As patents for pioneering biotech drugs near expiry, life sciences companies are hunting new and controversial products. Can law firms help clients win the race?
For those close to the biotech industry, the events of a 2006 clinical trial at Northwick Park Hospital in London are etched firmly in the memory. In what was later dubbed the ‘Elephant Man’ trial, six healthy young men suffered catastrophic multiple organ failures within hours of testing a biologic – a drug created by a biological process – intended to treat leukaemia and rheumatoid arthritis. The volunteers became critically ill, including the loss of fingers and toes, after the monoclonal antibody TGN1412 caused near-fatal side effects. The drug was immediately withdrawn from development and its German-based creator TeGenero filed for insolvency four months later.
This is an extreme example of the risks at play, but the failed trial highlights some of the challenges facing biotechnology companies trying to bring a new generation of sophisticated drugs to market. However, almost a decade on, the biotech landscape has rapidly developed and new cutting-edge technology has replaced some of the biggest blockbuster drugs from the pharmaceutical industry.
For example, the antibody-protein Humira became the world’s best-selling drug last year. Manufactured by biopharmaceutical company AbbVie, the biologic brought in sales of $10.7bn in 2013. Second to top the charts was Remicade, another biologic used to treat autoimmune diseases, with sales of $8.9bn. However, patents protecting some of these blockbuster drugs are due to expire and life sciences companies are lining up to launch derivative versions, also known as biosimilars. The race to develop new biologics and biosimilars is expected to attract substantial investment. At JP Morgan’s annual Biotechnology Investor and Partnering Conference in January 2015, some 400 emerging biotech companies presented to over 9,000 investors across three days in San Francisco.
The UK government has also backed the movement. In 2013, the Department of Health set up Genomics England to deliver the 100,000 Genomes Project – a £300m project aimed to sequence 100,000 human genomes by the end of 2017. City law firm Bristows’ team was appointed lead adviser to Genomics, including TMT partner Adrian Sim, intellectual property (IP) partner Matthew Warren and real estate partner Teresa Edmund. Covington & Burling became involved later, representing the US manufacturer Illumina on its partnership with Genomics England announced by David Cameron in August last year, worth around £78m. Partners Daniel Pavin and Lucinda Osborne led Covington’s team to provide infrastructure expertise for the four-year project.
Warren comments: ‘Biologics is the new ray that everyone has been talking about. We are seeing lots of deals in this space. They are different to the traditional transactions as charities and medical institutions are involved, and the government has jump-started this through its funding. This will be transformative.’
European authorities are also softening the regulatory hurdles that have previously prevented biotech and biopharma companies from bringing these drugs to market. With key patents set to expire over the next two years, IP lawyers are expecting repeat patent disputes work as the race to secure market share of the top-selling drugs begins. US-based litigator Ivor Elrifi at Cooley says: ‘There will be an emergence of companies dedicated to bringing biosimilars and, if they are successful, they will be the defendants in future litigation.’
Cutting edge
According to Genomics, biologics are sophisticated medicines that will replace traditional and small-molecule drug therapies based on broader chemical compounds, like chemotherapy, with less toxic and less invasive diagnostic methods – hence the furore over obtaining exclusive rights to their use. Advances in medical technology show that treatments will have the ability to be tailor-made or ‘personalised’ to suit specific gene variations in the future. This builds on the Human Genome Project’s 19-year research into gene sequencing (completed in 2003) – a technique that analyses the human genome to predict human responses to medicine.
Simmons & Simmons IP partner Scott Parker observes: ‘Technology can now work with antibodies and proteins in a way never seen before. The breakthrough led to an early wave of antibody products getting out and becoming huge blockbusters. There is also a shift in the way patients are treated and personalised medicine is the direction of travel rather than giving all patients the same drugs. Now the emphasis is on breaking ground in that.’
Data exclusivity protects the innovator company for a period of ten to 12 years for its investment in clinical trials and data collection. This has historically incentivised biopharma firms to invest the time and financial resources in establishing the safety and efficacy of the product, and has prevented competitors from free-riding on these efforts for a limited period. But now that many big-ticket patents are near expiry, competitors are seeking regulatory approval to bring their own versions of drugs to market.
For IP firms with big life science practices, this likely means a wave of disputes work because patents for any biologic trying to get into the market will be bitterly fought over. For example, if the lead patent is protecting the compound itself, companies that want to launch a biosimilar will look out for patents filed at a later stage that protect secondary inventions and challenge these instead.
