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Bausch Craters to Lowest Since 1995 After Patent Order Loss (1)

July 28, 2022, 3:21 PMUpdated: July 28, 2022, 5:07 PM

Bausch Health Cos. plummeted 41 percent to its lowest since 1995 after a judge indicated he’ll toss parts of patents tied to its Xifaxan drug for treating irritable bowel syndrome with diarrhea, clearing an obstacle for Norwich Pharmaceuticals Inc.'s proposed generic.

Judge Richard G. Andrews of the US District Court for the District of Delaware ordered Thursday that some patent claims involving the name-brand drug for IBS are invalid, but he upheld others related to treating neurological symptoms of liver disease. The shares fell to $5.10 in New York after trading was halted on the news.

The company indicated it plans to appeal the final ruling to the US Court of Appeals for the Federal Circuit.

“We are disappointed with today’s development. We strongly disagree with any conclusion that our patents are not valid and intend to file an appeal to any such order,” Thomas J. Appio, Bausch Health chief executive officer, said in a statement.

While Norwich could try to drop the drug’s usage for liver disease complications and forge ahead with gaining approval for a generic IBS-D treatment, Bausch said it will “vigorously oppose any attempt by Norwich” to do so.

“The management of Alvogen, Norwich’s parent company, is very pleased with the district court’s decision which clears a significant hurdle in the path to bringing an affordable alternative to patients taking Xifaxan for IBS-D,” said Alvogen CEO Lisa Graver in a statement to Bloomberg Law.

Norwich’s proposed generic “will induce infringement of the asserted [hepatic encephalopathy] patent claims, and would induce infringement of the asserted [irritable bowel syndrome with diarrhea], and Polymorph patent claims if they were valid,” according to Andrews’ oral order. “Norwich has failed to show that the asserted HE claims are obvious and that they lack adequate written description. The asserted Polymorph and IBS-D claims are invalid as obvious.”

Overall, eight claims across seven patents were tried before the district court, according to an Alvogen spokesperson. The Thursday order keeps alive four claims across three patents relating to the method of treating hepatic encephalopathy, she said.

Bausch Health and its subsidiary Salix Pharmaceuticals Ltd. sued Norwich in 2020 over the company’s plans to bring a copy of Xifaxan, known as rifaximin, to market before its 23 patents for the name-brand drug expired. A research and development unit of Norwich’s parent company, Alvogen, was originally named in the suit but later dismissed.

Thursday’s order comes after Andrews held a March bench trial, during which he explored both drug companies’ claims but did not issue a ruling.

While Thursday’s order left some Bausch patent claims alive, University of California Hastings law professor Robin Feldman said it was an obvious setback for the patent owner.

“Although the ruling was mixed, the financial markets sent a clear signal of the potential effects on Bausch,” she said. “On the bright side, the ruling could clear the way for a generic drug to enter, which could eventually drive down the price of IBS medication. In general, a drug’s price falls an average for 40% when a single generic enters and as much as 80% when four or more generics enter.”

In separate litigation, Bausch and Salix previously asserted infringement of 14 Xifaxan patents against Novartis’ Sandoz Inc., hoping to head off that company’s planned generic. The parties settled in May 2020 by agreeing that the patents are valid, enforceable, and would be infringed by Sandoz’s generic, according to court documents.

Bausch noted Thursday that it has reached deals with Sandoz as well as Teva Pharmaceutical Industries Ltd. and Sun Pharmaceutical Industries Ltd. to delay their generic rifaximin products until 2028.

Shaw Keller LLP and Axinn, Veltrop & Harkrider LLP represent Norwich. Venable LLP and Morris, Nichols, Arsht & Tunnell LLP represent Bausch.

The case is Salix Pharmaceuticals, Ltd. et al v. Norwich Pharmaceuticals, Inc., D. Del., No. 20-cv-00430, 7/28/22.

(Updated with additional reporting throughout.)

To contact the reporter on this story: Kelcee Griffis in Washington at kgriffis@bloombergindustry.com

To contact the editors responsible for this story: Jay-Anne B. Casuga at jcasuga@bloomberglaw.com; Bernie Kohn at bkohn@bloomberglaw.com