Eli Lilly 2006 Annual Report Download - page 51

FINANCIALS
49
Note 13: Contingencies
We are a party to various legal actions, government investigations, and environmental proceedings. The most
signifi cant of these are described below. While it is not possible to predict or determine the outcome of these mat-
ters, we believe that, except as specifi cally noted below, the resolution of all such matters will not have a material
adverse effect on our consolidated fi nancial position or liquidity, but could possibly be material to our consolidated
results of operations in any one accounting period.
Patent Ligitation
We are engaged in the following patent litigation matters brought pursuant to procedures set out in the Hatch-
Waxman Act (the Drug Price Competition and Patent Term Restoration Act of 1984):
• Dr. Reddy’s Laboratories, Ltd. (Reddy), Teva Pharmaceuticals, and Zenith Goldline Pharmaceuticals, Inc., which
was subsequently acquired by Teva Pharmaceuticals (together, Teva), each submitted Abbreviated New Drug
Applications (ANDAs) seeking permission to market generic versions of Zyprexa prior to the expiration of our
relevant U.S. patent (expiring in 2011) and alleging that this patent was invalid or not enforceable. We fi led lawsuits
against these companies in the U.S. District Court for the Southern District of Indiana, seeking a ruling that the
patent is valid, enforceable and being infringed. The district court ruled in our favor on all counts on April 14, 2005,
and on December 26, 2006, that ruling was upheld by the Court of Appeals for the Federal Circuit. Reddy and Teva
are seeking a review of that decision. We are confi dent that Reddy’s and Teva’s claims are without merit and we
expect to prevail. An unfavorable outcome would have a material adverse impact on our consolidated results of
operations, liquidity, and fi nancial position.
• Barr Laboratories, Inc. (Barr), submitted an ANDA in 2002 seeking permission to market a generic version of
Evista prior to the expiration of our relevant U.S. patents (expiring in 2012-2017) and alleging that these patents
are invalid, not enforceable, or not infringed. In November 2002, we fi led a lawsuit against Barr in the U.S. District
Court for the Southern District of Indiana, seeking a ruling that these patents are valid, enforceable, and being
infringed by Barr. Teva has also submitted an ANDA seeking permission to market a generic version of Evista. In
June 2006, we fi led a lawsuit against Teva in the U.S. District Court for the Southern District of Indiana, seeking a
ruling that our relevant U.S. patents are valid, enforceable, and being infringed by Teva. No trial date has been set
in either case. We believe that Barr’s and Teva’s claims are without merit and we expect to prevail. However, it is
not possible to predict or determine the outcome of this litigation, and accordingly, we can provide no assurance
that we will prevail. An unfavorable outcome could have a material adverse impact on our consolidated results of
operations, liquidity, and fi nancial position.
• Sicor Pharmaceuticals, Inc. (Sicor), a subsidiary of Teva, submitted ANDAs in November 2005 seeking permission to
market generic versions of Gemzar prior to the expiration of our relevant U.S. patents (expiring in 2010 and 2013),
and alleging that these patents are invalid. In February 2006, we fi led a lawsuit against Sicor in the U.S. District
Court for the Southern District of Indiana, seeking a ruling that these patents are valid and are being infringed
by Sicor. In response to our lawsuit, Sicor fi led a declaratory judgment action in the U.S. District Court for the
Central District of California. Sicor also moved to dismiss our lawsuit in Indiana, asserting that the Indiana court
lacks jurisdiction. The California action has been dismissed. In September 2006, we received notice that Mayne
Pharma (USA) Inc. (Mayne) fi led a similar ANDA for Gemzar. In October 2006, we fi led a lawsuit against Mayne in
the Southern District of Indiana in response to the ANDA fi ling. In response to our lawsuit, Mayne fi led a motion
to our lawsuit, asserting that the Indiana court lacks jurisdiction. In October 2006, we received notice that Sun
Pharmaceutical Industries Inc. (Sun) fi led an ANDA for Gemzar, alleging that the 2013 patent is invalid. In December
2006, we fi led a lawsuit against Sun in the Southern District of Indiana in response to Sun’s ANDA fi ling. We expect
to prevail in litigation involving our Gemzar patents and believe that claims made by these generic companies that
our patents are not valid are without merit. However, it is not possible to predict or determine the outcome of this
litigation, and accordingly, we can provide no assurance that we will prevail. An unfavorable outcome could have a
material adverse impact on our consolidated results of operations, liquidity, and fi nancial position.
In June 2002, we were sued by Ariad Pharmaceuticals, Inc., the Massachusetts Institute of Technology, the
Whitehead Institute for Biomedical Research and the President and Fellows of Harvard College in the U.S. District
Court for the District of Massachusetts alleging that sales of two of our products, Xigris and Evista, were inducing the
infringement of a patent related to the discovery of a natural cell signaling phenomenon in the human body, and seek-
ing royalties on past and future sales of these products. In June 2005, the United States Patent and Trademark Offi ce
commenced a re-examination of the patent in order to consider certain issues raised by us relating to the validity of
the patent. On May 4, 2006, a jury in Boston issued an initial decision in the case that Xigris and Evista sales infringe
the patent. The jury awarded the plaintiffs approximately $65 million in damages, calculated by applying a 2.3 percent