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Msg  187365 of 191935  at  4/30/2014 5:48:58 AM  by

Rob Cos

The following message was updated on 4/30/2014 10:29:03 AM.

Strong Buy

Barclays very detailed Markman reveiw just out - "Rulings from the Markman Hearing could be a positive catalyst for CELG "we believe Celgene has a strong case with its polymorph patent (and other patents) based on prior case judgments "

  

Barclays

30 April 2014

Celgene Corp.

Preview for Markman Hearing

Revlimid Markman hearing scheduled for May 15. The Markman Hearing for the

Revlimid patent challenge will be held on May 15th. In this report, we have laid out the

arguments between the two parties and our take on the patent challenge.

Rulings from the Markman Hearing could be a positive catalyst for CELG: Broadly

speaking, there are two major patents under dispute – the composition of matter set to

expire in 2019 and the polymorph patents, which are the last to expire in 2027. We

believe the main challenge is the polymorph patent as composition of matter patents

are very difficult to challenge (over 90% are ruled in favor of the patent holder). After

reviewing the Markman hearing briefs and discussions with patent attorneys, we do not

view Natco/Actavis’ arguments as compelling enough to invalidate CELG’s polymorph

patents. While we don’t see the Markman Hearing as a significant catalyst in itself, the

deliberations between the companies could help paint a clearer picture of who may

have the upper hand. We do see the final ruling, which could take 2-6 months to be

determined, as a likely positive catalyst for CELG.

A win in the patent challenge would be the best case scenario for CELG and a 1- or

2-year settlement a close second: Revlimid is CELG’s key product, representing ~67%

of 2013 product sales and we estimate 90%+ of earnings – a resolution will have a

significant impact on CELG. The best case for CELG would be if all Revlimid patents are

upheld in court (exclusivity thru April 2027) and Natco/ACT is found to infringe on

these patents; we see CELG shares increasing upwards of 20% if CELG wins the trial. A

near-term settlement (within a year of the Markman ruling) with CELG forfeiting 1-2

years of its Revlimid patent life (i.e generics entering market in 2025/2026) would be a

close second-best case as it would remove the overhang with minimal impact on future

earnings power – we also see CELG shares rising significantly (10%+). The Markman

hearing and ruling will provide both companies with a better idea of where they stand

and could also facilitate a settlement discussion. We are hosting a patent attorney call

on May 2 at 11:00am (dial in: 800-706-8249 passcode: 35785573).

Key Takeaways

In this report, we have reviewed the disputes in layman terms and focused on the main

points of discussion.

There are four sets of patents in focus for the dispute between Celgene and Natco/Actavis –

the polymorph patents, the pharmaceutical patents, patents covering the use of

lenalidomide in treating multiple myeloma, and the use of lenalidomide in treating

myelodysplastic synrdrome (MDS). We see the two main patents under dispute as the

composition of matter patent (‘517) expiring in October 2019 and the polymorph patents

expiring in April 2027.

The main disputes between Celgene and Natco/Actavis include:

Is the chemical name lenalidomide bound by the process in which it is prepared?

Should a hemihydrate be exactly 0.5 molecules of water to 1 molecule of compound

ratio?

Should Form A be limited by the specifications of the claim?

Do the phrases – “said compound has the R-configuration and “said compound has the

S-configuration” include the racemic mixtures?

Should the definition of “unit dosage form” contain the phrase “a predetermined

quantity of active material calculated to produce the desired therapeutic effect”?

Do the phrases “administered cyclically” and “administered in a cycle” require

construction and should they limit the scope of the claim?

Does the phrase “cyclically administered” require construction and should it limit the

scope of the claim?

Based on our review of the Markman Hearing briefs and discussions with patent attorneys,

we have outlined below who we see as having a stronger argument in the different claims

being challenged. The final Markman ruling should be determined within 2-6 months of the

hearing and will paint a clearer picture of which party has the stronger position. After the

Markman ruling, the companies will have approximately 200 days for expert discovery. We

see a trial date most likely being set in the first half of 2015.

FIGURE 1

Patents Being Disputed – We Believe CELG has a Stronger Case

Patent Celgene Natco/Actavis

Chemical name lenalidomide + -

Hemihydrate + -

Form A + -

R-configuration, S-configuration + -

Unit dosage form -/+ +/-

Administered cyclically/administered in

a cycle

-/+ +/-

Cyclically administered + -

*+ = stronger case – = weaker case

Source: Company data, Barclays Research


What are the Potential Next Steps Following the Markman Hearing?

Following the Markman Hearing, the patent challenge could progress one of two ways –

trial or settlement. We believe the Markman Hearing and the final judgements on claims

construction will give a strong indicator of whether or not the two companies will settle, at

least in the near term. If Celgene and Natco/Actavis decide not to settle but progress to trial,

then Natco/Actavis will need to prove the invalidity of the Revlimid patents or that its

generic lenalidomide circumvents these patents.

There are three ways Natco/Actavis can launch its generic lenalidomide before the

expiration of Celgene’s Revlimid patents:

1) Invalidate the polymorph patent and launch following the expiration of the

composition of matter patent in October 2019.

2) Invalidate both the polymorph and composition of matter patents and launch before

2019.

3) Develop a generic that circumvents the patents and demonstrate bioequivalence and

similar safety to Revlimid. There are different ways Natco can circumvent the patents -

produce a completely amorphous compound to avoid the polymorph patent and

circumvent the hemihydrate claim through an anhydrate (no water) compound. The

narrower Natco/Actavis can restrict the patent claims during the Markman Hearing,

the easier it will be for Natco/Actavis to circumvent the patents.

