The Acrux Limited (ASX: ACR) share price has had a disappointing start to the week.
At lunch the pharmaceutical company’s shares are down a sizeable 18% to 22.5 cents.
Why are Acrux shares plunging lower today?
This morning Acrux advised that it has been notified of a patent challenge by one of the world’s leading pharmaceutical giants.
According to the release, Valeant Pharmaceuticals North America LLC has initiated patent litigation against Acrux and 13 other generic companies in the U.S. District Court for the District of New Jersey.
The litigation relates to Paragraph IV Abbreviated New Drug Applications for Efinaconazole Topical Solution, 10% (a generic version of Jublia topical solution, 10%), with Valeant asserting patents listed in the Orange Book for Jublia Topical Solution, 10%.
This is a bitter blow for Acrux as last month it submitted the first-to-file application for the generic version of Jublia, making it eligible for 180 days of generic exclusivity.
This application was accepted for review and the company saw a major opportunity for the generic version of the antifungal drug indicated for the topical treatment of infections of the nail. Jublia’s US sales are estimated to exceed US$280 million per year currently.
However, at the time of the application, the company advised that Valeant had 45 days to file a patent litigation suit asserting patents listed in the Orange Book. So this move is not unexpected and the selloff today could be a bit of an overreaction.
Should you buy the dip?
It is also worth noting that the Jublia generic product is just one of 13 topical generic products that the company has in its development pipeline. This pipeline of products has an estimated addressable market of over US$1.4 billion, meaning there’s still a significant opportunity for the company outside Jublia.
However, while I have been impressed at the company’s transformation this year, I would suggest investors wait to see how things develop over the next 12 months before considering an investment.
In addition to CSL and Mayne Pharma, instead of Acrux I would be buying this buy-rated share.
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Motley Fool contributor James Mickleboro has no position in any of the 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 Scott Phillips.