Pharmas Market with Mike Huckman

Is AstraZeneca's Crestor Cresting?

In a federal courthouse today, a trial is getting underway that could determine the fate and fortune of AstraZeneca and its blockbuster cholesterol drug Crestor.

The company is suing more than half a dozen generic drug firms that want to make a cheaper copy of Crestor years before the patent on the drug is set to expire. But you won't find me sitting in the pews furiously taking notes.

No doubt this case is a big deal.

AZN sold $4.5 billion worth of Crestor last year. And 2009 Crestor revenue grew a whopping 25 percent at a time when sales of the other brand-name statin, Pfizer's Lipitor, are going down. Crestor sales could climb again this year because the company just won FDA approvalof a new use for the drug.

But first of all, it's a trial in federal district court.

You can't bring in a TV camera or any recording equipment, for that matter. Video of armies of corporate and patent lawyers walking in and out of court with their assistants pushing dollies loaded up with cardboard boxes containing documents just doesn't make for compelling TV. No offense against courtroom artists, but there's only so many ways you can shoot (take video of) that stuff. And the subject matter here is dense, dull and dry. A few years ago I sat through a couple of relatively short hearings on the Plavix patent when Bristol-Myers Squibb and Sanofi-Aventis were fending off a threat from privately-held Canadian generic drug company Apotex. As they were taking boring testimony about who discovered the bloodthinner and how, I discovered the cure for insomnia. I haven't patented it yet, though.

And to make matters worse in this case an AstraZeneca spokesperson says the scientists who own the patents and the lawyers defending them speak Japanese. So, all of the questions and answers from those key witnesses will apparently have to be translated in court by interpreters. Can you imagine being the poor stenographer?

Leerink Swann pharma analyst Seamus Fernandez says there's a 30 percent chance AZN loses the case. He claims the judge has a track record of favoring patent holders. And you have to take into consideration that the trial is on AZN's home turf of Wilmington, Delaware where its U.S. headquarters are located. The company says between 4,000 and 4,500 people work there. And I'd be willing to bet the judge might know or live in the same neighborhood as some of them, maybe even golf or go to church with them. But, of course, decisions are based solely on the evidence.

Sure, there will be an appeal no matter who wins, but Fernandez estimates if the company ultimately runs out of legal options and comes out on the losing end that it could cost as much as 80 to 90 cents in earnings per share. At first he had forecast the stock could take a five to six dollar hit in a discounted cash flow value analysis, but in a research note to clients today Fernandez bumped that up to eight to nine bucks. LS may trade in BMY shares.

Finally, it's not like this is a jury trial where there will be deliberations that result in a verdict. It's a bench trial. So, when it's over the judge will ask the attorneys to submit some more stuff and then make a decision down the road. He recently announced he's retiring in July, so presumably the ruling will come by then. For now, I will be following dispatches from unfortunate wire service reporters who've been assigned courthouse duty on this one and from a Fernandez team member who has been planted in the courtroom for the duration of the trial.

The analyst told me he'll owe that guy big time.

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