We believe it will be very difficult for Natco/Actavis to invalidate the composition of matter

patent – based on historical patent cases over 90% of challenges against the composition of

matter patent are ruled in favor of the patent holder. We believe it will be the case here as

well. Therefore, the main dispute lies with the polymorph patents – where we believe

Celgene has a strong case.

Scenario analysis - Significance of the Patent Case

Revlimid sales were approximately $4.3 billion in 2013 and we are forecasting sales of

approximately $4.9 billion in 2014 and $7.0 billion in 2017. Approximately 56%-58% of

Revlimid sales are from the U.S. This product currently represents approximately two-thirds

of total Celgene product sales and we estimate 90%+ of earnings. This should decline to

approximately 54% of sales and ~75%-80% of earnings by 2017 – still a very significant

proportion of earnings power for Celgene.

CELG shares have declined from a height of approximately $170 at the beginning of 2014 to

a low of under $140 in early April. While the overall biotech sector has been under pressure

with fund rotations out of high beta names, CELG has been disproportionally weighed down

by the Revlimid patent case. Rulings from the Markman Hearing will provide a clearer view

on what the potential next steps could be for both companies, particularly if it swings

strongly in favor of one over the other (could facilitate a settlement).

Best Scenario – The best case scenario for Celgene is if it wins the patent challenges in

court and Revlimid has patent protection until April 2027. We would expect CELG shares to

increase upwards of 20% as a result. However, timing of the resolution will also be

important for CELG. Investors would like to see a resolution of this case sooner than later. If

the timeline is dragged out (trials over the next couple years with decision in 2016 or after),

CELG shares will continue to be penalized for the overhang until a final verdict is reached.

Second best scenario – We see the close second best scenario for Celgene as a settlement.

If Celgene and Natco/Actavis settle with Celgene forfeiting 1-2 years of exclusivity and

allowing Natco/Actavis to launch its generic lenalidomide in 2025/2026, it will remove an

overhang on the stock and little value is usually given to the last couple years of a product’s

patent life. We see CELG shares increasing 10%+ if this is announced.

Acceptable scenario – If Celgene settles with Natco/Actavis and forfeits ~4 years of

exclusivity (generics enter the market in 2023), we expect CELG shares to up 5%-10%.

While a resolution will be welcomed and lifts an overhang on CELG, this will eat into future

earnings.

Worst scenario – Celgene loses the polymoph patent challenge and generics enter the

market after the expiration of the composition of matter patent in 2019 - we see shares

declining 20%.

Background

Revlimid was originally approved in December 2005 for the treatment of patients with

transfusion-dependent anemia as a result of myelodysplastic syndromes. The product in

combination with dexamethasone was then approved in 2007 for the treatment of multiple

myeloma after failure of one prior therapy. In 2013, the company also received FDA

approval for use of Revlimid in treating mantel cell lymphoma after the patient has failed

two prior therapies.

Natco Pharma Limited, a generic company based in India, filed an Abbreviated New Drug

Application (ANDA) with the FDA in August 2010 for four doses (5mg, 10mg, 15mg, and 25

mg) of lenalidomide (generic Revlimid). The company is seeking approval of its generic

lenalidomide for the treatment of multiple myeloma (MM) and myelodysplastic syndrome

(MDS) and believes it was the first-to-file and should receive 180-day marketing exclusivity

if approved. In December 2010, Natco Pharma entered into an exclusive partnership with

then Watson (now part of Actavis) for the development and commercialization of

lenalidomide in the US.

As part of the ANDA filing, Natco/Watson filed paragraph IV challenges against certain

Celgene patents (‘517, ‘501, ‘720, ‘554, ‘976, ‘977, ‘784, ‘106, and ‘800 patents) and alleged

that certain claims within these patents are unenforceable, invalid, and/or not infringed by

the company’s generic lenalidomide. In October 2010, Celgene filed an infringement suit

against Natco/Watson in the US District Court of New Jersey for infringement of the ‘517,

‘501, ‘230, ‘720, ‘554, ‘976, ‘977, ‘784, ‘106, ‘800, ‘357, ‘219, and ‘598 patents. In June 2012,

Natco/Watson filed additional paragraph IV challenges against the ‘517, ‘230, ‘740, ‘217,

and ‘569 patents and Celgene returned with a new infringement action against

Natco/Watson/Actavis for these newly challenged patents as well as two patents not listed

in the FDA Orange Book.

In addition to these patent challenges, Celgene has also claimed a “first defense” of unclean

hands - that Natco illegally obtained Revlimid used for bioequivalence testing. Revlimid is

marketed under a restricted-distribution program called REMS (Risk Evaluation and

Mitigation Strategy), which makes it difficult for generic companies such as Natco and

Actavis to obtain Revlimid for bioequivalence testing.


The Patent Challenge

Overview of patent disputes

Celgene is alleging that Natco/Actavis’ generic lenalidomide is infringing on a total of 18

Revlimid patents. The main patents and claims being disputed between the companies can

be divided into four sets – the polymorph patents, the pharmaceutical patents, a multiple

myeloma patent, and a myelodysplastic syndrome patent. Of these four families of patents,

the polymorph patents are the most crucial given they are the last to expire and will protect

Revlimid until April 2027. In addition to these patents, there are also a number of patents

mainly on the method of drug delivery (expiring between 2018 and 2020) that Celgene

believes Natco/Actavis is infringing with its generic lenalidomide.

