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Encouraging news flowed in at AstraZeneca when it obtained a temporary injunction against the U.S. launch of Hanmi Pharmaceutical’s esomeprazole strontium. Esomeprazole strontium was approved by the U.S. Food and Drug Administration (FDA) in Aug 2013.

We remind investors that in Jun 2013 AstraZeneca had entered into an agreement with Hanmi Pharma and Amneal Pharmaceuticals (the U.S. marketing partner of Hanmi Pharma), to resolve patent issues related to AstraZeneca’s heartburn drug, Nexium (esomeprazole).

As per the terms of the agreement, Amneal Pharma and Hanmi Pharma accepted that two of AstraZeneca’s patents (5,714,504 and 5,877,192) protecting Nexium in the U.S. are valid. The consent judgment provides that Hanmi’s esomeprazole strontium product does not infringe these patents based on the District Court’s claim construction issued in Dec 12, 2012.

AstraZeneca filed a Notice of Appeal in the U.S. Court of Appeals for the Federal Circuit seeking reversal of critical aspects of the District Court’s Dec 2012 construction.

Nexium generated sales of approximately $2 billion in the first half of 2013, accounting for approximately 15% of AstraZeneca’s total revenues. However, the company expects Nexium sales to decline from 2014 onwards due to generic competition. We remind investors that AstraZeneca is entangled in patent litigation related to Nexium with several generic companies including Actavis, Inc. . We believe the sooner-than-expected entry of generics will put additional pressure given that the company is already witnessing plunging revenues due to generic competition for several key drugs including Seroquel.

AstraZeneca carries a Zacks Rank #3 (Hold). At present, companies like Novo Nordisk and Bayer look well-positioned with a Zacks Rank #2 (Buy).

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