Back in July of 2017, I wrote a column on these pages discussing the early patent battles between two high-flying biotech firms, Kite and Juno, as both companies raced to bring a miraculous cancer treatment called Car-T therapy to market. Just a month after that column ran — and despite the ongoing threat of Juno’s patent assertion against Kite at that time — Kite was swallowed up by Gilead at an eye-popping valuation of $11.9 billion. By the following January, Juno itself was acquired by Celgene at a price of $9 billion. (Celgene itself was acquired by Bristol-Myers Squibb earlier this year for an astronomic $74 billion; biotech is big business.) Both investors and patients hoped that those acquisitions would help supercharge delivery of each company’s Car-T therapies, with Kite’s Yescarta gaining the first FDA approval for a Car-T treatment in October 2017.
But the initial excitement around Car-T therapies, particularly Yescarta, has dissipated. Sales of the drug have not met expectations, resulting in Gilead having to take a writedown on a portion of Kite’s assets while also making a decision to run Kite as a separate business. Rendering matters worse, Kite’s attempt to invalidate Juno’s seminal ‘190 patent failed in both the PTAB and the Federal Circuit, leaving the company vulnerable to Juno’s pressing of its (along with Memorial Sloan Kettering, where the research underlying the ‘190 was undertaken) infringement claims in a California District Court.
Even back then, the endgame was clear. As I wrote in 2017, “it is clear that Juno’s patent will eventually reach its day of reckoning on the merits” against Kite. Having survived Kite’s IPR, the next day of reckoning of import to patent owners like Juno and Sloan is often a jury verdict. That day has come, with important ramifications for Kite’s value — both to Gilead and as a potential standalone entity if Gilead ever divests the company.
So what happened at trial? In what will likely enter the list of the biggest verdicts in patent history, the jury awarded Juno and Sloan Kettering $585 million in damages for sales of Yescarta, along with a robust 27.6% running royalty on future sales — bringing the total value of the verdict close in excess of $750 million according to reports. While the final damages award, if any, will have to wait for post-trial motions and appeal, the ‘190 patent for now ranks as one of the most valuable ever issued. While also standing as confirmation that royalty rates for pharma patents are among the highest ones going. Making matters worse for Gilead, news of the negative result had an immediate short-term effect on the company’s stock price, as is often the case when patent litigation news comes down for publicly traded companies — especially in pharma/biotech.
While this is just an interim result in the ‘190 patent saga, IP lawyers and their clients can draw some immediate lessons from these developments. First and foremost, this case is the poster child for acquiring companies really needing to account for patent risk — especially when a fundamental challenge to the target company’s core product or service is posed by the patent assertion of a competitor. Here, it was clear at the time of Gilead’s acquisition that the ‘190 patent was a substantial risk. At the same time, even a $750 million verdict pales in comparison to the hit Gilead has taken for overpaying for Kite in the first place. Still, Gilead (and companies in its position who want the short-term benefit of announcing a key acquisition) probably wishes it would have found a way to settle this case, if only to avoid the stock impact of the negative headlines from this trial.
Second, this case also illustrates the risk of filing an IPR in an attempt to dissuade a patent owner from seeking recompense for infringement. Yes, IPRs have proven very successful in eliminating patents for those accused of infringement. But when the IPR kill-shot misses, the repercussions (and the future exposure) are often more serious than if the alleged infringer didn’t take such an aggressive approach. Once a patent is challenged, any patent owner who doesn’t have the luxury of watching it be invalidated will surely fight hard to keep it alive. It will also be emboldened to seek maximum redress when and if the patent survives, as Gilead found out once it lost its IPR on the ‘190 patent.
Ultimately, Gilead has had a run of bad luck on the patent front, with both this verdict and the highly publicized lawsuit filed against the company’s blockbuster HIV treatment offerings by the U.S. government. But all is not lost, however, as the company continues to argue in both the Yescarta and HIV cases that the asserted patents are invalid. Whether those arguments eventually take root is unclear. At bottom, Gilead is surely hoping that the Federal Circuit will see things its way when the respective cases make their way up to that court. Until then, Gilead has surely learned a lesson about flying its kites too close to the sun, in terms of taking aggressive stances against patent assertions raised by powerful patent owners. Because a high-flying infringer’s kite makes a colorful target for a patent missile — especially when flown before a jury.
Please feel free to send comments or questions to me at gkroub@kskiplaw.com or via Twitter: @gkroub. Any topic suggestions or thoughts are most welcome.
Gaston Kroub lives in Brooklyn and is a founding partner of Kroub, Silbersher & Kolmykov PLLC, an intellectual property litigation boutique, and Markman Advisors LLC, a leading consultancy on patent issues for the investment community. Gaston’s practice focuses on intellectual property litigation and related counseling, with a strong focus on patent matters. You can reach him at gkroub@kskiplaw.com or follow him on Twitter: @gkroub.