Business Wire reported that the United States District Court for the District of Delaware returned a verdict in favor of Affymetrix in its patent infringement suit against Illumina Inc.

According to Business Wire, the jury found that Illumina’s arrays, scanners, software, and related products infringed on one or more claims of all five of Affymetrix’ (5,535,531, 5,795,716, 6,355,432, 6,399,365, and 6,646,243) patents-in-suit. The jury found that the proper royalty rate was 15 percent, and awarded total damages of more than $16 million for the period of 2002-2005.

Despite the Affymetrix victory, the battle is not yet over.  Forbes reported that Illumina plans to appeal, and that the verdict will affect the market for genotyping and genetic sequencing.  Forbes further reported that:

New customers — chiefly corporate labs — could balk until the case is settled, [UBS analyst Derik] De Bruin said, benefiting Affymetrix.  The analyst also said that by awarding Affymetrix a better than expected royalty rate of 15%, the company may now have better price flexibility in a "very price-sensitive" market.  The patents in question are from 2002 to 2005, and thus the higher than expected royalty rate also bolsters Affymetrix’s case for a similarly high rate "in claiming damage awards from 2006 and beyond should Illumina decide to settle," said De Bruin.  The analyst did, however, add that "unless Ilumina is blocked from the genotyping market, an outcome we continue to believe is unlikely, many customers may still choose Illumina’s products on expectations of better performance and ease of use despite potentially higher prices."

 

 

St. Louis-based Monsanto Company agreed today to pay the University of California more than $100 million to settle a claim that the company infringed on a University of California patent related to a hormone that makes cows produce more milk.

According to AP Business Writer Christopher Leonard, Monsanto agreed to pay the University of California $100 million in upfront royalties and 15 cents a dose, or at least $5 million annually, to license the patented technology, commonly called BST. The University’s patent rights expire in 2023.

Leonard describes the issues at the heart of this dispute as follows:

At issue is the genetically engineered bovine somatotropin hormone, sold under the brand name Posilac. Monsanto says injections of the hormone help dairy cows produce 10 percent to 15 percent more milk.

The university alleges in its lawsuit that three researchers at UC-San Francisco first isolated the DNA that is used to make the hormone. The lawsuit said that Monsanto knew about the research as early as 1985, but sold the product anyway.

Under the settlement agreement reached today, Monsanto will receive an exclusive commercial license to use the university’s patented hormone, while the University of California will have the right to use the hormone in noncommercial research and the U.S. government will also retain some rights.

Foster City-based Gilead Sciences, Inc. has resolved its dispute with Roche, which arose out of the companies’ 1996 Development and License Agreement for the flu drug Tamiflu. The settlement, which resulted in an amendment to the 1996 Agreement, provides for Gilead to accept a revised royalty structure, with a co-promotion option, and $80 million in additional royalty payments for prior Tamiflu sales. The new royalty rate will be 14% for the first $200 million in Tamiflu sales, 18% for the next $200 million, and 22% for sales above $400 million.

The dispute arose in June, 2005 when Gilead delivered a notice of termination to Roche for the 1996 Agreement, seeking to gain back all rights to Tamiflu. The biotech company had alleged that Roche had failed to pay Gilead some $18 million in royalty payments incurred pursuant to the 1996 Agreement. The companies had entered into arbitration proceeding to resolve the dispute.

As a result of Gilead’s resolution of this dispute, Forbes reports that Gilead may look for an acquisition for the pulmnology, pediatric, or specialty infectious disease markets. Forbes author Kerry Dolan wrote in today’s article Biotechnology: Gilead’s Half-Empty Pipeline :

[T]he Foster City, Calif., company also has a problem shared by much of Big Pharma–an awfully thin pipeline. . . . For Gilead to keep growing between now and then, several analysts are betting that it will make an acquisition–either of a whole company or of specific drugs in development from other companies. . . . The challenge here: Gilead competes not with biotech companies but with deep-pocketed Big Pharma. So it may have to pay richly for any acquisition it undertakes.

Clearly, the challenge for Gilead in the coming months will be how to enhance its current pipeline that has very new products on one end of the spectrum and massive products on the other. Thanks to this settlement, Gilead now has new funds to take its pipeline to the next level–the real test will be what Gilead will be able to do with its windfall.

In “The Impact of a Brand Generic Launch on the Recovery of Patent Damages” published in the Summer 2005 IPL Newsletter, James D. Veltrop and Chad A. Landmon explore the positive and negative effects of a brand name drug company making the decision to also launch a brand name generic. In light of the extensive litigation between brand and generics drug companies, the authors’ discussion raises some interesting issues to consider.

