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02 June, 2015 18:55 IST
Protonix settlement a blow to Sun Pharma's near-term acquisition plans
Source: IRIS | 13 Jun, 2013, 10.27AM
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Sun Pharmaceutical Industries said Wednesday the company settled litigation pending in the United States District Court, District of New Jersey (Court) regarding Sun Pharma (Q,N,C,F)* subsidiary's generic pantoprazole. Sun Pharma will pay USD 550 million to Pfizer Inc and Atlanta Pharma AG as a part of this settlement. It will continue to sell its generic pantoprazole in the U.S.

In 2005, Wyeth and Altana had filed a patent infringement suit against Sun after it filed its ANDA for Pantoprazole. Sun launched its generic Pantoprazole in the US on Jan. 30, 2008 at risk. In April 2010, a jury had determined that Altana's patent was valid. Wyeth had sought USD 960 million for the so called infringement. The Protonix patent had expired in January 2011. On Jun. 3, 2013, the court began a jury trial to assess the amount of past damages that Sun Pharma owed for infringing Altana's now expired patent. The settlement has effectively neutralised the ongoing litigation. Sun has already provided for USD 107 million in Q2FY13.

Commenting on the development, ICICIdirect said, ''As the settlement amount is unprecedented, the stock is likely to witness knee-jerk reaction in the near term. However, the event was not entirely unexpected. Sun will have to shell out Rs 30 billion out of its cash pile of Rs 54 billion as on Mar. 31, 2013, thus effectively putting its immediate acquisition plans in jeopardy. We have cut our FY14E and FY15E EPS estimates by Rs 27 and Rs 5, respectively, owing to a dent in other income (treasury income). Our revised target price now stands at Rs  976 i.e. 23x FY15E (revised) EPS of Rs 42.4. We maintain Hold. Any swift correction can be used as an opportunity to re-enter the stock as all other strongholds remain intact.''

It has maintained 'Hold' on Sun Pharmaceuticals with target price of Rs 976 as against current market price (CMP) of Rs 981 in its report.

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