Allergan: Restasis Buyers Antitrust Lawsuit Could Exceed $2.5 Billion

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Allergan CEO Brent Saunders. Source: Business Insider

Allergan (AGN) is known as one of the more litigious pharmaceutical companies. It will go great lengths to protect is patents, as it should. However, sometimes it could appear the company crosses the line. Allergan has been trying to beat back generic competition for dry eye drug Restasis since 2014. Its recent decision to sell patents for Restasis to the St. Regis Mohawk Tribe raised eyebrows and might have crossed the line. The company tried to rent the Mohawks’ sovereign immunity to dismiss an inter partes review (“IPR”) brought on by Mylan (MYL). The attempt might have backfired, however.

In October Judge William Bryson ruled the patents were invalid due to obviousness. Earlier this month Restasis buyers hit the company with an anti-trust lawsuit, claiming Allergan blocked low-cost generics from entering the market:

A proposed class of Restasis buyers on Friday accused Allergan Inc. in Texas federal court of blocking low-cost generics for the dry-eye medication through improperly obtained patents, sham infringement suits and citizen petitions, and partnering with a Native American tribe to avoid patent challenges.

The direct purchasers, led by FWK Holdings LLC, say if Allergan hadn’t been allegedly gaming the system, there would have been generic drugs, which could have been purchased at a fraction of the cost, on the market as early as May 2014. Instead, Allergan has hurt consumers using a multifaceted approach to keep generics off the market, while making $3.9 billion off the drug over the last three years alone.

The rub is that Allergan extended Restasis’s exclusivity after one of its underlying patents was set to expire in May 2014. The lawsuit claims Allergan used the patent system to thwart competition for its Restasis monopoly. An argument can also be made that Allergan benefited greatly by keeping generic Restasis off the market.

The market might not fully understand the implications of the lawsuit. According to Shocking The Street, a premium service in conjunction with Seeking Alpha, exposures under the lawsuit could exceed $2.5 billion. Shocking The Street has been the most accurate analysts covering AGN. They had a sell rating on the stock since it was in the $230 range. Now the stock down over 25% since that time, despite Wall Street’s attempts to prop it up.

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