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Re: Analyst Actions: Piper Sandler Starts Amarin at Overweight With $21 Price Target 7:22 AM ET, 08/26/2020 - MT NewswiresRe IP case: With all eyes on AMRN’s appeal in September, let’s recap the history of the patent litigation In our view, the spotlight is on AMRN’s most prominent catalyst, which is Vascepa’s Federal Circuit patent appeal set for September 2 at 10AM ET, which we believe will likely announce its public decision by late 2020 to early 2021. Recall, in March 2020, the U.S. District Court of Nevada ruled in favor of generic drug developers during the ANDA patent litigation, in what we viewed as a surprising twist. We believe that this decision was extremely unexpected, given that there was an initial summary in January ruling against generics, which had set up AMRN for a positive outcome prior to the ruling. The patent ruling was a significant setback for AMRN’s commercialization of Vascepa in the U.S., although AMRN has been able to continue to grow revenues of Vascepa despite the court’s decision in March. However, it is important to note that the ruling only impacts Vascepa’s IP in the U.S., as Vascepa is protected in Canada until 2027 with potential for extension into 2039, and that Vascepa’s IP protection in the Middle East is not impacted. Although the ruling was in favor of generic developers, a challenge for generics, in our view, is the limited quantity of suppliers and manufacturers of high-quality icosapent ethyl, which we believe will limit the opportunity of generics from achieving the same market share as AMRN. Patent law 101 and the lynchpin to the District Court’s ruling: Obviousness focuses on claims and whether it represents an obvious variation of what currently exists (prior art) In patent law, obviousness is the fundamental bedrock upon which intellectual property (IP) protection is built. The test of obviousness, which is not only specific to pharma/biotech or healthcare IP, in the case of AMRN’s current litigation refers not to the actual invention described in a patent but rather to its specific claims. In our understanding, the question at the core of the test for obviousness is the following: do the contents of the patent represent an obvious variation of what already exists in the public domain (prior art) or is it non-obvious? Let’s use the example of a car to better illustrate the test of obviousness: 1) We try to claim a car in a patent, but this claim is rejected as obvious; 2) Our response is that we are trying to claim a red car; and 3) The evaluation becomes maybe there are no other types of red cars out there and our red car is genuinely new, but the test to determine validity is still whether a red car was obvious given the options already out there in the public domain. Therefore, at the core of it in pharma biotech IP, obviousness is really about these method of use claims in the formulations of drugs. For AMRN’s situation, the issue at hand is Vascepa use obvious over prior art that used fish oils or omega-3 drugs, particularly EPA, for patented methods of use (i.e. lipid lowering). What’s in and what’s out at the Federal Circuit level In our discussions with leading IP experts, we were able to isolate critical aspects of the case between AMRN and generic drug developers that could be considered as the litigation moves to the Federal Circuit Court of Appeals in Washington, D.C. First, we emphasize that the Federal Circuit is a court of review, and not retrial. This means that the Federal Circuit will evaluate aspects of the prior District Court’s decision by standards of review and apply this evaluation to determine if the law was correctly applied or if certain errors were made. In the case of AMRN’s appeal, the focus of the appeals court will be on whether these claims are invalid as being obvious. As a question of law, we note that this addresses the conclusion of whether a patented invention is obvious or not. Second, we point out that the Federal Circuit Court of Appeals does not have to give deference at all to the trial court’s findings (free to engage in de novo review). Nevertheless, the Federal Circuit’s review would likely center more on questions of how the law is applied (i.e. how the underlying facts support the legal conclusion of obviousness) vs. finding on the underlying facts. Barring any facts that are clearly erroneous, we see Federal judges as likely to give a high level of deference to the District Court’s findings if questions of underlying facts need to be evaluated again. Appeals argument focuses on the District Court’s take on primary vs. secondary considerations Let’s now take a closer