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B.A. in economics and MBA from top 10 business school. I have over 10 years of M&A / corporate finance experience. Currently head the New York Shock Exchange, a youth mentorship program that teaches investment management skills and ... more

Allergan: Judge Asks If Patent Transfer To Mohawks Is A 'Sham'

Date: Saturday, October 7, 2017 4:40 PM EST

Allergan's (AGN) unusual patent transfer to the St. Regis Mohawk Tribe  continues to draw scrutiny. Judge William C. Bryson, who is overseeing the federal patent infringement case, is questioning whether the deal is a "sham":

Judge William Bryson, who is overseeing the federal patent infringement case, noted that on Sept. 8, after the case went to trial, Allergan told him that it expects to have the Mohawk tribe join Allergan "as a co-plaintiff in due course."

But "no motion to join the Tribe has been forthcoming during the month since," Bryson wrote in the order in U.S. District Court for the Eastern District of Texas, where Allergan is suing Teva Pharmaceutical, Mylan and other companies to block them from selling competitors to Restasis on patent-infringement grounds ...

Bryson ordered Allergan and the defendants to file briefs by Oct. 13 "addressing the question whether the Tribe should be joined as a co-plaintiff in this action, or whether the assignment of the patents to the Tribe should be disregarded as a sham."

A judgment in the federal case could be rendered by the end of the month. I assumed the case would be smooth sailing and the the uncertainty would potentially come from the inter partes review ("IPR"). This throws a wrinkle into the scenario. Will Allergan have briefs filed by the imposed deadline? Will the Tribe join Allergan as a co-defendant or not?

Having the judge question whether the transfer of Restasis patents was a "sham" or not could be another concern. Will the ploy negatively impact Judge Bryson's ruling? This is likely the most important question I would ask myself if I was long AGN.

The Situation

Restasis, Allergan's top-selling dry eye drug, is under siege from generic drug makers like Teva (TEVA), Mylan (MYL) and Pfizer (PFE). Allergan sued in federal court to block them from offering a generic version of the drug. Last month Allergan put out a surprise press release stating [i] the St. Regis Mohawk Tribe owned all Orange Book-listed patents for Restasis, [ii] Allergan had been granted exclusive licenses in the patents and [iii] the Tribe was filing a motion to dismiss the IPR based on its sovereign immunity.

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