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Biotech / Medical : Incyte (INCY) -- Ignore unavailable to you. Want to Upgrade?

To: LLCF who wrote (931)	3/23/1999 4:46:00 PM
From: RCMac	Read Replies (1) \| Respond to of 3202

David, >>1.) Yes, but of course institutions valuing INCY will look at it as an ongoing concern... << Yes, certainly if, say, in 2001 the Supreme Court declared patents on human genome sequences invalid (or if Congress were somehow persuaded to do so), the value of INCY's business would take a hit. How big a hit I don't know, but my earlier point was that INCY would still have rights to royalties on drugs developed under the terms of the (1000's of) licenses big pharmas had signed earlier with INCY. That is, the contract rights are presumably valid whether or not the subject of the license is patentable, or later held to be unpatentable. (This would be untrue only if the licensing agreements said something to the effect that "Megapharma shall be relieved of its obligations to pay the aforesaid royalty if it is determined that the subject matter of this license is not patentable" and we can be sure that INCY didn't agree to anything like that. INCY is selling access to IP it has developed, and it's irrelevant whether the IP is (a) patentable or (b) just a "trade secret" that INCY has and the pharmas will pay for. >>2.) >>Yes, I think it is the value of (1) vs (2)in your comment above that I talk about in valuing INCY without patent rights? How badly is INCY damaged if (1), their proprietary databases, are really public domain.<< Damaged certainly: if the gene sequences are in the public domain, big pharmas won't need to pay INCY for them any more, although they might still need to pay INCY for its software to organize and manipulate the data. But any such decision holding gene sequences unpatentable is (1) probably really unlikely, and (2) even if it happens, won't happen for some time (wild guess: no less than two or three years from now, probably longer, because (a) litigation takes a lot of time, (b) you need a litigant with both the incentive and the standing to challenge the patentability of such sequences -- most litigants in gene sequence patent suits are companies in the drug business one way or another, who don't want to kick over this applecart, or to weaken the patent system generally). >>INCY clearly wouldn't be "racing" to beat competitors to patent this stuff if it didn't there was value!!! Actions speak loudly, we certainly know THEIR opinion on the issue.<< Absolutely. INCY doesn't seem at all worried by the potential unpatentability of whole gene sequences. INCY doesn't even mention the issue in the section called "Uncertainty of Protection of Patents and Proprietary Rights" at pages 13-16 of its 1997 10-K: (http://www.edgar-online.com/bin/edgardoc/gethtml.pl?duplicate_request=1&formfilename=0000950008-98-000156&docname=INCYTE+PHARMACEUTICALS+INC&doctype=10-K&cik=879169&filingdate=Mar+30+1998+12%3A35PM&accept_doc=View&nad=&x=32&y=12 ) Let me underscore the point:. where the securities laws and wariness about class action lawyers give a public company every incentive to "disclose" even the most obscure and hypothetical risks and to put the most pessimistic face on things, INCY doesn't even mention the possibility that whole-gene sequences may be unpatentable - it does say that there are uncertainties and risks about the patenting of partial-gene sequences, about overlapping patents issued to others and possible expensive interference proceedings and litigation, etc., but there's not a peep about any risk that its whole-gene sequence patents are fundamentally infirm. Had the patentability of whole-gene sequences been a major worry, it would almost certainly been mentioned. INCY's patent lawyers and management are therefore pretty confident. (So, BTW, is Rocketman, a/k/a exIncy on Yahoo: messages.yahoo.com@m2.yahoo.com .) Some, but hardly all, of the concern about patenting partial gene sequences was presumably put to rest by the issuance of 44 patents on EST's last year. I'm interested in what INCY says on these risks in the next 10-K, which due out within a couple of weeks. --RCM