Bristows’ patent litigator Dominic Adair describes the process: ‘In the chemical context, a generic [a life sciences company that specialises in releasing non-branded version of popular drugs] requests to bring a copy of a drug to market and is aware of the specific patent listed in the “orange book” [the US Food and Drug Administration (FDA)’s list of approved therapeutic drugs] relevant to the drug they want to bring to market. Therefore, the generic needs to prove a non-infringement or knock the patent out to get into the market.
‘In the biologics system, it is much fuzzier – there is no orange book – so they have a patent dance, where the innovator puts everything on the table and says: “Here are all of my patents, find a way through that.”’
However, at the end of 2014, biosimilars began to hit the market. In December, Zydus Cadila launched the first biosimilar version of Humira under the name Exemptia in India, in what was the first in a long line of copies to threaten AbbVie’s powerhouse drug, adalimumab. The version will cost around a fifth of Humira’s US price and sales are expected to reach an estimated $16bn in just its local market.
According to Thomson Reuters’ BioWorld study – ‘Biosimilars: A Global Perspective of a New Market – Opportunities, Threats and Critical Strategies 2014’ – biosimilars are expected to account for around 25% of the $100bn expected in sales from off-patent biological drugs by the end of 2020. In addition, between 2014 and 2019, nine blockbuster biologics, whose annual sales exceed $1bn, are set to come off patent.
European champions
But before biosimilars can dominate the market, development companies have to meet a host of regulatory and patent requirements. ‘Historically, small-molecule drugs went off-patent and then generic companies would pile into the market with their generic version,’ says IP partner Christopher Stothers at Arnold & Porter. ‘But because biologic molecules are so complex and hard to make, it is more complex to produce a biosimilar, jump over the regulatory hurdles and put it on the market. This is a major challenge and a major opportunity for both innovator and pharmaceutical companies.’
Surprisingly, Europe seems to be ahead of the US in clearing some of the regulatory barriers to bringing biosimilars to market. In January 2015, the European Medicines Agency (EMA) published the last of three revised guidelines on biosimilars, which laid down the non-clinical and clinical requirements for a similar biological medicinal product. This followed the second adopted guideline, published in October 2014, which outlined the general principles to be applied; and the first revised guideline, published in June 2014, which addressed the quality issues related to biosimilar development.
This move opened the regulatory doors in Europe and biopharma companies were quick to jump on the bandwagon. In 2014, Taylor Wessing led US-based pharma company Hospira to victory in two patent disputes around launching biosimilars. The first win was against The Kennedy Institute of Rheumatology on a dispute over infliximab (the drug for rheumatoid arthritis); and the second and most recent battle was in November last year, when head of the firm’s patents practice, Nigel Stoate, instructed Richard Meade QC (8 New Square), as well as Tom Mitcheson QC and Jeremy Heald (both of Three New Square), to represent Hospira, after it challenged US biotech Genentech on two of its patents for the breast cancer drug Herceptin and its active ingredient trastuzumab. Marks & Clerk advised Genentech alongside Michael Tappin QC and Mark Chacksfield of 8 New Square.
The support for biosimilars has sparked around 20 approvals in Europe so far, compared to hundreds of thousands of chemical compounds that get approved. But while European regulators continue to slowly cut through red tape, the US lags behind by comparison. ‘It is a shock that, for once, the European Union has actually been quicker than the US to provide a framework for the biosimilar drugs,’ says Stothers.
Others agree. Adair comments: ‘This is a rare field where Europe is leading the States in terms of biosimilars,’ while Taylor Wessing’s Tim Worden adds: ‘The FDA has not yet reached the same position as the EMA. It is surprising.’
The US Supreme Court’s ruling in critical biosimilar patent disputes illustrates this cautious attitude. In June 2013, the court denied a patent in the Association for Molecular Pathology v Myriad Genetics landmark dispute. The judgment ignited controversy and public interest after the court decided that isolating genes found in nature does not make them patentable. Jones Day IP partner Gregory Castanias and patent litigator Jennifer Swize represented Myriad. The American Civil Liberties Union and Public Patent Foundation represented the claimant, with Christopher Hansen arguing.
By contrast, a year later, the UK High Court refused US pharma Eli Lilly and Company’s request to prevent biopharma Human Genome Sciences (HGS) from obtaining a supplementary protection certificate (SPC) for the human monoclonal antibody tabalumab. Field Fisher Waterhouse IP partner Beatriz San Martín advised Eli Lilly, alongside Andrew Waugh QC and Tom Mitcheson QC at Three New Square. HGS turned to Powell Gilbert IP partner Penny Gilbert and Michael Tappin QC at 8 New Square. In reaching its decision, the court made it clear that SPCs are granted to encourage research and innovation into new medicines.
