King trims its court following Altace about-turn

By Anna Lewcock

- Last updated on GMT

Related tags: Appeal

King Pharmaceuticals last week announced that it would be cutting
20 per cent of its workforce after the US Court of Appeals reversed
a previous court ruling and invalidated a patent covering the
firm's blood pressure drug, Altace (ramipril).

The US drug firm said that it was being forced to "accelerate a planned strategic shift​" in light of challenges to the company's Altace franchise that it foresees as a result of the September court ruling. King will be speeding up it plans to establish a more concentrated focus on neuroscience and hospital/acute care, and alongside staff reductions will also be cutting expenses, enforcing additional spending controls, reorganising sales teams and the "realignment of research and development priorities." ​ The reduction in headcount is due to come into force in December this year, with the company hoping for cost savings of $75m-$90m (€52.5m-€63m) from the measures to be realised in 2008. Indian generics firm Lupin filed an abbreviated new drug application with the US Food and Drug Administration (FDA) seeking permission to market a generic version of King's Altace several years ago, along with a challenge to the validity of a composition of matter patent covering the King product. In July 2005, King filed a patent infringement suit against Lupin, and in June 2006 a District Court granted King summary judgment and found Lupin to be guilty of infringing the contested patent, and in July 2006 upheld the validity of the King patent. However, Lupin appealed the decision and on September 11 this year the Court of Appeals reversed the decision of the District Court and invalidated the disputed patent on the basis of obviousness. King is of the opinion that that the Court's decision relies on factual inaccuracies and is not consistent with other recent court rulings of the Federal Circuit Court. As such, the company has filed a petition with the Circuit Court for rehearing and rehearing en banc​ (i.e. with all the judges of the court), but has yet to hear back regarding the request. The about-turn in the Altace patent decision has thrown King somewhat after the firm thought it was home and dry last year. "Invalidation of this patent will likely lead to generic versions of Altace entering the market sooner than previously anticipated, and the company's sales of Altace are anticipated to decline significantly as a result,"​ company documents read. Sales of Altace over the first half of this year total around $320m, up from $313m for the same period last year. As of June 30, 2007, King reports it had net intangible assets related to Altace of approximately $213m, which will equate to a pre-tax charge of around $150m in 2007. However, if the company's rehearing petitions are unsuccessful, the company may be forced to reduce the estimated remaining useful life and/or take an additional charge against a portion or all of the value of the remaining intangible assets. The company has also estimated pre-tax charges of around $60m associated with the impairment of inventories related to Altace, and a further $30m from inventory related loss of contracts. A one-off charge of $70m is also expected related to the restructuring announced last week. While job cuts and plant closures seem to be two of the defining features of the pharmaceutical sector at present, dealing as it is with impending patent expirations and generic competition, King would presumably have been hoping for a stay of execution for Altace which has now been whipped from beneath it. The company will be providing more details regarding the restructuring announcement during its third quarter results conference call on November 8.

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