This is my first post since Halloween Day. I still have a modest, underwater position in this thing (down from mid-October when I was also short a bunch of Oct 22.5 puts - thank goodness it was gone after that).
I assumed yesterday's move was an upgrade only but did not dig in to news given major items on other important holdings: SGP, WYE, ELN, BGP.
Well, I lost track of what was going on. Apparently, on March 28, the Markman Hearing for Breath's patent challenge vs. Xopenex was held. Per Cowen, the challenge was not particularly well-prepared. This reduces at-risk launch odds. This could lead to settlement with Sepracor holding upper hand. Cowen has SEPR at buy - first time I can remember. Also, apparently mfg patent is harder to work around than first believed.
They now believe any settlement may go beyond mid-2011 which was their first estimate. Breath by the way has agreed to 30 day notice before any at risk launch. First date of at risk launch was a month ago.
From a recent report:
The Xopenex Manufacturing Patent May Be Sepracor?s Ace
About half the hearing was spent discussing patent ?289, which claims the manufacturing process and finished product specifications for Xopenex nebules.
The specifications describe a packaged, preservative-free formulation of r-albuterol having a pH of about 4, an albuterol aldehyde level of <0.08%, and a dissolved oxygen content of < 1 parts-per-million. The Breath Limited legal team argued that this specification covers the r-albuterol formulation post-manufacture, but not at a later time point (e.g., through the six-month accelerated stability testing period or twelve-month shelf-life). The Sepracor legal team argued that the specification claims contain no temporal limitations and the specifications should apply through the shelf-life of the product. Therefore, under rule of law, temporal limitations cannot be read into the claims. Our patent consultants agree with Sepracor?s argument.
Breath Limited Prevented Sepracor From Testing Unexpired Samples Sepracor?s legal team implied that, although the Breath Limited formulation of levalbuterol may have an oxygen concentration greater than 1ppm postmanufacture, the vacuum packaging is likely to reduce that figure below 1ppm.
Otherwise, the higher oxygen level may cause growth of albuterol aldehyde and the albuterol aldehyde level may rise beyond the FDA limitation of 0.10% at the 12-month expiration date. Judge Woodlock repeatedly highlighted the fact that Breath Limited delayed providing product samples for Sepracor to test until all of the available samples had expired, preventing Sepracor from definitively testing the Breath Limited formulation for infringement of the patent specifications. Judge Woodlock noted that this refusal would be a matter of record at the trial and was damaging to the credibility of the Breath Limited legal team.
We formerly believed that the ?289 patent could be circumvented by generic challengers by formulating around the manufacturing specification claims. But given Judge Woodlock?s statements and Breath Limted?s actions, we now believe that the outcome of the litigation on the ?289 patent is uncertain enough that Breath Limited is highly unlikely to pursue an ?at-risk? launch. Moreover, we believe Sepracor now will be negotiating a settlement agreement from a stronger position.
Jon |