‘In the US, bringing biosimilars to market is more difficult. In terms of the Myriad case, is the identification of something that triggers cancer, for example, at a too early stage to patent the DNA?’ asks Stothers. ‘It is very controversial in the US, which is restricting the very early case patents, whereas in Eli Lilly v HGS, the argument was: if you kill the patent, you kill the early stage research.’
US-based IP partners seem hesitant to comment on why the US trails behind. ‘I don’t know whether it is political or cultural, but there is a huge part of the market that is dedicated to innovator biologics in the US, probably more than anywhere else,’ says Elrifi.
But one IP partner at a US law firm says it boils down to relative lobbying in the two regions. ‘Those who want to produce the copies want it to be easier to come to market and those that make the originals want it to be difficult,’ he says. ‘In this area though, more than in the old-fashioned drugs space, there are players who have an interest in both camps, through doing their own biologic innovation and also through producing biosimilars of their competitor products.’
But some US IP partners say that despite the ongoing regulatory hurdles, the American market offers plenty of work. ‘This is an evolution, but there remains a healthy market for biologics,’ says Elrifi. ‘Most of the clients here are still developing the original drug. There are some 4,000 emerging life sciences companies – a large segment of which are dedicated to making biologics.’
Expanding teams: global IP practices gear up
Demand for cross-border, co-ordinated intellectual property (IP) advice and litigation strategising has led clients to push their firms to provide multijurisdictional IP offerings in recent years. Those firms, particularly based on the west coast of the US, have responded with mixed results. Recruiting genuine IP talent in Europe – particularly in London – has been far harder than attracting leading corporate and finance specialists from the Magic Circle. There’s a much smaller pool of available talent and which is well-established and unlikely to move.
However, the London market has been particularly active in the last year with US technology and life sciences specialist Cooley being the most recent to launch a 20-partner office in the City – its first office in Europe. Just one partner was an original Cooley member, while the rest were picked up from Morrison & Foerster and Edwards Wildman Palmer, with former head of Morrison & Foerster’s London corporate practice, Justin Stock, heading the new office.
While the office is still relatively new, IP litigator Akash Sachdeva says his practice is busy working on data protection issues specifically. ‘There is so much processing power now and this brings data, IP and cyber issues,’ he says. ‘People who obtain and hold crucial information will be open to copyright and database issues. It is important that clients know how to protect the data collected.’ Critically, the firm is looking to bring in a core team of life sciences specialists in London to match its capability at home, although details are vague so far.
Meanwhile, Wilmer Cutler Pickering Hale and Dorr added its first London IP partner in 2014, hiring Anthony Trenton from Dentons in September in a bid to tap into the European IP litigation market. His appointment follows that of veteran IP practitioner Trevor Cook from Bird & Bird in 2013.
Meanwhile, Washington DC-based IP firm Finnegan, Henderson, Farabow, Garrett & Dunner hired three qualified patent partners in London in 2014, including Hazel Ford from J A Kemp; Philip Cupitt from RGC Jenkins & Co; and Daryl Penny from Boult Wade Tennant, bringing the total number of partners in the City to five. The hires came as the firm looks to offer clients specialist advice related to the revamped European patent litigation regime. However, managing partner Anthony Tridico says it is still early days for the firm. ‘We are still in a start-up phase in London. Three of our partners have been with the firm less than a year and are in the middle of getting their practices established.’
Outside of London, China is increasingly placing itself alongside the US and the EU as a third vital cog in a global IP strategy, particularly as the country develops its own approach to the exploitation and enforcement of IP rights. With international firms restricted from practising Chinese law, Simmons & Simmons became the most recent firm to establish a separate legal entity permitted to provide a range of IP-related services by Chinese regulators. The firm launched its specialist trade mark practice in Beijing in September 2014, hiring George Chan as a partner from IP firm Rouse. According to Simmons, it was essential to be in the region to represent clients directly before the Chinese trade mark authorities.
Cooley’s Sachdeva says only 2% of all IP disputes in China are brought by foreign companies. ‘China will be the next big thing. China is growing and with that so does the priority of Chinese companies to become inventors rather than copiers. This has not translated into the disputes market yet, but it will soon become the number one country for patent applications, which is a major shift from a decade ago.’
