Pharma's new patent worry by the numbers: No 'IP death squad' here, analyst says

Kyle Bass

With generics makers attacking Teva's ($TEVA) next-generation Copaxone and hedge fund manager Kyle Bass waging war on a range of pharma patents, these days, the phrase "inter partes review"--or IPR--is flying around more than ever. But how much do pharma companies need to worry about these patent reviews affecting their IP protection?

According to an analysis of past IPR challenges, not a lot, Bernstein analyst Ronny Gal wrote in a Thursday note to clients. In 165 pharma cases so far, only 88 have gone through a decision on whether to institute review proceedings. Of those 88, the U.S. Patent and Trademark Office (PTO) has only chosen to fully institute proceedings 41 times, or in 47% of cases. That rate is "remarkably lower" than the 75%-plus rate across all sectors, which includes tech, he pointed out.

And so far, only 7 cases have come to a final decision following the 12-month review process. All claims were found valid only 5 times, and all patents were invalidated only twice--for Suboxone and Vyvanse.

His conclusion? It's "not much of an 'IP death squad,'" he wrote. While the comparatively speedy nature of IPR review has some drugmakers--and their investors--worried, the stats so far "suggest 15% of patents challenged via IPR are invalidated," and that's "reasonably similar to patent challenges via the court system."

"In short, it appears the IPR process is doing exactly what it is supposed to do--providing fast, low cost way to eliminate patents which should have never been granted," he wrote.

Of course, the sample size is still small, Gal cautioned; 26 more already-instituted cases are up for final decisions over the course of the next year, and that'll provide a much larger sample set.

In the meantime, though, companies may be breathing a little easier in the wake of the PTO's recent decision not to further investigate Bass' first patent challenge, which targeted Acorda's ($ACOR) shield for multiple sclerosis med Ampyra. Armed with a mantra that challenging low-quality patents will bring down drug prices and help the public, Bass has since taken aim at a number of other drugmakers, including Shire ($SHPG) and Celgene ($CELG).

Pharma, though, hasn't been so appreciative of his crusade. Bass and his partners want "to line their own pockets at the expense of public pharmaceutical companies and their shareholders," Celgene recently said in legal papers seen by Reuters.

Teva--which has already seen its patents on star treatment Copaxone upturned--is facing a different opponent over the new, patent-protected version of the blockbuster drug. The PTO recently instituted review proceedings on all three of the drug's patents, and if they're nixed, Momenta ($MNTA)--which developed Copaxone generic Glatopa--and others hope to be waiting in the wings with knockoffs.

On that scenario, Gal and his fellow Bernstein analysts think the odds of invalidation "are close to even," he wrote last week.

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