All the big legal, market and deals news from the life sciences sector in June

All the big legal, market and deals news from the life sciences sector in June

In June’s round-up of life sciences-related news, we report on the US Supreme Court’s decision to grant certiorari in the Helsinn Healthcare v Teva Pharmaceuticals Section 102 dispute, but not in the Cleveland Clinic’s Section 101 case against True Health Diagnostics, as well as proposed legislation to shield US pharma patents from facing both IPR and Hatch-Waxman challenges, and the USPTO’s recent guidance on patentability.

Legal radar

Supreme Court grants Certiorari in the on-sale bar Section 102 clash between Helsinn Healthcare and Teva – The US Supreme Court agreed at the end of June to review the decision of the Court of Appeals for the Federal Circuit to invalidate patents owned by Helsinn Healthcare on the grounds that the patents’ claims were on-sale prior to application and therefore do not qualify for patent protection under Section 102 of the Patent Act concerning novelty and prior art. The patents protect palonosetron – a drug for treating chemotherapy-induced nausea – and were challenged by Teva in ANDA litigation and were upheld by a district court. But this decision was reversed by the Federal Circuit, which ruled that, because Helsinn had struck a supply deal for the formulation with another company prior to its patent application priority date, the formulation had been on-sale before that date and therefore was not eligible for patent protection under Section 102’s on-sale bar. In its petition to the Supreme Court, Helsinn contended that under the America Invents Act, the confidential sale of an invention to a third party does not qualify as prior art for the purposes of determining patentability. Several representatives of life sciences innovators and IP rights holders submitted amicus briefs to the Supreme Court asking it to grant the petition and clear up the uncertainty created by the Federal Circuit’s decision, which it is claimed threatens the validity of large number of patents granted to (especially small and medium sized) biotech companies.

Supreme Court refuses to grant certiorari in Cleveland Clinic Section 101 dispute – The United States Supreme Court decided not to address the way lower courts are applying criteria for patent subject eligibility, denying certiorari in Cleveland Clinic Foundation v. True Health Diagnostics. The Cleveland Clinic’s petition asked the court to review the 2017 decision of the Court of Appeals for the Federal Circuit to invalidate three of its patents relating to methods for testing for arterial damage and methods for treating patients with cardiovascular disease. Having applied the two-step Alice/Mayo test for determining patent subject eligibility under Section 101 of the Patent Act, the CAFC deemed the patents’ claims to be directed towards laws of nature and therefore unpatentable. The Supreme Court was asked to consider whether its Mayo decision authorises a district court to invalidate patents on the pleadings when there are disputed questions of fact, a disputed question of claim construction or scope, and/or an undeveloped evidentiary record; and whether the Federal Circuit erred in ruling that that a method involving natural phenomena is ineligible for patent protection if it claims known techniques that have been adapted for a new use and purpose not previously known in the art. Life sciences innovators, hoping for more clarity around the eligibility of method-of-treatment claims, will be disappointed with the Supreme Court's decision not to hear the case.

AbbVie compelled to produce more evidence in Humira litigation – June saw the latest developments in AbbVie’s patent battles with producers of biosimilar versions of its best-selling drug, Humira – in this case, against Boehringer Ingelheim, whose product is accused of infringing 74 US patents. Two new opinions regarding discovery in the case were issued by Magistrate Judge Lloret on 14th of the month. The first granted in-part the Boehringer’s motion to force AbbVie to submit an unredacted version of its “Humira IP Discussion” slide show, compelling the plaintiff to produce six of the 11 slides in question in unredacted form. AbbVie had previously insisted these were subject to attorney-client privilege.  Secondly, the court granted Boehringer’s motion to compel AbbVie to search for documents under 10 additional search terms chosen from language contained in the patent-in-suit. AbbVie has acquired a large number secondary patents for Humira, a slew of which it has asserted in patent suits. Boehringer is making an ‘unclean hands defence’ and claims that the AbbVie deliberately acquired many non-inventive and overlapping rights in order to shield its blockbuster treatment from competition. Other biosimilars producers, such as Amgen and Samsung Bioepis, have reached notable recent Humira patent suit settlements, offering favourable terms to AbbVie (as reported here and here): so it will be interesting to see whether Boehringer’s decision to push forward with litigation will produce a different result, perhaps helped by evidence uncovered as the result of these latest discovery rulings.