Healthy investment
Biosimilars have attracted considerable funding on both sides of the Atlantic. In May last year, monoclonal antibody company Kymab secured a $40m investment from the Bill & Melinda Gates Foundation and the Wellcome Trust to advance clinical development of antibody therapeutics. Taylor Wessing’s corporate partner Simon Walker, who also co-chairs the firm’s US group, advised Kymab.
In addition, the public markets have opened the floodgates to biotech companies looking to raise capital. US firm Wilson Sonsini Goodrich & Rosati partners Patrick Schultheis and Michael Nordtvedt advised Juno Therapeutics – a biopharma company developing cell-based cancer immunotherapies – on its $305m float in December, making it the largest biotech initial public offering (IPO) of 2014. Latham & Watkins partners Shayne Kennedy and Brian Cuneo advised the underwriters, including Morgan Stanley & Co, JP Morgan Securities, Goldman Sachs and Leerink Partners.
‘For a long time, the public market wouldn’t accept biotech companies because they didn’t make enough money. But in the last two years in the US and the last year in Europe, the public market has opened. Big pharma companies have set up their own venture funds and invested heavily in smaller biotech companies to help bring new technology through,’ says Bristows non-contentious IP specialist Laura Anderson.
There has also been increased consolidation in the life sciences industry, with the recent $17bn headline merger between Pfizer and Hospira attracting particular attention, as the pharma giant gears up to compete in the biosimilar space. Hospira – the generic injectable drugmaker – already boasts a rapidly growing biosimilars business in Europe, where there is already a regulatory pathway to bringing cheaper versions, placing Pfizer at the heart of the action. Ropes & Gray securities and public companies partners, Marko Zatylny and Paul Kinsella, represented Pfizer, alongside Clifford Chance’s antitrust partner Tony Reeves, based in Brussels, for advice on international regulatory matters. Meanwhile, Skadden, Arps, Slate, Meagher & Flom’s team advised Hospira, including partners Charles Mulaney and Richard Witzel in M&A; Clifford Aronson and Frederic Depoortere for antitrust and competition; and Joseph Yaffe in executive compensation and benefits.
The US, on the other hand, is showing trends of increased consolidation between biotech companies in a bid to develop drugs themselves and make them more valuable. This is mostly due to greater funding access, but also because of the attractive profit margins biosimilars offer. Typically, biosimilars will be 20-30% cheaper than the original drugs to produce because of the complexity and cost involved when trying to bring the drug to market. This produces a significantly greater margin compared to when a generic product enters the market, where price falls by around 90% after the drug comes off patent.
Drugs war
With a freer market developing around these popular products, the biologics market is expected to get saturated with a mix of biotech and biopharma companies all trying to market their own versions.
However, as more pharma companies gravitate towards biosimilars, the disputes landscape within life sciences is expected to change. Historically, patent disputes have been between originator and generic companies, but with ‘big pharma’ pressing hard to knock out existing patents, law firms should expect to see larger clients going head to head over key assets in a way not seen before. ‘There will be more conflicts,’ says Parker. ‘A law firm cannot just say “we are only going to act for the generics, so then we are free to act against any originator companies, or vice-versa”, because this may have kept the firm free from conflict so far, but there are going to be more disputes between big pharma companies, so potentially between a firm’s big clients.’
An ongoing regulatory challenge also exists around the ethical implications of patenting genes or living cells. Again, Europe is ahead of the curve in this regard as European guidelines in the European Biotech Directive state genes can be patented, provided they are isolated from the human body and expect issues to only arise in areas that remain to be tested, such as stem cells or if the patent involves the destruction of a human embryonic cells. The US, on the other hand, aims to release its guidelines in due course.
Another major consideration is to what extent rejecting patent applications will prevent early stage research and stagnate drug development. ‘It’s about getting that balance right and protecting the investment of the companies that have spent hundreds of millions in getting these products to market, but not letting them be too greedy and have patents that extend beyond their contribution, and block others unnecessarily,’ says one City-based IP partner.
It will be interesting to see how the courts will apply the principles of patentability in traditional small-molecule drugs to biologics, especially as patents for some of the world’s best-selling biologic drugs will expire one by one over the next two years.
Essentially, it will be up to the courts to move away from the context of traditional chemical-based medicines and assess new patent claims against these different biological products. The aim will be to get the balance right, both practically and ethically. And while the rules of engagement are being established, IP and life sciences regulatory lawyers have critical roles to play. LB
jaishree.kalia@legalease.co.uk