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Allergan (AGN - Analyst Report) received some positive news when the US Court of Appeals for the Federal Circuit ruled in its favor and found that ‘819 patent protecting its product, Lumigan is not invalid. Lumigan is indicated to reduce intraocular pressure (IOP) in patients suffering from ocular hypertension or glaucoma.

A couple of companies have challenged the Lumigan patent and have filed marketing application for approval of their generic version of Lumigan. Allergan expects the product to generate sales of $600–$620 million in 2012.

We note that quite a few products in Allergan’s portfolio are facing patent challenges. To counter the generic threat, the company has been active on the acquisition front.

A few days back, Allergan inked a deal with MAP Pharmaceuticals, Inc. to acquire the latter. As per the terms of the deal, Allergan will acquire all the shares of MAP Pharmaceuticals for $25.00 per share. The offer price represents premium of 60% over MAP Pharmaceuticals’ closing price on Jan 22, 2012.

The deal is expected to be worth approximately $958 million. The transaction, which has been cleared by the boards of directors of both companies, is expected to close either towards the end of the first quarter or in the second quarter of 2013.

Earlier this month, Allergan received a major boost with the US Food and Drug Administration (FDA) approving Botox (onabotulinumtoxinA) for the treatment of patients suffering from overactive bladder (OAB) with symptoms of urge urinary incontinence, urgency and frequency.

Although, we view the approval of Botox for the treatment for OAB as a major positive for Allergan, we remain concerned about Botox’s sales post the re-entry of Merz Pharmaceuticals Xeomin in the market. In Mar 2012, an injunction against Xeomin was issued, which was valid till Jan 9, 2013.

Allergan carries a Zacks Rank #3 (Hold) in the short run. Pharma companies that currently look better-positioned include Eli Lilly (LLY - Analyst Report) and Sanofi (SNY - Analyst Report). Both are Zacks Rank #2 (Buy) stocks.

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