Patentability guidance for methods-of treatment issues by the USPTO - The United States Patent and Trademark Office (USPTO) has issued a memorandum discussing how patent eligibility for method-of-treatment’ patent claims is to be assessed, in the light of the Federal Circuit’s recent judgement in Vanda Pharmaceutical Inc v West-Ward Pharmaceuticals. In that ruling (reported in a previous life sciences round-up), the court gave its first opinion on the patent eligibility of method-of-treatment claims under the Mayo test set out in the Supreme Court’s Alice decision. It upheld Vanda Pharmaceutical’s claims for methods of treating schizophrenia, finding that they are not directed towards a law of nature (patent ineligible subject matter under Section 101 of the US Patent Act), but rather to an application of a law of nature recited in the claims. The USPTO document emphasises the decision’s significance, stating that it “illustrates several important points regarding the subject matter eligibility analysis”: firstly, that claims are to be evaluated as a whole; secondly, that a clear distinction should be made - in accordance with Supreme Court precedent – between laws of nature per se and their applications; and, thirdly, that the Federal Circuit did not consider whether the treatments steps were conventional or routine in determining what the claims were “directed to”. In its effort to provide “clear and predictable patent rights” – an objective stressed by director Andrei Iancu in his keynote address at IPBC Global earlier in the month – the USPTO emphasises that its own guidance and training examples are consistent with these points.

Market radar

US legislation proposed to shield drug patents from facing both IPR and Hatch-Waxman challenges – A legislative amendment was introduced by US Senator Orrin Hatch, proposing to prevent patents for innovative drugs being challenged by both Hatch-Waxman litigation and inter partes review (IPR). He told a Senate Judiciary Committee on 14th June that, while IPR is a critical tool for fighting so-called patent trolls – and serves as a vital tool for tech innovators – it poses a threat to the careful balance between branded drug companies and generics created by the Hatch-Waxman Act. IPR is a “much blunter instrument” than Hatch-Waxman litigation, which has “industry-specific balancing features”, he said. Aimed specifically at pharmaceuticals patents, the amendment may not face the opposition from tech companies that it otherwise would; and if Hatch successfully pairs it with the CREATES Act of 2017 – as is his intention – the proposal has a chance of receiving wide political support.

Fears that South African patent system could grind to a halt following move to adopt substantive examinations – South African patent law experts told IAM last month that the country’s move to introduce substantive patent search and examination for pharmaceutical innovations carried substantial risks. The new policy will have caught the eye of rights holders in the sector, with its stated aim of clamping down on the perceived ‘evergreening’ of pharma patent protection. However, while the introduction of new substantive proceedings might prevent weak patents from being granted, there do not appear to be any plans in-place to preclude follow-on patents as such. The greater danger for innovators, local sources emphasised, was that the introduction of greater complexity into an already inefficient system could lead to substantial delays in patent granting. Erik van der Vyver, head of Cape Town-based Von Seidels’ patent practice, for instance, told IAM: “South Africa needs to come into line with first-world patent practices, and substantive examinations are certainly part of that process…Our concern though, is that, given the inefficiencies in the current system, adding an extra layer of complexity will make the system unworkable…We don’t want the patent office to become a bottomless pit – as happened in Brazil – and have the whole system grind to a halt.”

Pharma industry to drop off ‘second patent cliff’ between 2018 and 2024, says report – The imminent genericisation of several blockbuster drugs and the underestimated threat of biosimilar market entry mean that the pharmaceuticals industry faces a second patent cliff in the coming years, according to Evaluate Pharma’s World Preview 2018, Outlook to 2024, released last month. As much as $251 billion worth of sales are at risk as these development, it estimates. This suggests that pressures to replenish pipelines will remain acute. The report forecasts that oncology and orphan drugs will be two of the key growth areas for pharmaceuticals sales, which means that these treatment areas are likely to be at the centre of deal-making activity; although the preview sees organic product development as promising a greater ROI than M&A investment.

