(Adds Bristol comments in paragraphs five and six; updates share movement)
By Varsha Tickoo
BANGALORE, April 8 (Reuters) - Bristol-Myers Squibb Co (BMY.N) agreed to pay Repligen Corp (RGEN.O) $5 million and royalties to settle a patent infringement lawsuit related to Bristol’s rheumatoid arthritis drug, Orencia, boosting Repligen’s shares as much as 24 percent.
Repligen expects a net profit in 2009, and $7 million to $8 million in royalties from Bristol, the biotechnology company said in a conference call. Bristol’s stock fell as much as 1 percent to $21.78 on the New York Stock Exchange.
The deal marks another success in a legal battle for Repligen, which last year got $65 million from ImClone Systems Inc IMCL.O to settle a patent infringement lawsuit related to ImClone cancer drug Erbitux. Repligen’s market value has jumped by more than a third since news of the ImClone deal.
Repligen said it owns exclusive rights to a U.S. patent, effective till 2021, which covers a method of treating rheumatoid arthritis with CTLA4-Ig, a biologic drug Bristol sells as Orencia that had 2007 sales of $231 million.
Bristol spokeswoman Laura Hortas said the company settled to avoid risk associated with litigation.
“I would just emphasize that the royalty payments do end in 2013,” she said.
Repligen has an “enabling patent” that covers a process to make Orencia, Rodman & Renshaw analyst Elemer Piros said. Bristol could make Orencia in some other way, but the process licensed to Repligen is very efficient, Piros, the only analyst covering Repligen, said.
The settlement was unexpected and would add roughly $2 per share to Repligen’s market value, Piros said. He had a $8 price target on the stock, which did not factor in the Bristol settlement. Piros had expected the lawsuit to go to trial.
Piros expects the total value of the deal to be more than $100 million over six years, based on the view of Orencia as a fast-growing, potential blockbuster drug. Blockbuster drugs have annual sales of a billion dollars or more.
Under the settlement, Bristol will make an initial payment of $5 million to Repligen and also pay royalties on the U.S. net sales of Orencia for any clinical indication.
Bristol will pay royalties at the rate of 1.8 percent for the first $500 million in annual sales, 2 percent for the next $500 million in annual sales and 4 percent of U.S. annual sales of more than $1 billion for each year from Jan 1, 2008, until Dec 31, 2013.
“You could make Orencia even without using this invention, so the 2 percent royalty range is fair. I don’t think they (Repligen) got a bad deal or an extremely good deal; it’s just the right amount,” Piros said by phone.
Repligen expects more than $30 million in total cash from various businesses and activities, including Orencia royalties, for the fiscal-year 2009, beginning April 1.
The company expects a net profit of $5 million to $6 million in 2009. Piros expected the company to post a loss of 11 cents, before special items, according to Reuters Estimates.
The company also confirmed its 2008 revenue forecast of $19 million. Piros expects $20.7 million.
Repligen said the lawsuit against Bristol, earlier set to start this month, was dismissed.
Bristol got U.S. regulatory approval to sell Orencia in 2005. In January 2006, Repligen and the University of Michigan sued the bigger drug maker.
The related patent is owned by the University of Michigan and the United States Department of the Navy and is exclusively licensed to Repligen.
Shares of Repligen, based in Waltham, Massachusetts, lost early gains and were up more than 10 percent at $6.03 in midday trade on Nasdaq. Earlier in the session, they rose to a high of $6.75. (Editing by Pratish Narayanan)