CEPH’s Nuvigil Faces Generic Threat

Cephalon, Inc. (CEPH - Analyst Report) recently received a Paragraph IV Certification Notice Letter regarding an Abbreviated New Drug Application (ANDA), which has been filed by Teva Pharmaceuticals (TEVA - Snapshot Report) with the U.S. Food and Drug Administration (FDA). Generic player, Teva, is looking to market and sell its generic version of Cephalon’s Nuvigil (50 mg, 100 mg, 150 mg, 200 mg and 250 mg strengths).
 
Nuvigil (armodafinil) is a follow-on version of Provigil (modafinil), which contributed about 50% to revenues in 2008. With Provigil slated to face generics from 2012, Cephalon is looking to protect its sleep franchise sales by switching patients to Nuvigil.
 
Cephalon is aggressively promoting Nuvigil which was launched in June 2009. The company has taken several initiatives to ensure the smooth transition of users to Nuvigil, which has been priced at a significant discount to Provigil. Besides this, Cephalon is working on gaining approval for additional indications for Nuvigil, which should help expand the market for the product and drive sales for the franchise. We expect the Provigil/Nuvigil franchise to cross $1 billion in sales in 2009.
 
Cephalon is currently reviewing the patent challenge. Given the importance of the sleep franchise, we expect Cephalon to vigorously defend its patent. Cephalon has a three-year period of marketing exclusivity for Nuvigil that extends until June 15, 2010. The entry of generic versions of Nuvigil would have a devastating impact on sales.
 
We believe Cephalon will file a patent infringement lawsuit against Teva within 45 days so that Teva’s product cannot receive FDA approval until a court rules in favor of Teva or April 2012, whichever comes earlier. Cephalon could also opt to enter into an agreement with Teva in order to delay the entry of generics. The company had employed a similar tactic to postpone the entry of generic versions of Provigil.
 
We currently have a Neutral recommendation on the stock. We expect investor focus to remain on Cephalon’s emerging oncology pipeline, Amrix, and the conversion of patients to Nuvigil.