Coherus denied institution on Enbrel® IPRs – how does that affect Sandoz?
The PTAB has denied institution of two IPRs filed by Coherus Biosciences against patents covering Enbrel®’s proteins, the ‘182 and ‘522 patents. We previously discussed Coherus’ obviousness arguments, and Amgen’s response. The PTAB bought into Amgen’s first argument that two of Coherus’ prior art references, Watson and Zettlmeissl, do not adequately teach the hinge region of the claimed fusion protein.
The IPRs were not filed by Sandoz, but they will most likely affect Sandoz. Unlike Coherus, Sandoz already has FDA approval to market Erelzi®, which is its biosimilar for Enbrel®. Sandoz received FDA approval in August 2016. Nonetheless, Sandoz has indicated that it will not launch Erelzi® pending its litigation against Amgen. Amgen commenced that suit in February 2016. The case has been on a relatively fast-track, and it is scheduled to go to trial in April 2018.
Will Sandoz launch at risk?
Sandoz appears to have agreed not to launch while Amgen’s lawsuit is pending. But that comes with a caveat. The parties agreed to a relatively fast schedule, and Sandoz appears to have agreed not to launch provided that schedule is not delayed. In a brief opinion issued by the Court on June 7, 2017 regarding whether Amgen must produce certain documents, the Court stated, “the parties have agreed that [Sandoz] won’t launch their product, provided the schedule and trial date are adhered to (and subject to certain other agreements) . . .” Before that, on August 11, 2016, the Court entered a preliminary injunction against Sandoz’s launch, which Sandoz appears to have consented to. That consent, however, was subject to certain conditions. Those conditions are contained in a separate stipulation between the parties. That stipulation was filed with the court, but it is sealed, and it is not currently public.
Thus, Sandoz appears have to brokered a deal with Amgen. It won’t launch while the case is pending, provided the case stays on a fast-track and the parties do not deviate from the agreed-upon schedule. But that leaves open some unanswered questions. Exactly how long has Sandoz agreed not to launch? Until the end of the trial? Under the trial court issues its decision following the trial? Until after the appeal to the Federal Circuit? The trial is likely to be complete by the end of April 2018. There is no hard deadline for when the court must issue its decision following the trial, but a safe estimate is three to nine months, or by the end of 2018. Appeals to the Federal Circuit typically take roughly 12 months. Thus, if Sandoz has agreed not to launch until the outcome of the trial, but not the outcome of the appeal, then we can expect a possible launch of Erelzi® by the end of 2018. That assumes that Sandoz prevails at the trial, because if it does not, then its launch will be riskier, and it will likely not launch even if it has the right to do so. If Sandoz has rather pinned its launch on the appeal, then probably farther in 2019.
Will Sandoz and Amgen settle?
We are frequently asked by clients whether the parties to a given dispute will settle. And the short answer is, we don’t know. And more importantly, we cannot know, because settlement discussions are non-public. They are also business decisions, rather than legal ones. That means, a company’s decision to settle a litigation is often impacted by factors far outside the scope the given dispute. That could include the status of a company’s other drugs, pending clinical trials, market expectations, and so forth. From the outside, it often appears that all cases should settle since, settlement buys certainty, the market likes certainty, and litigation is always uncertain. But litigations don’t always settle.
That said, settlement is typically driven by leverage, and settlements often occur when the relative leverage between the parties shifts. Sandoz has undeniably lost some leverage from the PTAB’s denial of the two Coherus IPRs. Why? Because the Coherus IPR decisions will mitigate the strength of Sandoz’s obviousness arguments at trial.
Technically, the standard for invalidating a patent in an IPR (preponderance-of-the-evidence) is lower than that used by district courts (clear-and-convincing-evidence.) Yes, they are separate proceedings, and yes, the district court in the Sandoz case is free to make an independent determination that the patents are nonetheless invalid. But most courts, who are not (necessarily) experts in the validity of biologics patents, are likely going to be wary of playing contrarian to the very federal agency that granted the patents in the first instance.
Had Coherus prevailed on the IPRs, then Sandoz would have likely frontloaded the trial by arguing that the ‘182 and ‘522 patents are obvious. It would have waved the PTAB’s institution decisions around in court, and reminded the Judge that the PTAB instituted the IPRs under a lower standard than required for Sandoz to meet. But that did not happen, and Sandoz’s obviousness defense at trial will now be met with Amgen waving around the institution decisions, and Amgen arguing that the patents could not be invalidated even under the lower preponderance-of-the-evidence standard.
Is there a possibility that Coherus can appeal the IPR decisions? The short answer is no. In 2016, in Cuozzo Speed Techs. v. Lee, the Supreme Court confirmed that the PTAB’s decision not to institute an IPR cannot be appealed. Coherus can, and most likely will, file a rehearing request, which essentially argues that the PTAB overlooked something in Coherus’ argument. There is no way to assess the merits of a hypothetical request in advance, but statistically, rehearing requests following institution decisions are rarely granted by the PTAB.
What about Sandoz? Can it appeal the IPRs? Or file its own IPRs? Again, the answer is no on both grounds. Sandoz was not a party to the Coherus IPRs, and thus, even if those IPRs could be appealed, Sandoz would lack any standing to do so. Sandoz also cannot file its own IPRs because it is time-barred from doing so under the statute. A party sued for patent infringement may only file an IPR challenging that patent within a year of suit. Sandoz was sued in August 2016, and thus would have had to file IPRs by roughly August 2017 to standing the right to do so.
What other defenses does Sandoz have? This is the critical question, because it bears directly on whether Sandoz believes it can win this case, and that speaks to whether there might be a settlement. Sandoz has at least two other defenses that can potentially have traction at trial.
First, Sandoz has argued that the ‘182 and ‘522 patents are invalid for obviousness-type double-patenting, which we previously discussed. A corollary issue to the double-patenting question is whether the ‘182 and ‘522 patents share a common owner with the reference patents. Sandoz claims that they do share a common owner, namely, Immunex. By contrast, Amgen argues that they do not share a common owner because Roche owns all rights to the ‘182 and ‘522 patents. The question of who is the owner of a patent is never straightforward. Just because there may be a document stating that Roche owns all right, title and interest to the ‘182 and ’522 patents is not conclusive. Rather, it is a highly factual question, which will likely be the focus of the upcoming trial. (Indeed, this was one of the reasons that Allergan’s bid to avoid IPRs by transferring its Restasis® patents to the St. Regis Mohawk Tribe ultimately failed.)
Second, Sandoz may also argue that the ‘182 and ‘522 patents lack written description. The patents technically claim a fusion protein comprising a soluble fragment of the 75 kDa TNFR and the hinge-CH2-CH3 region of a human IgG. But the patents purportedly do not disclose any actual examples of that fusion protein. We previously discussed this potential defense in greater detail. We highlighted Sandoz’s chance of prevailing on this defense may have been lifted by the Federal Circuit’s recent decision in the PCSK9 case between Amgen and Regeneron.
In short, Sandoz still has tractable defenses within its arsenal. Those defenses are soon to be put to test at the upcoming trial. The stakes are high because Enbrel®’s protein patents do not expire for another 10 years. If the parties do settle, it is not unlikely that a settlement is announced either before or during trial coming up in April. It will be interesting to see whether the outcome of the Coherus IPRs tips the balance. While a settlement after trial is never impossible, after all the evidence is in, the lawyers often feel they did a great job, and everyone is typically more willing to roll the dice. Nevertheless, the next few weeks leading up to the trial will be worth watching, and observing that trial is likely worthwhile for investors.