Ativo Capital

Rigorous Thinking

Financial and economic commentary reflecting Ativo’s world view:

Santorus vs. PRX Patent Dispute

Thursday, April 15, 2010


Yesterday a court ruled against Santorus (SNTS) and in favor of Par Pharmaceuticals (PRX) in a patent dispute. PRX wants to produce a generic version of Zegerid, Santorus’ heartburn medication. Today SNTS is down $1.73, meaning it has lost approximately $101 million in market cap, while PRX is up $1.57, giving it a gain of $55 million. The difference between the two amounts, $46 million, is presumably a net transfer of value to other competitors who may be able to also sell generic versions of Zegerid and most of all to consumers, who will benefit from a lower price for their medication. SNTS has said it will appeal, of course.


  1. By the end of the day SNTS was down $1.77/share and PRX was up $2.00/share, so between the two firms the amount of market value that was lost was down to $33.4 million. What we saw today, throughout the trading day, was the gap gradually closing from $79.5 million at the open. The right play would have been to buy both stocks aggressively early on, as there was a good chance that at least one of the was undervalued.

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