Jefferies Comments On Eli Lilly Strattera Appeal

In a report published by Jefferies, Eli Lilly's LLY Strattera appeal could be an uphill task.

Jefferies said that its analysis of the legal issues surrounding the Strattera US patent challenge appeal hearing suggests that the lower court's invalidity ruling is unlikely to be overturned, which could cause management to lower its guidance for 2011. “Lilly appealed the August 2010 ruling by the District Court of New Jersey that invalidated the method-of-treatment patent protecting atomoxetine (U.S. Pat. No. 5,658,590), the active ingredient in Strattera. The patent is set to expire in May 2017. The appeal hearing was held on 9 December 2010, and a decision is expected at any time. An injunction pending the appeal is in effect. Our valuation of $35.00 is derived by placing our 2012E EPS estimate on a circa 25% discount to the 2012E US market PE multiple. Risks: Patent expiries/ challenges; cost saving; acquisitions; R&D risk; manufacturing; reimbursement; product litigation/ withdrawal.”

Eli Lilly closed yesterday at $46.06.