FIGURE 2

Revlimid Patents Being Challenged

Celgene Patents Description Patent Expiry

Polymorph Patents

7,465,800 family of patents Polymorphic forms April 22, 2027

7,977,357 (not orange-book listed)

8,193,219 (not orange-book listed)

8,431,598 (not orange-book listed)

7,855,217 Polymorphic forms November 24, 2024

Pharmaceutical Patents

5,635,517 Original patent filed in 1996 that covers

composition of matter and method of use;

extended to 2019 following reexamination

by PTO

October 4, 2019

6,281,230 Continuation of ‘517 that covers

composition of matter and method of use

July 24, 2016

6,555,554 Continuation of ‘517 and ‘230 that covers

composition of matter and method of use

July 24, 2016

7,119,106 Continuation of ‘554 and ‘230 that covers

composition of matter and method of use

July 24, 2016

8,288,415 Composition of matter July 24, 2016

Method of treating MDS

8,404,717 Methods for treatment of MDS April 11, 2023

7,189,740 Methods for treatment of MDS April 11, 2023

Method of treating MM

7,968,569 Methods for treatment of MM October 7, 2023

Method of Drug Delivery

6,561,976 Method of Drug Delivery August 28, 2018

6,045,501 Method of Drug Delivery August 28, 2018

6,561,977 Method of Drug Delivery October 23, 2020

6,755,784 Method of Drug Delivery October 23, 2020

8.315.886 Method of Drug Delivery October 23, 2020

6,315,720 Method of Drug Delivery October 23, 2020

Source: Company data, FDA Orange Book

Polymorph Patents – ‘800 Family of Patents

There are 10 terms being disputed in the ‘800 family of patents, which includes the ‘357,

‘219, and ‘598 patents. The ‘800 family of patents covers particular polymorph forms and is

the last of the Revlimid patents to expire (April 27, 2027). These disputes also cover

methods lenalidomide is manufactured according to the 6,281,230 and 5,635,517 patents.

Not surprisingly, the majority of the Markman briefing arguments were related to these

polymorph patents.

Background on polymorphs

A polymorph is a crystal form in which a solid compound may exist. Products such as

Revlimid may exist in multiple polymorphs that differ in density, hardness, and solubility,

which can affect the therapeutic effect (how quickly dissolves and enters the bloodstream),

manufacturing, stability, and shelf life of the product. Differences in polymorphs can be

based on varying levels of hydration and solvation. Variances in polymorphs can be

detected and examined using a number of different techniques. An estimated 30%-50% of

all pharmaceutical products exhibit polymorphism and the FDA requires that all polymorphs

of a new drug be registered with the agency.

Polymorphism can work for or against a company. For example, Glaxo unexpectedly

discovered a new, easier to manufacture, polymorph of its Zantac product. Abbott was not

as fortunate and had difficulties with its HIV drug Norvir. The company launched Norvir in

1996 and two years after approval, Abbott realized that the manufacturing process had

produced a second polymorph, which was less soluble and thus could affect the therapeutic

effect in patients. Abbott had to withdraw the product from the market and reformulated it

into a soft gelatine capsule before reintroducing it back on the market. The estimated loss in

sales was approximately $250 million in addition to the investments made to finding the

original polymorph and developing a new manufacturing process.

Polymorph Dispute

The ‘800 patent claims eight polymorphs of Revlimid (A through H), which all demonstrate

unique qualities that define each polymorph. Each polymorph contains the same

lenalidomide molecules but the molecules are arranged in different configurations that

produce different characteristics. To bypass the polymorph patent, Natco/Actavis’ generic

lenalidomide will need to be amorphous and completely void of any crystal particles and

shown to be bioequivalent.

There are two terms being disputed in the ‘800 patent: 1) whether the chemical name (3-

(4-amino-l-oxo-1,3 dihydro-isoindol-2-yl)-piperidine-2,6-dione) for lenalidomide is limited

by and/or defined by the method by which it is manufactured as described in the ‘230 and

‘517 patents and 2) whether the term hemihydrates requires an exact ratio of water to

compound forming the hydrate and whether it is limited to the Form B polymorphic form.

What does Celgene need to defend?

Chemical name lenalidomide: Celgene needs to show that the preparation methods

described under the ‘230 and ‘517 patents are purely illustrative and represent two (but not

the only) approaches to produce Revlimid. Celgene argues that the chemical name has

nothing to do with the process in which the compound is prepared.

Hemihydrates: Celgene’s definition of a hemihydrate is a hydrate that contains

approximately half a mole of water to one mole of compound forming the hydrate. The

company did not include an explicit definition in the patent as it argues the meaning is plain

to a person of ordinary skill in the art (POSA) and argues that there are imperfections in the

ability to accurately measure an exact molar ratio and therefore a hemihydrates should not

refer to exactly 0.5 molecule of water to every molecule of a compound. Celgene believes

that Natco/Actavis is imposing unwarranted limits on the patent. The Federal Circuit has

stated that much more than disclosure of a single embodiment is needed to limit claim

terms.

Celgene also argues that Natco cannot state that a hemihydrate as defined under the patent

is exactly 0.5 molecules of water per molecule of lenalidomide and also state that the patent

refers to only “Form B” which is described as a hemihydrate containing 0.46-0.59 molecules

of water to every molecule of lenalidomide – the two arguments conflict with each other.

What does Natco/Actavis need to prove?

Chemical name lenalidomide: In short, Natco/Actavis needs to prove that its generic

version of lenalidomide is not covered under Celgene’s patent because the patent coverage

is specific to two forms (“Form A” and “Form B”) prepared as described in the ‘230 and ‘517

patents.

