Last week Bristol Myers Squibb (BMS) announced that it planned to acquire Celgene in a deal valued at $74 billion. Following the acquisition, the resulting company will have nine products in its portfolio that each generate more than $1 billion a year. This portfolio will include Celgene’s Revlimid®, a derivative of thalidomide (lenalidomide) used to multiple myeloma (MM), transfusion-dependent anemia due to myelodysplastic syndromes (MDS), and mantel cell lymphoma. Revlimid® sales exceeded $8 billion in 2017, but there are questions surrounding its long-term value since it may face generic competition in 2022 by Dr. Reddy’s.
A settlement conference is scheduled for tomorrow, January 10, 2019, in the Hatch-Waxman patent case between Celgene and Dr. Reddy’s. To date, the parties have not been able to reach a settlement. However, this may now change with Bristol Myers at the table.
Celgene has many patents protecting Revlimid®, including a composition of matter patent covering lenalidomide (U.S. Patent No. 5,635,517) which expires in October 2019. The other patents mainly fall into two categories: method-of-use or indication patents and polymorph patents. The method-of-use patents mostly expire by 2023 but the polymorph patents, including U.S. Patent Nos. 7,855,217 and 7,465,800, do not expire until 2024 and 2027, respectively. Revlimid’s® long-term value thus stems from these polymorph patents which look to extend Revlimid’s® monopoly past 2022.
In terms of generic competition, Celgene faced an early threat from Natco back in 2010, which ended in a settlement in 2014 that would allow Natco to enter the market with a limited quantity of product in 2022 and gradually increasing to an unlimited quality in 2026. At least according to this settlement, the generic cliff for Revlimid® would not fully be 2022, but rather 2026. This agreement most likely includes, although we have not been able to verify through public documents, an acceleration or most-favored-nation provision that would allow Natco to enter the market sooner if a subsequent generic was able to obtain a better entry date.
Since Natco, several other companies have filed ANDA’s against Revlimid®, including Dr. Reddy’s, Zydus, Cipla, and Lotus Pharmaceuticals. The case with Dr. Reddy’s is the furthest along. Although a trial date has not yet been scheduled, it would likely take place in the second or third quarter of 2019, as the parties have thus far been engaging in discovery.
The trial will likely focus on the polymorph patents and Dr. Reddy’s argument that is does not infringe those patents because its generic product is “amorphous” lenalidomide, whereas the patents are limited to “crystalline” lenalidomide. Dr. Reddy’s thus believes it can circumvent the polymorph patents. Celgene, on the other hand, will likely argue that even though Dr. Reddy’s product is amorphous at certain stages, it is also crystalline at others. There is at least some support for this type of argument as the Federal Circuit suggested in a 1994 case (Zenith Laboratories, Inc. v. Bristol-Myers Squibb Co.) that a drug that is not infringing when made or sold, but converted into a patented polymorph when ingested, may be infringing.
Another possible venue for challenging the polymorph patents would be through an inter partes review (IPR) proceeding. Dr. Reddy’s, however, chose not to challenge the polymorph patents that way, focusing instead on challenging three MDS patents which expire in 2022. There are two potential reasons why Dr. Reddy’s chose not to challenge the polymorph patents through an IPR. First, IPR challenges are limited to Section 102 and Section 103 issues, meaning that you are challenging the validity of those patents. Dr. Reddy’s appears to be arguing that its product does not infringe, which is not an appropriate argument for an IPR. Second, if Dr. Reddy’s were to challenge the polymorph patents in an IPR and win, then it would open the door for other generics to launch their products. By arguing non-infringement in a district court litigation rather than invalidity in an IPR, Dr. Reddy’s can keep other generics off the market.
To date, Celegene and Dr. Reddy’s have not been able to resolve their differences and it appears as though they are headed for trial. One main obstacle to settlement has been Celgene’s prior settlement agreement with Natco, which limits what Celgene can offer Dr. Reddy’s.
Nevertheless, Dr. Reddy’s probably wants to beat Natco to the market. If Dr. Reddy’s can successfully show non-infringement of the polymorph patents, and wait for the expiration of the other patents, then it could enter the market with an unlimited quantity by 2022. This would be a better outcome than the one that Natco received.
BMS’s presence at the table may change the dynamics of any potential settlement. While Celgene may not have had the ability or the economics to broker a settlement, the new BMS/Celgene entity with its new product pipeline and business model just may.
We will keep you informed of any new developments following the January 10 settlement conference.
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