Synthetic biology patent landscape illuminated by new report – New insights into the patent landscape of the booming synthetic biology industry were provided by a report produced by R&D analytics firm PatSnap, and reported by IAM. Research in this field, it revealed, has produced a total 24,070 INPADOC patent family representatives – consisting of 72,999 total patent documents – belonging to private companies, which own 13,648 of these assets; academic institution, which possess 6,226 and tend to have the largest portfolios in the field; as well as individuals and governments, which account for 5,309 and 548 patent family representatives respectively. The University of California, Novozymes and Harvard University are the three biggest synthetic biology rights holders; while Hewlett Packard, whose focus is not traditionally in the life sciences, is a leading innovator of enabling technologies in the field. While the volume of patents in the space has been growing rapidly, the number of patents granted year-on-year in fact began to decline after 2013 – a fact that could be a sign of market stabilisation or a greater caution among filers produced by a rise in litigation, the report’s author Timi Olotu told IAM. Other findings included that the United States leads the world in terms of synthetic biology patent filings, with 25% of the global total, while second-place China represents 14%.

AbbVie offshoring patents to lower taxes – Pharma giant AbbVie, best-known as the owner of the world’s highest-selling drug Humira, was one of the companies revealed by a recent Reuters report to be lodging patents in low-tax jurisdictions in order to mitigate its tax liabilities. The majority of its Humira patents are located in Bermuda, enabling AbbVie to report its income in the British Overseas Territory where there is no tax on profits. While the Chicago-based entity has never recorded a profit in its home country, it paid approximately $1 billion a year in US taxes between 2013 and 2016, on money imported from overseas subsidiaries – taxes it will no longer be forced to pay under President Trump’s Tax Cuts and Jobs Act, according to Reuters.

Deal watch

Asia-Pacific transactions help drive up pharma M&A deal-making in Q1 2018 – The value of M&A transactions in the pharmaceuticals industry was $123 billion in the first three months of 2018, a substantial increase on the $73.3 billion worth of such deals in the first quarter of 2017, according to data published by Clarivate Analytics this month. The opening period of 2018 saw the highest total reported deal value since the first three months of 2010. However, the number of M&A agreements fell 131 to 90, meaning that this year’s opening months have seen more money change hands on average for each M&A transaction; 28 exceeded $100 million, while at least 18 were worth more than $500 million. While patent-protected assets are not the only consideration in such deals, they are a major driver; and the data presented by Clarivate is encouraging for those involved in pharma IP deal-making.

Novartis to divest eyecare business as it continues to shed non-core business units – Swiss pharma giant Novartis announced that it plans to spin off its eyecare business, Alcon, thought to be worth as much $25 billion dollars. The move follows the recent sale of the company’s consumer healthcare joint venture, JV, for $13 billion to GlaxoSmithKline (whose patent implications are analysed by IAM here); and, like that divestment, it reflects its CEO Vas Narasimhan’s strategic focus on core business areas. A range of valuable patent-protected assets will constitute a major portion of the value of the sale of Alcon, whose proceeds might also be used by Novartis to fund its own patent deal-making, which has been extensive in recent times: $8.7 billion of the proceeds from the JV sale were spent on promising biotech Avexis Inc; although $5 billion was spent on share buybacks.

Opposition to Takeda’s mega-purchase of Shire continues to grow-  Shareholder opposition to Takeda’s $60 billion takeover of Shire – the largest ever by a Japanese company – continues, with investors now seeking to thwart the transaction having grown to 130 (from just over a dozen), including members of the Takeda family. Only comprising 1% of shareholders at moment – it needs one-third to block the deal – the group says it is “working steadily to increase support”, Reuters reported. It argues that the takeover will negatively affect share prices – which have already fallen 20% since it was announced.

Private equity firm pays $3.5 billion for Recordati – In the month’s most valuable deal, CVC Capital Partners, a private equity firm, has agreed to pay $3.5 billion for Italian pharma company Recordati – 51% of whose shares were previously owned by its eponymous founding family. The company had been put on sale following the death of Giovanni Recordati two years ago, with an initial asking price of more than $9 billion.

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