Shares in Sun Pharmaceutical Industries have taken a thumping after the Indian drugmaker revealed that Pfizer is seeking damages of close to $1 billion in a long-running patent dispute over the gastrointestinal drug Protonix.

The case dates back to May 2004 when Nycomed (now owned by Takeda) and Wyeth (now part of Pfizer) filed a patent infringement lawsuit against Sun and Teva. The latter two firms started selling their copycat versions of Protonix (pantoprazole) from January 2008 until ordered to stop by a US federal court in April 2010.

Now the Mumbai-based firm has given an update on ongoing litigation in a court in New Jersey. It notes that Wyeth has submitted confidential expert reports claiming damages linked to 'at-risk' launches from Sun for $960 million. Teva may be liable for some of Sun's damages and vice versa.

Sun noted that it will be "providing its own assessment on the purported damages", after which "patent misuse and appropriate level of damages will be determined". The company says it believes it has "sound reasons to disagree with these overstated claims of Wyeth, and also continues to believe that the patent is invalid and unenforceable". Sun concluded that it will pursue "all available legal remedies including appeals".

Souvik Chatterjee, an analyst at SMC Global Securities, has issued a research note (reported by Bloomberg) saying he thinks all the parties in the litigation will likely “reach an out-of-court settlement between $400 to $600 million”. He added that "any penalty for Protonix sales will adversely impact Sun Pharma earnings in fiscal 2013.”

In 2007, before Teva and Sun started their at-risk launches of generic Protonix, sales of the drug reached $1.9 billion, then slumped 58% in 2008.