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Consumer discretionary

Allergan plc Ordinary Shares Namenda Concerns Considered Insignificant – Evercore ISI

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Global pharmaceutical business largely remains out of threat as the most selling Namenda version is expected to remain branded for a long time

Allergan plc Ordinary Shares (NYSE:AGN) recently released statement regarding its ongoing patent litigation related to Namenda XR, also known as memantine hydrochloride. The issue was especially focused on the FDA final ANDA approval received by Lupin Limited for making extended release capsules as the generic version. In its statement, the drug maker stated that it has reached a settlement agreement with the licensors whereby licensed entry date for the generic version is supposed to be in FY20 given as January 31 and nothing earlier to this. Following the announcement, it has also settled with all the defendants, including Mumbai-based business.

Moreover, it stated that one of the licensed patent families covering the drug was held invalid by Delaware court. Thus, the decision is still under plea largely to the US Court of Appeals. The business is said to believe that its arguments are quite praiseworthy and substantial; therefore, it might defend the validity of its patents. Parsippany-Troy Hills-based organization stated, “If the district court ruling on these patents is upheld, there is a possibility that generic entry for Namenda XR could occur following an adverse Court of Appeals decision.”

Evercore ISI observed that the investors were quite confused regarding the last bit, whereby it stated that there was possibility of Namenda XR generic entry resulting in unfavorable decision by the Court of Appeals. However, the firm and its analyst Umer Raffat stated that this was not a big deal. He backed this by stating that the decision of the court would be focused on patent family relating to FY26. Thus, it would not impact the $94.15 billion enterprise much as the ruling of the FY29 patent went in its favor.

Mr. Raffat further explained that the FY29 patents revolved around high dosage of Namenda XR specifically pertaining to 28mg, which represents about 70% of the total volume of the drug in the market. Thus, even if FF26 ruling is not in its favor, the firm only sees generics for 7, 14, and 21mg versions, whereas 28mg version is largely expected to remain branded. On the other hand, consensus holds that the patent would erode before that and the company might be under threat of losing Namenda branding by FY20. Despite this, its investors remain bullish on the explanation given by Evercore ISI. Thus, analysts at FactSet Fundamentals have given Allergan 17 Buy, two Overweight, and three Hold rankings. It has an average target price of $303.61. This PT shows high upside potential of up to 31.55% over the last closing price.

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