Biotech patent dispute involves millions

Ruling may require MedImmune to pay years of royalties

Wednesday, Nov. 16, 2005

For the time being, MedImmune’s ongoing dispute over a ‘‘strange” patent held by rival biotech firm Genentech Inc. has moved from the courthouse to the U.S. Patent and Trademark Office.

The Patent and Trademark Office has decided to re-examine the patent case at the request of an anonymous third party, following a favorable October court ruling for Genentech.

On Oct. 18, the U.S. Court of Appeals in Washington, D.C., ruled against MedImmune’s appeal to declare invalid Genentech’s antibody-making patent, now called Cabilly II. The judge made the decision on a lawsuit filled by MedImmune in April 2003, charging Genentech, of South San Francisco, Calif., and Celltech, a United Kingdom company, with violations of antitrust, patent and unfair competition laws.

At stake for MedImmune of Gaithersburg is whether it will be required to pay millions of dollars in royalties to Genentech for another 12 years on sales of its popular product Synagis, a respiratory treatment for infants.

The Genentech patent covers an antibody-making process used to make Synagis and other laboratory-produced antibodies. Synagis sales last year were about $942 million worldwide.

According to the April 2005 book ‘‘Monoclonal Antibody Therapies: Evolving Into a $30 Billion Market,” published by Datamonitor, the monoclonal antibody market is one of the fastest growing and most lucrative sectors of the pharmaceutical industry, with greater than 48 percent growth during the past two years. At least 17 companies with direct sales of therapeutic antibodies in 2004 may be licensing the patent to make them.

In the third quarter of 2005, Genentech took in approximately $20 million pre-tax net revenues from the Cabilly royalties, primarily from MedImmune and three other companies, said Genentech spokeswoman Caroline Pecquet, who expects the annual total to reach $80 million.

Patent attorneys say the case is strange because fighting over it began some 22 years ago. Genentech and the United Kingdom’s Celltech Inc. each originally filed for patents for the technology in 1983, but royalties may now extend to 2018 because of extenuating court and patent office rulings.

‘‘This is one of those patents that are submarine patents. They can float around in the patent office for years and then they pop up with another 17 years of life,” said William F. Heinze, Intellectual Property Attorney for Thomas, Kayden, Horstemeyer & Risley in Atlanta.

A tangled web

In 1983, Celltech, filed patent applications in the U.K. and then in the U.S. to cover methods used to produce antibodies by recombinant DNA technology. Celltech called it the ‘‘Boss” patent, after inventor Michael Boss. Also in 1983, Genentech filed a similar application they called the Cabilly patent for inventor Shmuel Cabilly.

Celltech and Genentech threw legal darts at each other for several years. But before the dispute was decided in court, they settled their dispute out of court. The rub, for MedImmune, was that settlement. The court-approved settlement finally granted Genentech the patent, while Celltech was awarded compensation until the original expiration date of the Boss patent in 2006. Celltech also secured preferential licensing for its products.

The Patent and Trademark Office issued Genentech a new patent in 2001, covering the same technology as the first patent, say Heinze and other experts.

MedImmune and other therapeutic antibody makers, those either with current products for sale or working on future marketed products, expected the Cabilly and the Boss patents to expire in 2006, seventeen years after they were finally granted in 1989. Instead, the Cabilly II patent arrived gift wrapped, says attorney Heinze, at Genentech’s door with an expiration date of 2018.

‘‘It does sound a little bit fishy to go through all your litigation and settle on the patent right before case is heard,” said Heinze. ‘‘The reason they got away with it was a quirk.” He said that when the Cabilly and Boss patents were originally filed in the U.S., patents by law lasted 17 years from the issue date. But now they last 20 years after the filing date.

MedImmune claims that Genentech and Celltech were guilty of collusion in their settlement to gain a monopoly of the artificial synthesis of antibody molecules.

Information from SEC filings by MedImmune indicate the company is considering new legal options, including petitioning to get the case heard by the U.S. Supreme Court. MedImmune counsel Aldo A. Badini, with Dewey Ballantine LLP, refused to comment on whether the company would take such a step. Observed patent attorney Heinze, ‘‘I would be surprised if the Supreme Court takes it up. Because this is such a one shot deal; I don’t think there are a lot of cases like this one.”

In the field of biotechnology — which is rife with patent disputes — the Cabilly case is one of the oddest and more esoteric in years, says Heinze. And yet the case carries financial implications for any company using the process, which is a fundamental way to use recombinant DNA to synthesize large batches of antibodies.

Robin L. Teskin, IT attorney and partner with Dwane Morris LLP, said such cases ‘‘are not at all typical. Essentially Genentech⁄Cabilly was awarded two very broad patents that the Patent and Trademark Office now considers may be obvious over each other. It is also unusual given the broad claims of the patent that on their face cover antibody manufacture in different host cells,” she said. ‘‘It is too early to predict whether the case will bear out that charge.”

Implications forother companies

The outcome of the Cabilly patent case is also important to the ambitions of young biotech firms, such as Rockville’s MacroGenics, which mass-produce antibodies for drugs yet to hit the market. Also affected may be larger, more established firms, such as Human Genome Sciences Inc. which is developing monoclonal antibody products to treat lupus and rheumatoid arthritis, HIV⁄AIDS, anthrax infections and cancer. MacroGenics and HGS have not yet marketed antibody-based products but are in position to develop them.

Said Michael Richman, COO of Rockville’s MacroGenics Inc., ‘‘I think everyone that makes antibodies is concerned with the royalty stack and hence look forward to when enabling patents expire. Yes, the co-expression process is currently integral to the production of Mabs.” [monoclonal antibodies].

Companies, such as Intracel Resources LLC In Frederick, that sell antibodies for research are not required to pay royalties for using Cabilly, said a company official. It affects only companies that use them in humans for therapeutic uses.

Genentech’s Pecquet said ‘‘the most significant” dollar amounts from Cabilly royalties come to Genentech from MedImmune for Synagis; Abbott Laboratories for making its arthritis drug Humira; Centocor Inc. for Remicade, a biological treatment for inflammatory disorders of the immune system; and ImClone Inc. for its Erbitux, a treatment for advanced colorectal cancer. She said the royalty fee the company charges is part of confidential licensing agreements.

Antibodies are considered very valuable in the bio-pharma industry because they are highly specific and can be used therapeutically to protect against disease, as well as to diagnose a wide variety of illnesses and to detect the presence of drugs, viruses, bacterial and other antigens in the bloodstream.

The boom in therapeutic antibodies is expected to continue, according to Datamonitor, raising the stakes higher in the Cabilly patent case, say most experts. Many key players in the industry are mum while the disputes continue.

Jerry Parrott, vice president for corporate communications at Human Genome Sciences Inc. in Rockville, said, ‘‘We can’t comment on this because there may be implications of what we say later if the case proceeds.”

Officials at MedImmune, Abbott, ImClone, and Centocor declined to be interviewed. Even officials at the trade association, Biotechnology Industry Organization, would not discuss the Cabilly patent case or the antibody segment of the industry. BIO’s leaders in biotechnology patent law, business, and science all failed to return calls and e-mails. Then, spokeswoman Kimberly Coghill offered, ‘‘We don’t comment on any type of law suit that involves any companies.” She said BIO’s attorneys ‘‘don’t think it is appropriate at all to comment even on background, from 30,00 feet or even just in concept of the question.”

Edward Eisenstein, director, University of Maryland’s Center for Advanced Research in Biotechnology in Rockville said however that, while the Genentech patent position is very aggressive, ‘‘antibodies can be made in a number of different ways.”

This story originally appeared in The Business Gazette.