Hemihydrates: Natco/Actavis argues the word “hemihydrates” means exactly one water

molecule for every two molecules of compound and detailed several descriptions from

dictionaries that indicated a hemihydrate as a compound that has one molecule of water of

crystallization for every two molecules of the compound. Natco/Actavis also notes that

hemihydrates must be identified through certain techniques and that Celgene’s patent

points specifically to the Form B polymorph, which is the only polymorph that is referred to

as a hemihydrate. Narrowing the definition of hemihdyrate will allow Natco/Actavis to

circumvent with its own generic version.

What do we think?

Based on discussions with a patent attorney, we believe Celgene has a strong case with its

polymorph patent based on prior case judgments. It will be difficult for Natco/Actavis to

establish that a hemihydrate is exactly 0.5 molecules of water to 1.0 molecules of

compound. Prior cases have also determined that a chemical name should not be limited by

the process in which it is prepared.

FIGURE 3

Celgene vs. Natco/Actavis Polymorph Patents Supporting Arguments

‘800 Polymorph Patent Celgene Natco/Actavis

Chemical name lenalidomide No construction/explanation needed Lenalidomide as prepared according to the methods

described in the U.S. Patent 6,281,230 and 5,635,517 Never specified in the patent that methods described Specification states the polymorphic form of Revlimid and

in ‘230 and ‘517 are required to produce Revlimid but simply noted a way it can be prepared

A Sanofi/Sandoz trial ruled in favor that specifications are not required but an illustrative method to obtain the product.

Based on the case Vanguard Prods v. Park Hannifin Corp, the method of manufacture does not convert

structure and then goes on to describe how to prepare based on the methods described in the ‘230 and ‘517 patents.

Nothing in the record to show that these patents were merely illustrative and representative of methods by which lenalidomide can be made but rather these are only ways the compound can be made.

Natco/Actavis’s lenalidomide is not produced through either methods described in ‘230 and ‘517 and therefore do

product claims to claims limited to a certain process. not infringe the patents A novel product that is patentable is not limited to

the process by which it is made.

Hemihydrates Definition of hemihydrates - “A hydrate containing approximately half a mole of water to one mole of the compound forming the hydrate”

Using plain meaning of word “hemihydrates”– did not need to include a specific definition in the patent.

Nothing in the patent suggests that the hemihydrates should be limited by any analytical technique (powder x-ray diffraction, IR spectra etc), which Natco/Actavis is proposing.

The Federal Circuit has rejected the contention that if a patent describes only a single embodiment that

Definition of hemihydrates “A solid crystalline form of lenalidomide containing one water molecule for every two molecules of the active agent , formally associated with one another within the unit cell in the solid crystalline structure and specifically identified

SmithKline Beecham v. Apotex described “crystalline paroxtein hydrochloride hemihydrates” as “a crystal form of paroxetine hydrochloride that contains one molecule of bound water for every two molecules of paroxetine hydrochloride.”

Ratio of 1:2 in Natco/Actavis’s definition is consistent with what is described by Celgene (half a mole of water to one mole of compound)

Term hemihydrates should not be broadened to anything beyond an exact 1:2 ratio of water to lenalidomide.

the claims must be limited to that embodiment. The Natco/Actavis’s generic is one-to-one ratio of water to

Federal Circuit requires more than disclosure of a single embodiment to limit claim terms.

compound and therefore is argued to not infringe on this patent.

Celgene argues that nothing in the intrinsic evidence Hemihydrates specifically points to the Form B polymorph

that suggests limiting hemihydrates to only the Form B polymorph.

of lenalidomide since Form B is the only polymorph in the patent that is referred to as a hemihydrates (provided several instances)

Source: Celgene vs. Natco/Actavis Markman Hearing Brief

Historic polymorph cases

There have been a limited number of patent challenge cases concerning polymophs and we

have described a few below. As shown with these examples, it is an argument of how

obvious and specific the polymorphs under patent are and whether or not the generic is the

same or contains the same polymorph under patent. With this case between Celgene and

Natco/Actavis, the burden will be on Natco/Actavis to prove that Celgene’s patent points to

specific polymorphs and therefore its generic is able to circumvent and not infringe the

patent.

Novopharm vs. Glaxo - Zantac

In the 1970s, Glaxo developed Zantac for the treatment of peptic ulcer and the company

obtained US patent 4,128,658 for the product in 1977. A new polymorph was unexpectedly

discovered during the manufacturing process in 1980. This new polymorph, which the

company referred to as Zantac form 2, was actually easier to manufacture. Glaxo decided to

market this new version instead and new patents were also granted (US 4,521,431 and

4,672, 133).

The US patent ‘658 for the original form of Zantac was set to expire in 1997 and several

generic companies filed to launch after its expiration. Novopharm was one of these generic

filers but the company had difficulty manufacturing form 1 when following the procedure

described in the ‘658 patent and believed that the procedure actually produced Zantac form

2. Novopharm filed an ANDA for form 2 and was then sued by Glaxo for infringement of its

form 2 ‘431 patent. Glaxo was able to win the case and establish the validity of the form 2

patent by providing evidence from the Oxford University lab that showed they were able to

recreate Zantac form 1 using the procedures described in the ‘658 patent.

The patent battle between the two companies did not end there. Novopharm filed a new

ANDA in 1994 for a generic version of Zantanc form 1. Glaxo sued again alleging that

Novopharm’s generic form 1 was actually a mixture of form 1 and form 2 and therefore was

still infringing on its patent protecting Zantac form 2. Novopharm’s original ANDA had

noted its generic contained 99% pure form 1 but an amended ANDA reduced the criteria for

its generic product to as low as 90% of form 1. However, Novopharm was able to produce

x-ray data that showed its generic version did not contain any form 2 and the court found

that Novopharm was eligible to market its generic Zantac form 1.