With respect to the two sides of the debate, the authors write:

On the one hand, the launch of the brand generic significantly reduces the profitability of the launch by the first generic competitor, who otherwise is often entitled to a six-month window of exclusivity before other generics can enter the market. In addition, the launch of its own generic allows the brand company to increase sales, albeit potentially at the expense of significant profits on its brand product. On the other hand, if the brand company also has patent claims against the generics, its launch of a brand generic might generate additional costs because any damages it might be entitled to recover could be substantially less than it might have recovered had it refrained from launching the brand generic in the first place. Because the brand generic would be a noninfringing alternative to the generic product, lost profits damages could be wholly or partially unavailable and the brand company would have to rely on a lower measure of damages than lost profits. . . . the launch of a brand generic might suggest that the brand company lacks confidence in either the merits of its patent claims or its ability to collect the full measure of damages from generic companies. Alternatively, it could suggest that the brand company is at least partially motivated by other factors, such as reducing the incentives of generic companies to challenge brand company patents.

According to the authors, the practice of launching brand name generics is thought by many generics companys to undermine the Hatch-Waxman Amendments, which made generics more widely available. Passed by Congress in 1984 in order to shorten the generics approval process,
the Hatch-Waxman Amendments enabled generics companies to launch a generic product simply by filing an Abbreviated New Drug Application (“ANDA”), which demonstrated that the generic product is bioequivalent to the brand drug that was already approved. In this manner, generics companies were able to quickly launch generics products, without having to bear the expense of producing safety and efficacy data. The authors go on to say, however, that

[H]aving recently passed the Medicare Modernization Act, it is doubful that Congress will take up again soon the Hatch-Waxman Amendments. Thus, the practice of launching authorized generics during the 180-day exclusivity period likely will remain a key brand company strategy for some time to come.

While the authors present an excellent summary of the issues involved with this debate, as a consumer myself, I wonder why brand name drug companies are pursuing this strategy at all, despite the litigation that is arising out of the generics-brand name disputes. How can companies think it makes good business sense to launch an expensive and then a cheaper version of its own products? While it is true that once a generic is available, some consumers will choose to buy the generic over the brand name product automatically, others will be reluctant to go with a generic simply because it was manufactured by a different company. However, if one company manufactured both versions of the drug, the majority of consumers would without a doubt simply purchase the cheaper version of the medication. In my mind, this practice seems to be a lousy business strategy that is out of sync with common sense. Although from a patent perspective, it may have some valid rationales, but from a business perspective, the brand generics strategy seems to undermine the company’s investment in the brand product.

As for the brand generics strategy itself, I can see why the generics companies dislike it, but I am conflicted as to whether or not it really undermines Hatch-Waxman. Certainly the practice has antitrust implications, but I suspect Congress intended to protect the public with Hatch-Waxman more so than the generics companies. Since the public receives a generic, regardless of whether or not it is a brand product, I don’t see how this undermines Hatch-Waxman. Apparently, however, my view is not a popular one among generic companies. Thus, the debate continues.

Mountain View-based Alza Corporation, a subsidiary of Johnson & Johnson, suffered a blow this week with the ruling by the Northern District of Virginia that Mylan Laboratories’s generic version of the overactive bladder treatment Ditropan XL did not infringe an Alza patent and that the Alza patent itself was invalid as anticipated and obvious.

Mylan was the first generic pharmaceutical company to file an Abbreviated New Drug Application (“ANDA”) for 5 mg and 10 mg of Oxybutynin, the active ingredient in Ditropan XL. Mylan will be eligible for 180 days of market exclusivity after it receives approval from the Food and Drug Administration (“FDA”). Earlier this year, Mylan received tentative approval for the drug from the FDA, which generally means that approval will be granted upon the resolution of any outstanding patent issues.

Alza has already announced that it intends to appeal the decision to the Court of Appeals for the Federal District in Washington, D.C.

The decision comes after Alza initiated another suit earlier this month, along with McNeil-PPC, Inc., against Hayward-based Impax Laboratories, Inc and Andrx Pharmaceuticals LLC in the United States District Court for the District of Delaware, alleging that defendants infringed their patents by seeking to make generic versions of Concerta prior to the expiration of the patents. Concerta is marketed as a treatment for attention deficit disorder (“ADD”) and attention deficit hyperactivity disorder (“ADHD”). The patents were issued in 2005 and cover the administration of the drug methylphenidate hydrochloride in an increasing concentration over a period of time. Plaintiffs argue that defendants’ drugs also cover the administration of the drug in an increasing concentration over a period of time, therefore infringing their patents. Genetic Engineering News has reported that sales of Concerta were $770 million in the 12 months ended in July, 2005.