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A More "Crystal" Bristol-Myers After Ruling

Bristol-Myers Squibb's future looks a lot clearer. A federal judge this morning ruled the patent on the bloodthinner Plavix which Bristol shares with Sanofi-Aventis is valid. And Judge Sidney Stein added the companies are entitled to injunctive relief and damages. Money. It'll come from the scrappy, pesky, Canadian, privately-held generic drug company "Apotex".

Last summer Apotex took advantage of a legal loophole in a sweet side deal it negotiated with Bristol and launched generic Plavix. In a matter of days it dumped several months' worth of Plavix onto the market. Sales of branded Plavix took an immediate, huge hit. Bristol CEO Peter Dolan lost his job over the bungled deal. And the company recently pleaded guilty and agreed to pay a $1,000,000 fine over the way it tried to keep Apotex at bay.

A short time after the generic launch, the judge told Apotex to stop making the stuff pending the trial and his decision on the patent. The trial took place in January. And today, he issued his 82-page, scientifically-dense ruling. It is laden with pages upon pages of detail about the molecular structure of Plavix, who discovered it and when. The bottom line, he writes, is that "Apotex...failed to prove by clear and convincing evidence that (the) patent is invalid or unenforceable on any of the grounds asserted. Apotex's argument...is ultimately unpersuasive."

The damages will be decided at a future proceeding. But despite the unequivocal language in the decision, Apotex isn't going quietly into the night. The billionaire CEO, Barry Sherman, is quoted in a press release as saying, "...we are unwavering in our belief that the...patent will ultimately be held invalid....we will pursue the Plavix case full bore and work relentlessly to invalidate the...patent, and, in so doing, once again make possible billions of dollars in savings for the public."

The company's lawyer says it will appeal immediately, but that it's too early to tell me on what grounds. Investors aren't giving it a chance. They're bidding up BMY shares to their highest level in years. Nearly every analyst had been saying the ruling would likely be favorable, so the decision doesn't come as a shock or a surprise. But investors are relieved the uncertainty has been lifted and, perhaps, now believe Bristol becomes a much more attractive acquisition target.

Interestingly, SNY shares popped on the news this morning, but have since pulled back. Again, investors are thinking Sanofi is a likely suitor for Bristol. A few months ago, there were reports out of France that the company was in talks with Bristol. Could this be the deal that ignites what many have been saying is a powder-keg of consolidation waiting to happen in big pharma?

In a research note to clients, Bank of America big pharma analyst Chris Schott writes, "Plavix is roughly an $8 billion global franchise...growing in the mid-teens. We estimate that US Plavix sales represent...25%-30% of Bristol's annual earnings." It's the world's second-biggest selling drug behind Pfizer's Lipitor. Schott adds, "We view the news today as refueling takeout speculation that has been part of the Bristol story since early January...." B of A has banked SNY and BMY and wants to do more of it. And it owns at least one percent of BMY shares.

Separately, Bristol announced two hours before the ruling came down that the FDA has put its new breast cancer drug on a fast track toward possible approval. It's a chemotherapy compound called, "Ixabepilone" (ix-uh-bep-uh-lone). Please, Bristol, give it a commercial name already. The generic name of Plavix is even more of a mouthful--clopidogrel bisulphate. But, if Apotex strikes out on appeal, I won't have to call it that until 2011 when the main patent on Plavix--thanks to the judge's ruling today-- is set to expire.

Questions? Comments? Pharma@cnbc.com

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