Editor's Note: This is part one of a two-part series. Part two will run in Friday's issue.
A promising rheumatoid arthritis therapy, Orencia, received FDA approval late last month, offering a new treatment option for patients and a hefty revenue source for Bristol-Myers Squibb Co.
But the scheduled launch has reignited a dispute between BMS and Repligen Corp., which have worked in parallel on the same technology, each securing patents covering it.
The conflict began this way: Repligen's collaborating scientist from the University of Michigan had previously worked with BMS on early stage molecular biology and cell culture experiments, but BMS eventually branched off on its own, and the university licensed its technology to Repligen. Now, the projects are at a crossroads, and Repligen wants a share of the Orencia sales.
Walter Herlihy, president and CEO of Waltham, Mass.-based Repligen, said BMS will need to "seek a license" from Repligen to sell the drug, adding that if that comes to pass "through negotiation, that would be fine. If it's through litigation, that would be fine, as well."
The company filed an infringement lawsuit against BMS earlier this month in the U.S. District Court for the Eastern District of Texas. Time will tell how this settles out, but Elemer Piros, an analyst with New York-based Rodman & Renshaw, who does not own stock in either company and has not assisted either company in a financing within the last year, said Repligen has "a very strong case."
Not only does Repligen hold the license to a U.S. patent in effect until 2021, Piros said, but the patent office examined the application for almost nine years, and a similar patent was issued in Europe, as well.
"In neither of those continents were those patents formally challenged while they were being examined," he told BioWorld Today.
For Repligen, Millions At Stake
Orencia (abatacept) is a soluble form of CTLA4 (CTLA4-Ig), which turns off the immune response once it has cleared an infection. It was approved to reduce the signs and symptoms of moderately to severely active RA in adults who have had an inadequate response to disease-modifying anti-rheumatic drugs.
"This is potentially a big deal because it's the first new mechanism of action of a drug for rheumatoid arthritis since the TNF blockers were introduced close to a decade ago," Herlihy told BioWorld Today. "The drug attacks the immune process at a different step and is likely to be useful for a different subset of patients."
Although final figures for 2005 are not in yet, sales of three blockers currently on the market - Humira (adalimumab, Abbott Laboratories); Remicade (infliximab, Centocor Inc.); and Enbrel (etanercept, Amgen Inc. and Wyeth) - could reach $6 billion, Herlihy said, and yet, about 25 percent of patients are refractory or unresponsive to the drugs. By 2010, analysts estimate Orencia could earn peak annual sales of $1 billion. Even at small, single-digit royalties, that's a hefty sum for Repligen - about $20 million to $50 million based on a 2 percent to 5 percent royalty scenario.
"It's certainly not insignificant for Repligen shares," Piros said. "This royalty stream alone may be in the order of $2 to $3 per share." The company's stock (NASDAQ:RGEN) closed Wednesday at $4.05, down 9 cents.
While Repligen expects to continue early clinical trials of its CTLA4-Ig product in multiple sclerosis (MS), Herlihy could not predict whether the company would advance it to the market for RA. If it did, it would need a license from BMS, he said.
Dispute Covers 'Many Lives' Of Orencia
Repligen's involvement with CTLA4-Ig goes back to 1992 when it began working with scientists from the University of Michigan and the Naval Medical Research Institute. While prior litigation concerning inventorship on the CTLA4-Ig patents ended in BMS' favor, a 17-year U.S. patent was issued to the university and the Secretary of the Navy in February 2004, and subsequently licensed to Repligen. It covers the use of CTLA4-Ig as a method of treating RA, MS, systemic lupus erythematosus and scleroderma, and for its use in combination with other immunosuppressants. (See BioWorld Today, Sept. 18, 2003.)
New York-based BMS secured the first patents in the area, but that has not protected the company from legal encounters.
"Just because I do get a patent does not mean that I can't get sued for infringement by somebody else with a patent," said Bruce Sunstein, a patent attorney with Boston-based Bromberg & Sunstein LLP, explaining BMS' position. "That's the first rule. Exhibit A is this litigation."
Nobody knows for sure the BMS strategy. The company declined to answer specific questions regarding the litigation.
But Piros speculated that BMS neglected to challenge the Repligen patent applications, doubting that a small biotech company would take on a large pharmaceutical firm with an expensive legal case that could drag out for years.
BMS might be hoping that Repligen will "blink at one point, and be willing to settle for pennies on the dollar because of their cash situation," Piros said. As of Sept. 30, the company had cash and investments of $24.9 million.
A $100 million settlement in lieu of future royalty payments might tempt Repligen, but the payoff could be much bigger if a court finds that BMS "launched the drug at the end of February, knowingly infringing Repligen's patent," Piros said. Then, BMS could be ordered to pay three times the lost income due to Repligen.
Is it a risk the pharmaceutical giant is willing to take? After all, licensing Repligen's patent and paying the company a 5 percent royalty annually could, in the long run, mean billions of dollars for BMS - its patents expire in 2014, but a license from Repligen would extend the Orencia runway through 2021.
And the drug could have potential beyond that date, as well.
"This cat may have many lives, and those indications such as lupus and other autoimmune diseases are also covered by Repligen's patent," Piros said. "So this may not be just a $1 billion drug. This may have a very long, very fruitful life. Look at Enbrel, by Amgen. It has passed the $1 billion mark some two or three years ago, and it's not declining."
Friday: Patent protection and the repercussions of the Repligen/BMS dispute.