The lawsuit was filed in response to a Paragraph IV Certification Notice Letter received by Cephalon in July regarding an Abbreviated New Drug Application (ANDA) filed with the US Food and Drug Administration (FDA) by Apotex. The lawsuit has been filed under the provisions of the Hatch-Waxman Act, which means that the FDA cannot grant final approval for up to 30 months or until final resolution of the matter before the court, whichever occurs earlier.

We note that Apotex is not the only company seeking to launch a generic version of Nuvigil. Generic players such as Teva Pharmaceuticals (TEVA), Watson Pharma (WPI), Mylan (MYL), Sandoz, Lupin Pharma and Actavis are all seeking to launch generic versions of Nuvigil. The entry of a generic version of Nuvigil would have a devastating impact on sales.

Nuvigil (armodafinil) is indicated for the improvement of wakefulness in adults who experience excessive sleepiness (ES) associated with treated obstructive sleep apnea (OSA), shift work sleep disorder, also known as shift work disorder (SWD), or narcolepsy.
 
Nuvigil is the follow-on version of Provigil (modafinil), which contributed about 47.6% to revenues in 2009. With Provigil slated to face generics from 2012, Cephalon is looking to protect its sleep franchise sales by switching patients to Nuvigil.

We currently have a Neutral recommendation on Cephalon, which is supported by a Zacks #3 Rank (short-term “Hold” rating). We believe the company has done a good job protecting its central nervous system (CNS) franchise by delaying the entry of generic versions of Provigil to 2012. This should give the company enough time to switch users to its follow-on sleep franchise product, Nuvigil, which was launched in June 2009. We expect investor focus to remain on the successful launch of Nuvigil and the company’s ability to expand Nuvigil’s label. In addition to the Nuvigil launch, we expect investor focus to remain on the performance of Cephalon’s emerging oncology pipeline.