Dow Jones Online News, 05/10/2000 10:58
Biotech Indus Fixed On Amgen Versus Transkaryotic Lawsuit
By Johanna Bennett and Beth M. Mantz
NEW YORK -(Dow Jones)- As far as the biotechnology industry is concerned, this could be the shot heard around the world.
Starting Monday in Boston, U.S. District Court Chief Judge William Young will preside over one of the most important disputes to hit the biotechnology industry. In a suit to be decided in a bench trial expected to last four to six weeks, industry bellwether Amgen Inc. (AMGN) alleges that a small, Cambridge, Mass. firm, Transkaryotic Therapies Inc. (TKTX), and French pharmaceutical giant Aventis SA (AVE) violated patents for its anemia-fighting drug Epogen.
Hanging in the balance could be billions of dollars worth of drug sales, as well as the future of Amgen's largest selling product. Meanwhile, the case could speak volumes about the enforceability of biotech patents that some contend have grown too broad.
"It's a big deal. You are talking about almost $2 billion in product sales that are at risk for Amgen," said Dresdner RCM Global Investor analyst Camilo Martinez.
At the heart of the case is erythropotein, or EPO, the generic name of a drug that boosts the number of red blood cells in patients undergoing kidney dialysis. Amgen makes its version, Epogen, by inserting a human gene into hamster ovary cells which then produce the protein. Transkaryotic's yet-to-be-marketed drug, GA-EPO, also is erythropotein, but is developed by a different method. Transkaryotic activates silent genes in human cells, by inserting a promoter into the human gene's sequence that then directs the cell to generate the protein.
While the two methods of production appear dissimilar, Amgen alleges Transkaryotic is infringing on patents protecting its exclusive rights to the protein and method of production.
Like most large pharmaceutical and biotechnology companies, Amgen is known for aggressively litigating patent lawsuits. And it is no wonder.
Epogen, which is Amgen's blockbuster product, generated $1.8 billion in sales for the company in 1999. Worldwide sales of Epogen total about $4 billion, including sales of Johnson & Johnson's (JNJ) version of the drug, marketed under the name Procrit, as part of a licensing agreement.
Industry insiders are consumed by the case because of a long-standing question: Does the creation of a new process for making a drug mean that a company has developed a new drug? And other companies that derive large sales from gene-based pharmaceuticals are worried their blockbuster drugs could fall victim to smaller insurgents.
"People are looking at the intellectual property of erythropotein to see if it holds up, and are thinking if Transkaryotic is able to get around Amgen's patents then other well known biotech drugs like Amgen's Neupogen or Genentech Inc.'s (DNA) growth hormone are susceptible as well," said SG Cowen & Co. analyst Eric Schmidt.
Genentech officials declined to comment.
In the biotech world, a company's value depends on its product pipeline and its ability to protect those products. Any event that weakens the sanctity of an existing patent can frighten investors and send stocks falling.
Many consider Amgen's Epogen patent to be broadly written because it encompasses more than the company's discovery. The U.S. Patent and Trademark Office has allowed broadly-written patents in order to guarantee new developments and continued investment. But critics are now complaining that these protections have damped innovation.
"(Biotechnology companies) are pushing the envelope to protect first-generation technology and trying to enforce it against second-, if not third-, generation technology," said Stephen Bent, a patent attorney with Foley & Lardner in Washington, DC.
It's a war that Amgen and Transkaryotic started fighting long before Monday's trial.
Amgen and Transkaryotic have argued several pretrial motions, culminating in an April summary judgment that Transkaryotic and distribution partner Aventis infringed one of Amgen's five patents, which covers erythropotein. But the judge declined to rule on patents governing the method of producing the protein, opting to leave that for trial.
Young's ruling was universally applauded as a major pretrial tactical victory for Amgen because it narrows the scope of the upcoming trial.
According to patent attorneys, the burden of proving the case, which once rested solely on Amgen's shoulders, has been shifted to Transkaryotic. Because it was found to have violated Amgen's patent for erythropotein, Transkaryotic must convince a judge that Amgen's patents are invalid and unenforceable.
Overturning a patent can be difficult since the company making the argument is held to a higher standard of proof than normally seen in civil trials. Also, judges tend to presume that U.S. officials didn't err in issuing the patent.
Representatives for Amgen and Transkaryotic declined to comment on the case or legal strategies, citing company policies banning remarks on pending litigation.
But observers contend the case is likely to be appealed to the U.S. Court of Appeals for the Federal Circuit, which has exclusive jurisdiction over patent lawsuits. Given the appellate court's tendency to defer to the trial court's decision, any appeal would probably favor whichever side prevailed before the lower court, said attorneys.
"Technology has developed to the point were you can make variations on gene sequences very quickly. I think the (appellate) court is saying, 'We have spurred enough innovation. Lots of investments are happening. Now let's pull in the reigns'," said attorney Willem Gadiano of McDermott Will & Emery in Washington, DC.
So far, many industry insiders are betting on Amgen due to the company's size, willingness to litigate and Young's summary judgment ruling.
But not everyone has ruled out Transkaryotic.
Bullish Wall Street analysts argued after last month's court ruling that Amgen's good fortune had crested, adding that Young had yet to decide the fate of the remaining four contested patents. And company officials contend there are issues surrounding the validity and enforceability of Amgen's patents.
"Transkaryotic should prevail if you examine the patent and scientific record in its entirety. Amgen contributed one thing. It cloned the EPO gene and that is it," said ING Baring analyst Jonas Alsenas. "Because it made that one genetic discovery, (Amgen) is trying to claim it invented EPO, which it did not, and it owns any way of making EPO even if it does not include the use of its own gene."
-Johanna Bennett, Dow Jones Newswires; 201-938-5240; johanna.bennett@dowjones.com
-Beth M. Mantz, Dow Jones Newswires; 201-938-5287; beth.mantz@dowjones.com
(This story was originally published by Dow Jones Newswires)
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