Teva/Cephalon vs. Mylan, Watson, Actavis, Sandoz, Teva, and Lupin

In 2009, Cephalon was notified that six ANDAs were filed for its Nuvigil narcolepsy drug.

The generic filers included Mylan, Watson, Actavis, Sandoz, Teva, and Lupin. Mylan was first

to file on certain doses and Watson was the first to file on two other strengths.

In April 2013, The District Court of Delaware ruled in favour of Cephalon that its patent,

7,132,570, is valid. The defendants claimed that patent 4,927,855, which expired in 2007,

made obvious and inherently anticipated the ‘570 Nuvigil patent and therefore the patent is

invalid. The ‘855 covered armodafinil, the active ingredient in Nuvigil, and the ‘570 patent

covers a specific polymorph of armodafinil.

The defendants argued that a person of ordinary skill would inevitably obtain Form 1

armodafinil (covered under the ‘570 patent) following the process outlined in the ‘855

patent. Cephalon had countered that testing had shown that producing as shown in the

‘855 patent did not necessarily or obviously produce the Form 1 polymorph. The court

determined that the defendants failed to prove that Cephalon’s ‘570 patent is made obvious

by the expiration of the ‘855 patent and noted that nothing in the ‘855 patent would lead

someone to know that armodafinil would crystallize into the Form 1 polymorph. The judge

of the trial also pointed to a publication that discussed the volatility of polymorphism. Since,

Teva/Cephalon has granted Mylan permission to launch its generic Nuvigil starting June

2016.

BMS vs. Mylan Pharmaceuticals

Celgene refers to the Bristol-Myers Squibb vs. Mylan Pharmaceuticals polymorph case in its

Markman brief. Mylan had filed for a generic version of BMS’ HIV drug Sustiva in 2010 to

launch before the expiration of BMS’ patent and as a result BMS filed suit. BMS alleged that

Mylan infringed U.S. patents 6,673,372.

Sustiva exists in crystalline polymorph forms. Mylan had argued that claim 18 of the ‘372

was invalid as it was anticipated by a prior polymorph form under another patent and also

that the patent was indefinite and should be deemed invalid.

In late 2013, the Court judged in favour of BMS as Mylan failed to prove with clear and

convincing evidence that claim 18 was invalid and that BMS was able to prove that Mylan

was infringing its patents.

Unsolvated Crystal Forms and Pharmaceutical Compositions – ‘357,’219,

and ‘598 Patents

There are eight claims under dispute in these patents and they fall into two categories: 1)

whether the term “Form A“ has limitations that can be read from the specification into the

claims and 2) whether certain phrases require construction and if there are limitations to

those phrases. A specification is a detailed written and/or illustrative description of the

invention on the process of creating and using it and should allow a person of ordinary skill

in the area to understand and use the invention. It often also describes the limits or

boundaries of the invention. The claim is usually included at the end of a specification and

explicitly describes the structure and function of the invention.

What does Celgene need to defend?

Celgene believes Natco/Actavis are trying to read limitations to “Form A” from the

specifications into the claims that are not valid. The company argues that the term “Form

A” was used as an example and refers to any crystal form of lenalidomide that is

distinguished by the limitations cited in each claim and should not be limited by anything

from the specifications. Celgene also does not see the need for construction for the multiple

phrases raised by Natco/Actavis as they can be taken in the plain and ordinary meaning. In

addition, if all specifications are included in all claims, the multiple phrases would then all

have the same scope, which Celgene argues was not the intent and is not correct.

What does Natco/Actavis need to prove?

Natco/Actavis’ argues the court should adopt its construction of term “the lenalidomide

crystal form described in the specification as Form A, having all of the characteristics

assigned to Form A in the specification”. Natco/Actavis are trying to narrow the scope of

the claim so that its generic lenalidomide would then not infringe on Celgene’s patents as it

likely does not contain all the characteristics assigned to Form A. In addition, Natco/Actavis

argues that if a construction does allow “Form A” to cover crystalline forms that do not

have all the characteristics outlined in the specification, then “Form A” should be rendered

limitless and therefore the patent invalid.

What do we think?

We view Natco/Actavis’ attempt to narrow the patent as a stretch - to argue that all

specifications should be incorporated into the claims would deem all the examples to be the

same, which would defeat the point of the different claims and we do not believe was

Celgene’s intention when establishing the claims/patent.

F URE 4

Celgene vs. Natco/Actavis Polymorph Patent Supporting Arguments

‘800 Polymorph Patent Celgene Natco/Actavis

Several cases have noted the term “form” as meaning A person of ordinary skill would construe the phase “form

a polymorphic crystal form of a drug that can be distinguished from other forms, the term “form” is used as “terms of convenience”.

To read specifications into a claim, it must be clear

A” as a unique identifier for a crystal form with particular chemical and physical properties.

The polymorph patent characterizes Form A based on

and unmistakable, which is not stated in these claims certain characteristics, which deems it different from other

otherwise there is no basis for importing limitations

form B through G. Celgene’s proposed construction is too

from specifications/figures into a claim when it is not broad and does nothing to specify the meaning of “form A’

specified in the claim.

versus all the other forms.

