Teva Pharmaceutical Industries Ltd. (TEVA) is facing a series of patent challenges for some of its products. The company is looking to protect these products from generic competition by filing patent infringement lawsuits. However, these litigations lead to higher expenses. Companies often look to settle these challenges as it removes uncertainty regarding the timing of generic product launches and also cuts down on litigation costs.

Teva recently settled its patent infringement lawsuits for Nuvigil by entering into agreements with Sandoz, Actavis (ACT), Lupin and Apotex regarding the litigation related to U.S. Patent 7,132,570.

As per the settlement agreements, Teva has granted licenses which allow these companies to market their generic versions of Nuvigil (50 mg, 150 mg and 250 mg) 180 days after Mylan, Inc.’s (MYL) launch. Mylan was the first generic company to file an abbreviated new drug application (ANDA) for these dosages. Teva already has an agreement with Mylan (entered in early 2012), granting the latter the license to sell its generic version of Nuvigil from Jun 2016, or earlier under certain circumstances.

Actavis enjoys the right to launch its generic version of Nuvigil (100 mg and 200 mg) in Jun 2016. Sandoz, Lupin and Apotex may launch their versions of Nuvigil at these dosages 180 days after Actavis. Other terms of the deal were not disclosed by the company.

We note that these settlements dismiss a pending appeal with the U.S. Court of Appeals related to a decision of the Federal Circuit of a trial court, which found the ‘570 patent to be valid and infringed.

Nuvigil, which generated revenues of $320 million in 2013, accounting for almost 4% of Teva’s total Specialty Medicines revenues, is indicated for improving wakefulness in adults who experience excessive sleepiness due to obstructive sleep apnea, shift work disorder or narcolepsy. According to Teva, Nuvigil’s market share (in terms of total prescriptions) was 42.8% in the U.S. wake category at the end of 2013.

Teva carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the health care sector include Akorn Inc. (AKRX), carrying a Zacks Rank #1 (Strong Buy).

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