Does Moderna Therapeutics’ pipeline depend upon its patent dispute with Arbutus Biopharma over mRNA delivery?
Moderna Therapeutics ($MRNA) just had the largest biotech IPOs in history. (It also has one of the coolest ticker symbols given its tech.) There’s a lot of hype and speculation around the company right now given that it has a deep pipeline, but for tech that essentially remains unproven. That hype was further question after the stock tumbled 20% after its IPO.
Moderna is currently embroiled in an intellectual-property dispute that may be material to its long-term profits, regardless of which of the products in its pipeline eventually succeed. This is because its technology relies upon a game-changing approach that harnesses a patient’s own protein-making machinery to essentially manufacture its own therapeutic protein.
But to achieve that, Moderna must deliver mRNA to the patient’s cells. At least one company, Arbutus Biopharma, has already claimed that Moderna’s tech uses its mRNA delivery technology. Two pending patent disputes may decide whether Arbutus’ patents are a roadblock to Moderna’s revenue.
Moderna’s hype is at least partially justified given its tech—which is potentially a game-changer. Moderna is focused on developing mRNA medicines. These are neither small-molecules nor biologics. Rather than delivering an antibody to your body, as biologics do, an mRNA medicine would effectively deliver instructions your body’s cells to manufacture its own therapeutic protein.
Your body’s DNA stores genetic instructions to make proteins. Proteins serve numerous different functions, both normal and disease-related. To make proteins, a copy of your DNA’s instructions must be delivered to ribosomes, where proteins are made. These instructions are delivered by mRNA, which is essentially a copy of the instructions stored in DNA. Ribosomes read the mRNA, obtain the instructions and make the protein.
Moderna’s therapeutics focus on designing mRNA for a desired protein, and then delivering that mRNA to the body. This process then relies upon the body to manufacture the desired protein, rather than administering the protein directly, as in the case of biologics.
One hitch in this process is delivering the mRNA to the body’s cells. That can be difficult. One method is through lipid nanoparticles, or LNPs. Moderna previously licensed mRNA delivery technology using LNPs from a small Canadian company called Acuitas. Acuitas had itself acquired a license to this technology from Arbutus Biopharma (which was formerly known as Protiva Biotherapeutics.) Arbutus subsequently claimed that Acuitas’ sublicense to Moderna was improper, and won a preliminary injunction in Canada against Acuitas’ sublicense.
Reports in early 2018 indicated that a settlement permitted Moderna to continue using Arbutus’ LNP delivery-technology patents. However, given that the announced settlement was related a Canadian litigation, the settlement may have only covered Moderna’s use of Arbutus’ patents in Canada.
Indeed, at the same time Moderna was settling with Arbutus in Canada, Moderna launched its own preemptive attack on Arbutus’ patents in the United States. On February 21, 2018, Moderna filed a petition for inter partes review (IPR) against Arbutus’ U.S. Patent No. 9,404,127. On March 5, 2018, Moderna filed another IPR against Arbutus’ U.S. Patent No. 9,364,435
Arbutus’ patents appear to cover LNP technology. They are directed to compositions of nucleic acid-lipid particles, which include particles for therapeutic nucleic acid payloads to a patient.
To date, Moderna has met with early success in invalidating Arbutus’ LNP patents. In September 2018, both IPRs were granted institution. At a high level, while this indicates that Moderna may prevail in invalidating Arbutus’ patents, there is much more to be done.
For instance, the ‘435 patent is directed to formulations containing different mol percentages of cationic lips, non-cationic lipids and a lipid conjugate. While Moderna’s IPR was instituted based upon prior art showing overlapping ranges with the claimed mol percentages, whether Arbutus’ claimed ranges yield unexpected results—and thus, really embody something inventive—remains undecided for now.
Over the next year, the PTAB will allow the parties to conduct further discovery, especially into each others’ experts, before issuing a final decision. Thus, while some commentators were surprised that the PTAB instituted these IPRs, it bears emphasis that the PTAB has not yet made any final decisions, and it has explicitly reserved certain highly material factual issues for later determination. The IPRs thus remain worth watching.
There are a couple of noteworthy takeaways from these IPRs. First, while Moderna’s CEO has indicated that Arbutus’ patents are immaterial to its technology, that is slightly belied by the fact that Moderna has nevertheless filed these IPRs. The implication is that Moderna is moderately fearful that it will not be able to design around Arbutus’ patents, which is why it has tried to preemptively invalidate them.
Second, the IPRs also indicate that Moderna is seeking leverage in its negotiations with Arbutus. Although Moderna has only attacked two of Arbutus’ LNP patents, its IPR petitions claim that Arbutus has numerous other unrelated patents that cover substantially the same technology, but with allegedly inconsequential differences. Presumably, Moderna believes that if it can invalidate two of Arbutus’ patents, it can use those decisions to leverage further invalidity decisions against Arbutus’ larger portfolio of LNP patents. Alternatively, this threat alone is likely a means by Moderna to gain leverage in its licensing discussions with Arbutus, and to negotiate down the price for a license to Arbutus’ patents.
At stake here is essentially a simple question—how big of a roadblock are Arbutus’ patents to Moderna’s tech? If Moderna can neither design around them nor invalidate them, then Arbutus could theoretically have a large stash of patents warranting a hefty royalty on Moderna’s profits.
Both IPRs were instituted on September 12, 2018. Accordingly, the PTAB is likely to issue a Final Written Decision in each proceeding by September 12, 2019. Additional public filings will be available before then, thereby allowing investors to further handicap the outcome.