Natco/Actavis is inappropriately asking the Court to o The prosecution history for the ‘357 patent shows Celgene

ignore the limitations specified in each claim and

narrowed the claims to state “form A” lenalidomide

instead read limitations from every reference to “Form because prior broader specification was not enough to

A” in specifications, into each claim. The Federal Circuit has warned of “the danger of reading limitations from the specification into the claim”.

Natco/Actavis’s proposal to read all limitations from

enable the claim. Natco/Actavis also point to the prosecution of the ‘598 patent during which Celgene argued that certain figures and descriptions in the specification support the ‘form A’ claims and as a result Natco/Actavis believe that it was Celgene’s intent to claim only Form A using these attributes described in the specification.

The specification defines the Form A polymorph as

specifications into every claim would render all claims including all characteristics described within. The Federal in dispute as the exact same. This doesn’t make sense Circuit has stated that “a claim construction that gives

to Celgene since that is not what the patent examiner meaning to all terms of the claims is favored over one that

nor what the company would have understood the claims to mean when writing it.

does not.”

The specification states that “one embodiment of the The ‘Form A” claim is ambiguous and does not provide a

invention encompasses Form A of lenalidomide, and

person of ordinary skill any guidance on the bounds of the

that the entire scope of the invention is not limited by claim and as a result the construction of the claim should

the specific examples described herein, but is more readily understood with reference to the appended claims.”

Claim 1 should be read in its entirety and should not

be rendered invalid for lack of enablement.

Descriptions of other forms do not specifically point to or

be construed to mean the same as “form A”, which is suggest the same characteristics attributed by the

included in claim 1.

specifications that are used to describe form A. Specification also does not teach a person of ordinary skill how to construct any unsolvated crystalline form other than Form A as described in the specification without experimentation.

Natco/Actavis’ attempt to construct five phrases that Natco/Actavis’ believes the phrases under dispute require

appear in the ‘219 and 598 patents as meaning the same thing as “form A’ doesn’t make sense since

construction given their technical nature and that their construction clarifies the scope of the term. They also see

“form A” does not even appear in any of these claims. construction needed for other claims that may be

amendable to more than one construction and therefore needs to be interpreted for validity and clarity.

The Form A polymorph is not only described as having specific XRPD peaks but also characteristics when analyzed or measured by other techniques such as DSC, TGA, IR, and Raman. The specification also does not describe any other unsolvated crystalline polymorph as having these particular XRPD peaks.

Source: Celgene vs. Natco/Actavis Markman Hearing Brief

Risks to the polymorph patent

There are of course risk factors to Celgene’s polymorph patent. One factor to consider when

weighing the polymorph patents is whether or not Natco/Actavis will be able to circumvent

these patents. If Natco/Actavis can develop an amorphous form of generic lenalidomide

and show that it has the same bioactivity and safety profile as Revlimid, the FDA may be

able to approve the generic even with the polymorph patent still intact. Natco/Actavis will

need to demonstrate that the manufacturing process will never make the polymorph form

(and thus infringe on Celgene’s patent). Natco/Actavis can potentially use a manufacturing

process already disclosed in Celgene’s older patents (patents established before the

polymorph patents), which would then make it difficult for Celgene to argue that it would

produce a crystalline form as it would then invalidate their polymorph patent as well.

Another way that Natco/Actavis can eliminate the polymorph patent is to render it obvious

or invalid. If Natco/Actavis run experiments using processes described in patents prior to

the polymorph patents and discover that it can make even a small trace amount of the

crystalline form, they are able to inherently show that the crystalline form of Revlimid is not

novel and the polymorph patent would be deemed invalid. Also, if Natco/Actavis are able to

find any published literature referencing the polymorph before the patent was established,

then the polymorph could also be deemed “obvious” and the patent invalid. In addition, if

Natco/Actavis can demonstrate that a person of skill in the art (POSA) would not require

inventiveness to find a polymorph, then the polymorph patent can also be invalidated on an

“obvious” basis. In these cases, Celgene would need to prove that the polymorph form is

not obvious and also produce superior results as well.

Pharmaceutical Patents

Related Methods of Use – ‘230 and ‘554 Patents

The ‘230 patent claims method of use for lenalidomide in treating autoimmune disease,

inflammation, inflammatory disease, and cancerous conditions. The ‘554 patent claims

method of use for lenalidomide in reducing TNFa and pharmaceutical composition of

lenalidomide in quantities sufficient to reduce TNFa, reduce inflammation, and improve

autoimmune disease and cancerous conditions.

The two companies are disputing two terms in these patents: whether the phrases “said

compound has the R-configuration” and “said compound has the S-configuration” exclude

the racemic mixtures. A racemic mixture has equal and balanced amounts of isomers that

are mirror images of each other. In simple terms, Natco/Actavis is arguing that Celgene’s

claim only covers compounds that contain all or substantially the specified isomer whereas

Celgene believes the construction says the compound needs to contain at least some of the

specified isomer.

What does Celgene need to defend?

Celgene believes Natco/Actavis are narrowing the definitions of the claims, reading

limitations that do not exist, excluding embodiments, and not reading the claim in its

totality. Celgene believes the phrases “said compound has the R-configuration” and “said

compound has the S-configuration” contain the word “has” and not “is” and therefore

means the compound contains the isomer but it is not the only isomer in the compound.

The Federal circuit has indicated in past cases that there must be a “clear and

unmistakeable disavowal” of the claim scope in the patent specification or prosecution

history to limit the scope of the claim – which Celgene believes is not shown in its patent.

Rather, Celgene indicates that claim 2 was written to be broader than claims 15 and 16 and

broadly covers all isomers and racemic mixtures whereas claim 15 covers all compositions

except those that include only the S-isomer and claim 16 covers all compositions except

those that only include the R-isomer.

