It certainly has been a difficult year to be a shareholder of Acrux Limited (ASX: ACR). The Australian drug delivery company has seen its share price crash a whopping 57% this year, thanks largely to an unfavourable court ruling in the United States on its Axiron patent.

In August the United States District Court for the Southern District of Indiana ruled that the formulation and application patents granted by the US Patent Office for Axiron were invalid.

This meant that the company would not be infringed by the commercialisation of generic versions of Axiron.

This is potentially catastrophic for the company and the sell off is not surprising. Axiron is a prescription underarm testosterone medication used to help treat men with low testosterone and the company’s largest commercial product.

The drug holds a US market share of approximately 14.2% and contributed 88.5% of the company’s FY 2016 sales.

Whilst Acrux and its licensee Eli Lilly are appealing the ruling, management appears to be planning for a future without the patent.

The company has stepped up its spending on research and development. It recently advised that it has made solid progress on three new generic projects.

One such drug in the pipeline is aimed at the treatment of onychomycosis. An estimated 30 million Americans suffer from onychomycosis, which is a fungal infection of toenails and fingernails. Current treatments have low efficacy, which puts Acrux in a strong position in my opinion.

I was reasonably pessimistic about the company’s future when its patents were invalidated, but I have been impressed with management’s response.

However, at this stage I think it is still too early to invest in Acrux. I do however feel it is worth keeping on your watch list due to its patent appeal and its pipeline of drugs.

In the meantime I believe investors would be better served with investments in industry peers Mayne Pharma Group Ltd (ASX: MYX) and CSL Limited (ASX: CSL).

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Motley Fool contributor James Mickleboro has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.