look at the mechanics of the District Court’s ruling under Judge Du before pivoting to what we believe are routes to best reverse the obviousness ruling before the Federal Circuit’s three-judge panel. As a patent applicant, the U.S. Patent and Trademark Office does not immediately presume patent validity. Instead, a patent filer must convince the USPTO of non- obviousness for its application using primary considerations based on the four-part Graham vs. Deere test. This assessment encompasses scope and content of prior art, differences in prior art, ordinary skill in the pertinent art, and secondary considerations of non-obviousness. Moving in stepwise fashion, once the facts around the claimed invention and prior art are evaluated (steps one-three), secondary considerations around the patent in question are considered. In our view, the key point here is that once the USPTO has gone through these steps and affirmed a patent, its evaluation in court always starts from the perspective that the patent is valid. Therefore, in any argument contesting the validity of a patent, the burden of proving invalidity for reasons of obviousness falls on the backs of the defendants, which in this case are the generic developers of Vascepa. As our discussions with IP experts and review of AMRN’s appellate brief confirmed, a key part of the appeals argument will re-examine the District Court’s proceeding for any potential burden shifting from generics to AMRN that might have occurred. A close reading of the District Court’s ruling shows several instances where it appears the burden is put on AMRN to defend the non- obviousness of the TG-lowering Vascepa patents. We note that the way non-obviousness was laid out (see pp. 54-58 of the District Court’s ruling) creates a narrative where the court first discusses AMRN’s prima facie case of non-obviousness, finds the primary considerations lacking in substantiality (i.e. one might interpret this as the court’s mind was already made up), and then moves the responsibility to AMRN to rescue its patent validity with secondary considerations. In our discussions with IP experts, an argument centered on the fact that incorrect application of the obviousness test does not support obviousness because some of the underlying factors do not support the ultimate conclusion of obviousness, without contesting any of the facts found by the District Court, could be a winning one. While we see AMRN with high POS for Federal Circuit reversal, what are the possible outcomes? As we digest the extent of different scenarios that could results from the Federal Circuit Court of Appeals three-judge ruling, we highlight three here: 1) Federal Circuit affirms the ruling of Judge Du and the District Court. This would mean that these patents would not stand as an obstacle for generics to launch, and thus would be a clear win for generic Vascepa manufacturers. Given the gaps in application of the obviousness test that underpin the District Court’s ruling, we see this as the least likely scenario; 2) Reversal of the District Court’s judgment and validation of AMRN’s triglyceride-lowering patents for Vascepa. In our view, this ruling would put AMRN immediately back in the driver’s seat for U.S. commercialization of Vascepa given its command of the CV-risk reduction and triglyceride-lowering indications in Vascepa’s FDA label; and 3) Remand the decision back to the District Court for reconsideration based on a procedural error, again focused on application of the obviousness test. Per our discussions with IP experts, the second and third scenarios we have outlined above both coalesce into an overriding theme in this litigation: if the Federal Circuit finds a procedural error in the District Court’s legal ruling and as a consequence deem it incorrect, we see it as likely that the Federal judges will simply apply the facts and reverse the previous ruling so as to find AMRN’s Vascepa patents valid. Thus, focus on a procedural error from the District Court litigation appears to be a high POS way for AMRN to prevail over generics, in our view. Don’t forget that REDUCE-IT-related IP is still protected Following December 2019 decision by the FDA to expand Vascepa’s label, AMRN’s drug now carries indications for triglyceride reductions (“as an adjunct to diet to reduce triglyceride levels in adults patients with severe hypertriglyceridemia, >500mg/dL”) and for CV-risk reduction (“as an adjunct to maximally tolerated statin therapy to reduce the risk of myocardial infarction, stroke, coronary revascularization, and unstable angina requiring hospitalization in adults patients with elevated triglycerides, >150mg/dL, and either