Celgene also argues that the two cases Natco/Actavis is using to support its claim both had

the racemate as prior art and therefore could not claim the racemate in the patent, whereas

it is not the case here with the Revlimid patent.

What does Natco/Actavis need to prove?

Natco/Actavis argues that the claim limits to only non-racemic forms of lenalidomide that

have all or mostly all of either the R or S enantiomers whereas Natco/Actavis’ compound is

a racemic form of the compound and is therefore not covered under the patent. While

Natco/Actavis agrees that claim 2 broadly covers all isomers and mixtures, its arguments

against claims 15 and 16 are that no person of ordinary skill in the art (POSA) would

describe a compound as being both a racemic mixture and also having a R- or Sconfiguration.

What do we think?

We believe Celgene has the more compelling argument and based on discussions with a

patent attorney, the phrases in questions should include the racemic mixtures based on

past cases.

FIGURE 5

Celgene vs. Natco/Actavis – Pharmaceutical Patents Supporting Arguments

Pharmaceutical Patents Celgene Natco/Actavis

The claims do not use the word “is” but “has” which

describes the existence of the isomer in the

compound but does not mean the compound

contains nothing but the isomer. Construction means

the compound contains at least some of the specified

isomer.

A person of ordinary skill would understand the term “said

compound has the R-configuration” as meaning the

compound is compromise of all or mostly all of the Renantiomer.

It should not include the S-configuration and if

the S-isomer is included in the compound it occurs as an

impurity or in an amount less than 50%. As a result, the claim

should not cover racemix mixtures.

Explicitly claimed an isomer to the exclusion of others

in patent ‘502 and therefore would have done the

same here if that was the intention

By stating R- and S-configuration – it is directing the focus on

a particular enantiomer and not the racemic mixture.

The specification, “The compounds of the present

invention possess a center of chirality and can exist as

optical isomers. Both the racemates of these isomers

and the individual isomers themselves,……, are

within the scope of the present invention”, clearly

demonstrates that racemates are within the scope of

the claim.

Natco/Actavis points to claim 2 of the ‘230 patent where a

specific isomer is not mentioned and therefore the company

argues it covers the racemic mixture. However, with the

claims being disputed (claims 15 and 16), they specifically

point to the R- and S- configurations and therefore should

not cover the racemic mixtures.

Claim 2 was written to be broader than claims 15 and

16 and broadly covers all isomers and racemic

mixtures whereas claim 15 covers all compositions

except those that include only the S-isomer and claim

16 covers all compositions except those that only

include the R-isomer.

Racemic mixtures should not be denoted as having or being

in either the R- or S- configuration and if the claim specifically

notes the compound has the R- or S- configuration; it is not

referring to the racemic mixture.

Argues the two cases Natco/Actavis is using to

support its claim both had the racemate as prior art

and therefore could not claim the racemate in the

patent, whereas it is not the case here with the

Revlimid patent.

Language in the ’230 patent shows that certain embodiments

of the compound require the racemate whereas other

embodiments require either the individual R- or S-isomers.

The Federal circuit has indicated in past cases that

there must be a “clear and unmistakeable disavowal”

of the claim scope in the patent specification or

prosecution history to limit the scope of the claim

During prosecution of the ‘230 patent, Celgene noted the

invention considered use of each individual enantiomer

Argues past cases favor Natco/Actavis’ interpretation –

pointing to the J&J v. Mylan and Teva v. Watson cases. Both

cases concluded the claims referred to specific enantiomers

and not the racemic compound. The courts would not specify

a numerical limit for impurities in a compound but indicated

that at most small amount of other enantiomers would be

found in the compound. Natco/Actavis is arguing that the

Celgene’s claims indicting R- and S- configurations would

then only cover compounds with small amounts of the other

isomers, therefore its compound which is 50%/50% of the

two is not covered.

Both cases noted above also concluded that the unique

nomenclature used in the claim clearly note that it is referring

to the enantiomer and not the racemic mixture. For racemic

mixtures, the denotation would be RS or +/- versus just Rand

S- configurations.

Unit Dosage Forms – ‘415 Family of Patents

The ‘415 patent claims the lenalidomide compound and unit dosage forms containing

lenalidomide. The two companies are disputing whether and to what extent Celgene has

provided governing lexicography for “unit dosage form”.

The ‘415 patent states: “The compositions preferably are formulated in unit dosage forms,

meaning physically discrete units suitable as a unitary dosage, or a predetermined fraction

of a unitary dose to be administered in a single or multiple dosage regimen to human

subjects and other mammals, each unit containing a predetermined quantity of active

material calculated to produce the desired therapeutic effect in association with a suitable

pharmaceutical excipient.”

The two parties currently agree that parts of the excerpt, “or a predetermined fraction of a

unitary dose to be administered in a single or multiple dosage regimen to human subjects

and other mammals, “ and “in association with a suitable pharmaceutical excipient” are not

language used to describe “unit dosage form”. The dispute lies with the phrase “containing

a predetermined quantity of active material calculated to produce the desired therapeutic

effect”. Celgene believes it is not part of the lexicography to describe “unit dosage form”

whereas Natco/Actavis argues it does and therefore limits the description of unit dosage

form.

What does Celgene need to defend?

Celgene believes the above excerpt adequately describes the term “unit dosage form” but

includes no limitations of “therapeutic effect”. The quantity of the active ingredient is

already established in claim 1 and therefore the specification should not include language

on this as well. The company argues that Natco/Actavis is cherry-picking which clauses of

the claim to include in its description and which not to and therefore incorrectly

understanding the claim.

