In what it says could be the largest disclosed patent settlement in the pharmaceutical industry, Roivant Sciences has reached a potential $2.25 billion settlement with Moderna Inc. over the use of its lipid nanoparticle (LNP) delivery technology in the Spikevax COVID-19 vaccine.

Of this, $950 million will be paid up front by Moderna in July. But the $1.3 billion balance is contingent upon an appeal – which both parties have agreed Moderna will bring to the Federal Circuit – to put forward the government-contractor immunity defense, under 28 U.S. Code C Section 1498. 

That will argue Moderna’s use of the LNP patents was not unauthorized, because sales of Spikevax were made under a government contract, as part of the emergency response to the pandemic.

This will be “a narrow legal appeal with one specific question: the applicability of Section 1498,” said Matt Gline, CEO of Roivant, detailing the settlement of the patent litigation on Mar. 3.

Gline noted this is an issue on which the District Court “ruled in our favor pretrial,” but that “Moderna felt it was important that they have that appeal.”

The settlement, around four LNP patents belonging to Roivant subsidiary Genevant Sciences and to Arbutus Biopharma Corp., in which Roivant is the largest shareholder, resolves all U.S. and international suits involving Moderna’s use of the mRNA delivery technology.

Moderna has admitted infringement and at the same time been granted a global nonexclusive license to the LNP technology for infectious disease applications.

Outside the U.S., Arbutus and Genevant had filed for redress in 30 other countries.

Moderna said the settlement, resolving all worldwide litigation relating to Spikevax and also to its respiratory syncytial virus vaccine Mresvia, provides certainty going forward across its portfolio.

“Resolving this legacy matter from our pandemic response removes uncertainty and allows us to turn our full focus to Moderna’s exciting near-term future,” said Stéphane Bancel, Moderna CEO.

Moderna will record the $950 million charge in the first quarter, but in contrast to Roivant’s reading of the legal position said it has concluded “a loss related to the pending Section 1498 proceeding is not probable.”

Emergency use provision

It is possible that a ruling on Section 1498 is not clear cut and that the court decides some sales of Spikevax are covered by the emergency use provision, and some are not. Gline said if that is the case, Moderna will pay a pro rate portion of the $1.3 billion.

If Moderna ends up paying the full headline figure on the settlement of $2.25 billion, it will be the largest lump sum ever paid for patent infringement in the pharmaceutical industry. “It is a large outcome, and it reflects the value of our technology,” said Gline. “Obviously, there were also unprecedented circumstances, but I wanted to highlight the unprecedented nature of this outcome.”

Of the confirmed $950 million payment, between 60-70% will go to Basel, Switzerland-based Roivant. That will be invested in the pipeline and in doubling an ongoing share buyback program from $500 million to $1 billion.

The IP at the center of the litigation overcame a significant technological hurdle in developing and deploying mRNA vaccines, by providing a safe and effective way to deliver mRNA to human cells. The Arbutus and Genevant LNP technology protects mRNA from degradation, enabling it to be delivered to the target cell and penetrate the cell membrane before releasing the mRNA cargo.

The patent litigation dates to 2022, but, Gline said, “this really started decades ago,” when research on LNPs began.

It has long been recognized that Arbutus scientists changed the drug development landscape when they invented LNP delivery technology, enabling the delivery of nucleic acids including mRNA, said Lindsay Androski, president and CEO of Arbutus.

“Today, Moderna has finally acknowledged the same. … It is a long-overdue recognition that the COVID-19 vaccines would never have made it to the world without the seminal work of Ian MacLachlan, Ed Yaworski, Lloyd Jeffs, Kieu Lam, Lorne Palmer, and Cory Giesbrecht,” Androski said.

The settlement “allows us to put this lengthy dispute behind us,” said James Heyes, CEO of Genevant Sciences. “At the same time, it is enormously gratifying for the Genevant team to, at long last, be recognized for our pivotal contribution to restoring normalcy around the world in the face of a once-in-a-lifetime pandemic.”

The timeline for the Section 1498 case is not clear, but having reached a settlement with Moderna that covers 33% of mRNA COVID-19 vaccine sales, Roivant is turning attention to the similar case it has brought against Pfizer Inc. and Biontech SE, covering Comirnaty, which accounted for about 66% of mRNA COVID-19 vaccine sales.

Pfizer has not to date asserted Section 1498 as a defense. Based on the settlement with Moderna, “there’s quite a lot of value potentially attributable to this case,” said Gline. “We intend to pursue that as aggressively as possible, as we feel we’ve contributed there as well.”