Galen Settles Estrostep, FemHRT Litigation, Barr Picks Up Loestrin In Deal

A product licensing agreement between Galen and Barr will settle FemHRT and Estrostep patent litigation inherited by Galen from Pfizer.

Under a deal involving several women's health products announced Sept. 11, Barr will be able to launch generic versions of Estrostep oral contraceptives and FemHRT hormone therapy six months before the expiration of their patents or as soon as another generic firm comes to market.

Barr indicated that timeline would allow a FemHRT generic by November 2009 at the latest and an Estrostep generic by October 2007.

The settlement may also reduce or eliminate a potential payment by Galen to Pfizer stipulated under a March deal to acquire Loestrin, FemHRT and Estrostep.

The $359 mil. agreement included the possibility of up to an additional $125 mil. payment from Galen to Pfizer if FemHRT and Estrostep retained market exclusivity for the full duration of their patents (¹ 'The Pink Sheet' March 10, 2003, In Brief).

Under the Barr deal, Galen also will receive a one-time $45 mil. payment and an option for a five-year, exclusive license to Barr's pending ANDA for Galen's branded oral contraceptive Ovcon .

Galen will make a $1 mil. payment to Barr at the grant of the option. If Galen exercises the option, the company would pay Barr an additional $19 mil.

Barr is also acquiring U.S. and Canadian rights to Galen's Loestrin oral contraceptive brand.

"We get an excellent, 28-day cycle branded oral contraceptive product," Barr CEO Bruce Downey said during an investor call to discuss the agreement. "It's our first branded, 28-day cycle product, and we think it's a very good product."

In addition, Barr expects to launch its generic version of Loestrin this month, pending FDA approval of its ANDA. Watson is currently the only marketer of generic Loestrin.

Galen's stock gained 12% on news of the deal, closing at $42.94 on Sept. 11, while Barr's stock fell 1% to close at $73.

The multi-layered deal may attract the attention of the Federal Trade Commission. The agreement is complicated, involving contingencies, several products and payments from both Galen and Barr. When the deal is finalized, Barr will also hold rights to both the brand version and a generic of a single product (Loestrin).

The companies have structured the agreement to separate the Ovcon option from the Loestrin and patent challenge provisions, signing two separate letters of intent.

Barr appears confident that FTC will not find the agreement anticompetitive. "I think the FTC has historically taken the view that oral contraceptives is the market. It's not Loestrin FE is a market independent of the larger oral contraceptive market," Downey said.

Even if Barr holds Loestrin and its generic, "that's still a $100 mil. in sales in a $2.5 bil. market. So we don't anticipate any FTC problem with us having both brand and generic products," Downey said.

Although Barr is waiting to adjust its earnings guidance, the financial benefits it hopes to accrue from the deal may partially go toward "an earlier and perhaps more aggressive" DTC campaign for the company's Seasonale 91-day oral contraceptive regimen, approved Sept. 5, Downey said.

The company discussed its marketing plans for Seasonale in a Sept. 8 call (see ² ).

With the acquisition of Canadian rights, Loestrin will be Barr's first oral contraceptive outside the U.S. The company is negotiating with Canadian firms to promote the product.

Barr also is examining U.S. promotional synergies for Loestrin. By holding rights to the brand and a generic version, "there may be the opportunity to promote both with a single program," Downey said.

Barr and Galen hope to close the deal by the end of the year. They had reportedly been discussing a merger earlier this summer (³ 'The Pink Sheet' July 28, 2003, In Brief).