established CVD or diabetes and >2 additional risk factors for CVD”). We believe it’s key to remember that generics have the right to carve out various indications in a drug label, and in this specific situation of AMRN vs. generic manufacturers, generics have carved out the CV-risk reduction indication. In simple terms, if the generic companies continue to win in court and receive final approval for a generic Vascepa, the ceiling for a potential label would be reduction of hypertriglyceridemia (triglycerides >500mg/dL), but no indication related to that supported by REDUCE-IT results. We see this as important given that the market for the CV-risk reduction (TG >150mg/dL on statin therapy) is approximately four-fold larger than the severe hypertriglyceridemia market (12M vs. 3.7M). Furthermore, while AMRN can still sue for inducement to infringe on CV patents, this would require it to argue that the defendants are engaging in illegal, off-label use and promoting it intentionally for the CV indication. We view this as an uphill battle, since a core part of the generics platform is lack of drug promotion. Overall, we believe AMRN’s maintenance of the lucrative CV-risk reduction indication allows Vascepa to retain considerable market share in the event of generic approval. Renowned cardiologist and REDUCE-IT PI also point to another flaw in generics ruling vs. Vascepa In addition to feedback from IP lawyers and patent experts, the scientific community, specifically Dr, REDUCE-IT PI Dr. Deepak Bhatt and colleagues, have also spoken up about the reasoning behind the obviousness ruling around Vascepa’s triglyceride lowering claim (Curfman, G., et al. SSRN, Federal Judge Invalidates Icosapent Ethyl Patents – But Based on a Common Statistical Mistake, SSRN, 2020). Recall that the core evidence for a ruling of obviousness from Judge Du came from Mori, T.A., et al. 2000, which was considered as prior art for the ruling. Before we point out the scientific-based criticism of the Court’s interpretation of Mori, et al., as prior art, let’s walk through the study step-by-step and consider its findings. First, it’s crucial to understand that the Mori, et al., study looked at the effects of treatment with 4g daily EPA ethyl ester, DHA ethyl ester, or olive oil for six weeks in 59 male patient with hyperlipidemia (serum cholesterol >230mg/dL, TGs >160mg/dL, or both). We believe it’s critical to understand that the study measured the individual effects of EPA and DHA on lipid parameters, but did not compare them. Therefore, while six-week DHA treatment demonstrated statistically significant (p=0.019) increases in LDL-C for hyperlipidemia patients, equivalent six-week treatment with EPA ethyl ester showed a 50% less increase in LDL-C but without reaching statistical significance in the endpoint. Therefore, while a biomedical researcher might interpret this as EPA treatment trending in the direction of less LDL-C increase, we believe that such a person of skill would recognize the apples to orange comparison here through the lens of statistics (DHA results hit statistical significance while EPA results could not be judged as such). Thus, such a researcher would not have concluded, as Mori, et al. did, that “EPA and DHA had differential effects in lipid...in overweight men with mild hyperlipidemia.” Linking this back to the argument by Curfman, et al., we see that the key question that underpinned the District Court’s ruling was whether it could be obvious to those skilled in the art that EPA and DHA had differential effects on LDL-C in the year 2000. In our view, the Court took the conclusion of Mori, et al., at face value without digging into nuances of the argument. Without delving into how evidence at the time of the study (2000) was insufficient to make an accurate (i.e. definitive statement with statistical power) comparison of the potential differential LDL-C lowering effects between EPA and DHA ethyl esters was just considered as is by the Court. Even more critically, in our view, Dr. Bhatt and colleagues emphasize that the mistake in Mori, et al.’s, conclusion would have been obvious to a person of ordinary skill in the art (POSA) with a basic foundation in statistics, therefore making the incorrect conclusion of Mori, et al., not obvious to them by mistake. Additionally, the report highlighted that the interpretation of Mori, et al., as a small sample size (n=59) study with various clinical measurements is characteristic of a hypothesis-generating study (which leads to further avenues of research) vs. a placebo-controlled trial designed to definitively answer a sole scientific question. In summary, we believe that the key fact