan Pharmaceuticals Inc., a subsidiary of Mylan Inc. (MYL), recently announced that it has entered into a settlement agreement with Somaxon Pharmaceutical, Inc. (SOMX). The patent litigation was related to a generic version of Somaxon's insomnia treatment, Silenor (doxepin, 3 mg and 6 mg).
Under the terms of the settlement agreement, Mylan has the exclusive right to market an authorized generic version of Silenor for a 180-day period starting January 1, 2020, or earlier under certain pre-specified circumstances. Mylan’s right to commercialize Silenor’s authorized generic version can be extended for another 180-day period, post which Mylan will market its own generic version of Silenor.
Along with the settlement agreement, Mylan also signed a supply agreement for Silenor whereby Mylan will supply commercial quantities of Silenor to Somaxon.
Meanwhile, Somaxon also settled its patent litigation with Par Pharmaceuticals Companies Inc. (:PRX) related to a generic version of Silenor. According to the deal, Par Pharma has the right to sell its generic version of Silenor, subject to regulatory approval, only after the 180-day exclusivity period granted to Mylan expires.
We note that few days ago, Par Pharma entered into an agreement with an affiliate of leading global private equity firm TPG Capitals, whereby TPG will acquire Par Pharma for $1.9 billion.
Somaxon expects Silenor to generate revenues of approximately $2.8 to $2.9 million in the second quarter of 2012.
As of July 3, 2012, Mylan had 167 Abbreviated New Drug Applications (ANDAs) pending US Food and Drug Administration (:FDA) clearance, targeting $83.8 billion in branded sales annually. Mylan believes that about 37 of these ANDAs are first-to-file opportunities, representing approximately $25.6 billion in branded sales. The revenue figures are as per IMS Health for the 12 months ending December 31, 2011.
We are encouraged by Mylan’s geographic reach and product depth along with a robust generic product pipeline.
However, we are concerned about the company’s lackluster performance in the Europe, Middle East and Africa (:EMEA) region. Additionally, with most large branded drugs due to lose patent exclusivity within the 2017-2018 period, we have little visibility on the growth prospects of generic companies like Mylan beyond that timeframe.
Thus, we prefer to remain on the sidelines and have a Neutral recommendation on Mylan. The stock carries a Zacks #2 Rank (Buy rating) in the short term.
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