Cephalon’s Nuvigil Under Pressure

Cephalon Inc.’s (CEPH: 63.01 -0.50 -0.79%) Nuvigil remains under pressure as yet another generic company is seeking to market a generic version of the drug. Watson Pharmaceuticals, Inc. (WPI: 39.41 -0.29 -0.73%) recently confirmed that it has filed an abbreviated new drug application (ANDA) with the US Food and Drug Administration (FDA) seeking approval to market its generic version of four dosage strengths (50 mg, 100 mg, 150mg, 200 mg, and 250mg) of Nuvigil.
 
Watson believes it is first to file on the 100 and 200 mg dosage strengths, which means that it will enjoy 180 days of generic market exclusivity on the approval and launch of these dosage strengths.
 
As expected, Cephalon has filed a lawsuit against Watson so as to prevent the latter from launching its product prior to the expiration of U.S. Patent No. 7,132,570.  The lawsuit has been filed under the provisions of the Hatch-Waxman Act, which means that the FDA cannot grant final approval for up to 30 months or until final resolution of the matter before the court, whichever occurs earlier. 
 
We note that Watson is not the only company seeking to launch a generic version of Nuvigil. Teva Pharmaceuticals (TEVA: 59.34 +2.50 +4.40%) and Actavis are also seeking approval for their generic versions of Nuvigil. Cephalon has filed patent infringement lawsuits against both companies.
 
Nuvigil (armodafinil) is indicated for the improvement of wakefulness in adults who experience excessive sleepiness (ES) associated with treated obstructive sleep apnea (OSA), shift work sleep disorder, also known as shift work disorder (SWD), or narcolepsy. 
 
Nuvigil 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.
 
Given the importance of Cephalon’s sleep franchise, the filing of a patent infringement lawsuit against Watson was in-line with expectations. 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 currently have a Neutral recommendation on Cephalon. We expect investor focus to remain on Cephalon’s emerging oncology pipeline, Amrix, and the conversion of patients to Nuvigil.