Celgene notes that at the time of the original application, the company had sought to use

the phrase “pharmaceutical composition” rather than “unit dosage form” but was told that

it lacked the data to support a definition of pharmaceutical composition and therefore

should be considered unit dosage form. The company was specifically told that unit dosage

form does not require therapeutic efficacy.

What does Natco/Actavis need to prove?

Natco/Acatvis does not agree with Celgene truncating the phrase “…containing a

predetermined quantity of active material calculated to produce the desired therapeutic

effect” from the definition. The company argues that a person of ordinary skill would

understand the phrase to mean that the compound is formulated as a unit dosage form to

produce a desired therapeutic effect.

The company points to the ‘415 patent where a claim states that “the compound is

formulated in unit dosage form, meaning physically discrete units suitable as a unitary

dosage…..to be administered in a single or multiple dosage regimen in human subjects….”.

Natco/Actavis argues that this plainly states that the unit dosage contains a predetermined

quantity of the active ingredient that is able to produce the desired therapeutic effect.

What do we think?

While we view Celgene as having the more compelling argument here, this is an area that

could swing in Natco’s favour - will be determined on expert opinions. Celgene was

specifically told that unit dosage form does not require therapeutic efficacy but Natco can

argue that the unit dose should be what was determined as the required amount for a

therapeutic effect and the language was included within the same claim description.

Barclays | Celgene Corp.

30 April 2014 18

Method of Using Lenalidomide for Treating Myelodysplastic

Syndrome – ‘740 Patent

The ‘740 patent claims method of using lenalidomide for the treatment of myelodysplastic

syndrome (MDS) and expires in April 2023. The two terms being disputed between Celgene

and Natco/Actavis are “administered cyclically and “administered in a cycle” and whether

these terms require construction (definition) and sets limits to the claim. Specifically, the

two companies appear to dispute the meaning of the terms “cyclically” and “cycle”. Celgene

does not see the need for construction of these two terms as they are plain and ordinary

whereas Natco does. In addition, Natco/Actavis’ construction specifies a treatment free

interval that Celgene does not agree with.

What does Celgene need to defend?

Celgene believes the phrases “administered cyclically” and “administered in a cycle” do not

require construction as they are comprised of plain and ordinary words. The district recently

affirmed that the word “administering” does not require construction and is well

understood by a person of ordinary skill and thus Celgene believes the disagreement

between the two companies lie in the meaning of the words “cycle” and “cyclically”.

Celgene defines the plain and ordinary meaning of the word “cycle” as a recurring series of

events and the word “cyclically” as periodic and does not believe there is anything in the

intrinsic record that defines these terms as anything else. Celgene does not believe a

predetermined treatment free interval was embedded in the claim and indicated that

Natco/Actavis only noted claims 20, 22, and 30 which do include rest periods but ignored

claims 18 and 29 which do not. An example of a specification states “….cycling therapy

involves the administration of a first agent for a period of time, followed by the

administration of the agent and/or the second agent for a period of time…”.

What does Natco/Actavis need to prove?

Natco/Actavis’s proposal for the construction of the terms “administered cyclically” and

“administered in a cycle” is “administered according to a pre-determined dosing regimen

that includes administering lenalidomide for an initial period, followed by a pre-determined

treatment-free interval, and repeating this sequential administration”.

Natco/Actavis agrees that each word in isolation is a simple English word but there is a

technical component when used together in a phrase. The company points to Celgene

providing nine different definitions of cycle depending on the biological context as an

example that there is not just a plain and ordinary meaning. Natco/Actavis argues that a

person of ordinary skill would understand the terms “administered in a cycle” or

“administered cyclically” as meaning administering the drug for a period of time followed by

a treatment free period and repeating. They also point out that Celgene has a devoted

section titled “Cycling therapy” in the patent specification describing and explaining the

cyclical administration regimen and therefore it is not “ordinary English words”.

What do we think?

We believe Natco/Actavis may have an argument here as Celgene does have a section

devoted to cycling therapy in its patent specification. We believe it will come down to a

battle of the experts.

Method of Using Lenalidomide for the Treatment of Multiple

Myeloma– ‘569 Patent

The ‘569 patent claims method of using lenalidomide for the treatment of multiple

myeloma. The two companies are disputing whether the term “cyclically administered”

needs construction and whether the term sets limitations to the claim.

What does Celgene need to defend?

Similar to the argument above, Celgene notes the term is plain and ordinary and should not

require construction. Celgene sees Natco/Actavis reading limitations into the claim that are

not there such as “in combination [with dexamethasone] for 21 consecutive days” and

reading limitations from other claims into this claim. Celgene argues that based off of

Natco’s arguments, the only conclusion is that claim 1 is broader than claim 13 as it does

not specify which days dexamethasone must be administered.

What does Natco/Actavis need to prove?

Natco/Actavis believes Celgene is inappropriately truncating the claim and therefore does

not agree with Celgene on the meaning of the claim and believes construction is needed.

The company believes the claim specifically points to the use of lenalidomide with a second

active ingredient (i.e. dexamethasone) in different cycles depending on the embodiment.

When specific days for which dexamethasone should be co-administered with lenalidomide

is not specified, then it must be administered with lenalidomide every day for 21

consecutive days.

What do we think?

While the argument is very similar to the ‘740 patent, we see Celgene as having the more

compelling argument here as Natco is trying to narrow the claim scope to states exactly

which days dexamethasone should be administered with Revlimid



 
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