underlying Judge Du’s ruling that all six of AMRN’s method-of-use Vascepa patents were obvious was supported by use of Mori, et al., as prior art. In our view, Curfman, et al., convincingly show that these key statistical flaws render Mori, et al., as lacking the meaningful evidence that differential effects for EPA ethyl esters and DHA ethyl esters on LDL-C were obvious to an expert in 2000 and would have made it “obvious” to develop EPA at that time. Without the Mori, et al., making the MARINE study obvious, we see this adding more fuel to the fire for non-obviousness of AMRN’s Vascepa patents. What we are looking for on Sep. 2 and going forward in Vascepa vs. generics litigation Ahead of oral arguments scheduled for September 2, 2020, we emphasize that AMRN has executed on its expedited timeframe for appeal to the U.S. Court of Appeals for the Federal Circuit. With briefings completed in June 2020, the oral arguments on Sep. 2 will be followed by a ruling from the three-judge panel in 4Q20 or 1Q21 (latest). Though hearing of the oral arguments in two weeks, on top of the filed briefs, will provide incremental insight into the lines of argument taken by both AMRN and generics, we believe selection of the three judges to hear the case can offer a tell into how an appeals ruling will turn out. See our analysis below for more. Finally, recall that AMRN has beefed up its legal team ahead of the appeals process: Jonathan Singer of the law firm Fish & Richardson, who has argued nine Hatch-Waxman appeals for clients over the last nine years and has a 7-2 record in those cases, was added as new lead counsel. We believe relevant to the current proceedings is Mr. Singer’s reversal of obviousness judgement in the In re Cyclobenzaprine case. With 28 Federal Circuit cases argued in 2019, we believe Mr. Singer is an ideal addition to the AMRN legal team and brings specialized experience in a situation where an obviousness judgment argument reversal will likely be targeted. Handicapping the Federal Circuit’s ruling: let’s use past decisions to frame our understanding of POS for AMRN’s appeal From our interactions with IP experts and lawyers, we learned that the appeals case for AMRN vs generics will be decided by three Federal judges from a pool of 12 possible. We see this larger pool as consisting of: 1) Judges that tend to lean pro-pharma and are more pro-patent, thus implying that they would look more favorably on AMRN’s appeal; 2) Other judges that are strict proceduralists, which we believe would be more keen to interrogate the use of the obviousness test from the District Court’s ruling. This group could find fault in its application, as well as the weighing of primary vs. secondary considerations, which would again swing the pendulum in favor of AMRN, in our view; and 3) Lastly, judges who might be considered wild cards and could consider the District Court’s ruling as a one-off, thus not interpreting the execution of the test for obviousness with such rigorousness. As we will only find out the choice of the three-judge appeals panel on the day of the oral argument, we believe a brief review of prior cases in battles of generic vs. branded competition as the best way to handicap AMRN’s POS for appeal. Before diving into these reviews, let’s run through the potential judges (in alphabetical order): William C. Bryson (Circuit Judge), Raymond T. Chen, Raymond C. Clevenger (Circuit Judge, assumed senior status in 2006), Timothy B. Dyk, Todd Hughes, Richard Linn (Circuit Judge, assumed senior status in 2012), Alan D. Lurie (Circuit Judge), Haldane Robert Mayer (Circuit Judge, assumed senior status in 2010), Kimberly A. Moore (Circuit Judge), Pauline Newman (Circuit Judge), Kathleen M. O’Malley (Circuit Judge), S. Jay Plager (Circuit Judge), Sharon Prost (Chief Judge), Jimmie V. Reyna (Circuit Judge), Alvin A. Schall (Circuit Judge), Kara Farnandez Stoll (Circuit Judge), Richard Taranto, and Evan J. Wallach (Circuit Judge). Now let’s briefly highlight several relevant patent rulings, as well as document judges with IP backgrounds:
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Msg # | Subject | Author | Recs | Date Posted |
7433 | Re: Analyst Actions: Piper Sandler Starts Amarin at Overweight With $21 Price Target 7:22 AM ET, 08/26/2020 - MT Newswires | Public_Heel | 2 | 8/26/2020 3:26:37 PM |
7434 | Re: Analyst Actions: Piper Sandler Starts Amarin at Overweight With $21 Price Target 7:22 AM ET, 08/26/2020 - MT Newswires | gnac | 0 | 8/26/2020 4:01:16 PM |
7436 | Re: Analyst Actions: Piper Sandler Starts Amarin at Overweight With $21 Price Target 7:22 AM ET, 08/26/2020 - MT Newswires | ex_hacker202 | 0 | 8/26/2020 4:50:10 PM |