How important is Celgene’s latest Revlimid® suit against Dr. Reddy’s over REMS patents?
In a slightly new wrinkle in Celgene’s recent Revlimid® saga, Celgene ($CELG) has commenced another suit against Dr. Reddy’s ($RDY). (This is the third patent lawsuit connected to Dr. Reddy’s proposed generic for Revlimid®.) In the most recent suit, Celgene asserts five new patents (the ‘720, ‘977, ‘784, ‘866 and ‘531). The suit was commenced on April 13, 2018 in the federal court in New Jersey, where the other Revlimid® suits are currently pending. What’s this suit all about?
Celgene filed the suit pursuant to a Para. IV Notice Letter from Dr. Reddy’s, dated around February 28, 2018. Celgene’s filing of the suit was therefore roughly 45-days later, pursuant to the Hatch-Waxman statute. The notice letter indicated that the Dr. Reddy’s believes that the five asserted patents are either invalid or not infringed by Dr. Reddy’s proposed generic for Revlimid®.
The five asserted patents are REMS patents. They cover computerized distribution systems to monitor patient access to drugs that potentially pose risks to certain patient pools. Celgene’s Revlimid® is known to be hazardous if taken by certain patient pools, such as pregnant women. Because of that, Celgene is obligated to distribute the drug pursuant to a REMS system. The REMS systems is intended to assure that at-risk patients do not receive the drug. Any generic version of lenalidomide, the API in Revlimid®, would likewise be required to distribute the generic pursuant to its own REMS system.
Celgene’s other pending lawsuits against most of the Revlimid® generics, including Dr. Reddy’s, did not previously assert the REMS patents. Lotus and Apotex appear to have been the exception. The presumption was most generics did not want to expend the resources challenging the REMS patents because their expiration dates—in October 2020—are relatively soon. Barring anything exceptional, an at-risk launch is not likely feasible before that time because the litigations themselves are likely to extend until 2020, including appeals.
Overall, the addition of the REMS patents to Dr. Reddy’s lawsuit does not appear to materially affect either side’s leverage. Patents covering computerized distribution systems are susceptible to being invalid, either as obvious or as directed to ineligible subject matter. For instance, a similar portfolio of REMS patents asserted by Jazz Pharmaceuticals ($JAZZ) in its Xyrem® Hatch-Waxman cases were invalidated pursuant to petitions for inter partes review. Thus, they do not present a formidable challenge to Dr. Reddy’s entry, or any generic’s entry. Yet, even if they did, their expiration dates are nevertheless very soon. They expire by 2020, which is roughly how long these litigations may last.
At the same time, the addition of these patents is not likely an indication that the parties are any farther or closer to reaching a settlement. As we previously discussed, we did not view the cancellation of the Markman hearing as an indication that a settlement was near. Similarly, Dr. Reddy’s notice letter for the REMS patents was sent in late February, i.e., weeks before the claim construction dispute between the parties was resolved. Further, Celgene was obligated to file suit within 45-days of that notice letter, or potentially waive its rights to suing over the REMS patents. Thus, the filing of this latest suit on April 13 against Dr. Reddy’s was the result of actions set in motion in February, and thus, not necessarily an indication of the current settlement status between Celgene and Dr. Reddy’s.
Exactly why Dr. Reddy’s changed its tune and decided not to wait until expiration of the REMS patents is not apparent from the complaint itself. Dr. Reddy’s may be considering its position relative to Lotus and Apotex. Technically, because those latter two companies challenged the REMS patents, and did not simply agree to wait until they expired, then Lotus and Apotex carved out the possibility that they could enter before Dr. Reddy’s and the other generics. That presumes that Lotus and Apotex can also knock out all the other patents that have been asserted, including the indication patents and the polymorph patents. That’s a big if, and we view that that possibility as remote. Nevertheless, Dr. Reddy’s may have nevertheless viewed it helpful to communicate to its shareholders that none of the other generics are in a better position itself.
Likewise, Dr. Reddy’s may be angling to increase the settlement leverage on Celgene by threatening, indirectly, to invalidate more of its patents and thus cut back any certainty Celgene can communicate to the market that Revlimid is safe until at least until 2020, when the REMS patents expire. Dr. Reddy’s may also be thinking about the cost and logistics of setting up its own REMS system, if and when it gains generic entry. By challenging the Revlimid®’s REMS patents, Dr. Reddy’s may positioning to negotiate a settlement that permits Dr. Reddy’s to piggy-back on Celgene’s REMS system in exchange for dropping any invalidity challenges to those patents.
It will be important to continue to watch the case mature to see how Dr. Reddy’s positions its challenge to the REMS patents. It would not be surprising if Dr. Reddy’s, Lotus and Apotex team-up to file IPRs against these patents, given that none of the parties are yet time-barred from doing so. Assuming Lotus joins, those IPRs would have to be filed by September 2018 to avoid any time-bar issues. Indeed, this latest suit may be more an indication of side-deals and joint-defense agreements among the generics than an attempt to gain more leverage over Celgene.
Overall, this is an interesting, but not necessarily super material development in the evolving settlement dynamic around proposed generic entrants for Revlimid®.