Biogen to fork over $1.25B-plus to settle blockbuster Tecfidera patent fight with Forward

Biogen has settled its Tecfidera patent fight with Forward Pharma for a whopping $1.25 billion in upfront cash. And if Forward wins particular patent rights on its rival drug, Biogen will be on the hook for Tecfidera royalties of at least 10%. Forward shares skyrocketed 83% to a $33.28 high in premarket trading on Tuesday after Biogen announced the deal.

Although the companies still have issues to resolve, the agreement gives Biogen a license to all of Forward’s related intellectual property, and it grants the Danish company potential royalties on Tecfidera, a product that brought in nearly $2.4 billion in sales in the first nine months of 2016 alone. Forward is developing a potential Tecfidera competitor now dubbed FP187.

If Forward goes on to win particular U.S. patent rights for FP187, Biogen will pay the company a 10% royalty on Tecfidera between 2021 and 2028, and a 20% royalty after that, until one of the two drugs' patents expires, according to a Forward statement. The agreement also covers other countries, pending the results of ongoing legal proceedings.

“This agreement limits our downside risk should we not be successful in either the U.S. or European proceedings, and it provides clarity as to our royalty stream should we be successful in either or both of those proceedings,” said Florian Schönharting, chairman of Forward’s board of directors, in the release. Michel Vounatsos, CEO of Biogen, said in its release that the agreement would “clarify and strengthen” the company’s Tecfidera IP.

The dispute between Biogen and Forward centers on Tecfidera's active ingredient, dimethyl fumarate (DMF). Forward developed an oral, slow-release formulation of DMF and persuaded the U.S. Patent and Trademark Office that its patent applications on that product predated Biogen’s Tecfidera IP. When Forward embarked upon a $200 million initial public offering in the summer of 2014, it earmarked $25 million of the haul to launch an IP fight against Biogen.

In April 2015, Forward chalked up its first major victory when the Patent Trial and Appeal Board declared an “interference,” essentially confirming that Forward filed for its patent on DMF before Biogen did and raising the possibility that, if the Danish company prevailed, the patents on Tecfidera would be cancelled. Interference issues are still pending, as is an opposition proceeding concerning Forward’s European patent. But regardless of those rulings, the $1.25 billion fee Biogen owes Forward is nonrefundable.

Forward says it is weighing possibilities for delivering “a substantial portion of the cash” it receives from Biogen directly to shareholders, perhaps via stock buybacks or straight cash distributions. The payment will be subject to a 22% Danish corporate tax, the company said. Forward is preparing for a phase 3 trial of FP187 in relapsing remitting MS, but it’s been a struggle: The company reported a net loss of $11 million in the third quarter of last year.

As for Biogen, it’s locked in a three-way battle for the oral MS market, with Tecfidera fighting against Novartis’ Gilenya and Sanofi’s Aubagio. Biogen is the clear leader, with a 51% share, but Tecfidera’s 10% growth in the third quarter came largely from price increases, the company admitted in a recent securities filing. Meanwhile, 22% of patients who try Tecfidera end up abandoning the medication because of gastrointestinal side effects.

Biogen has worked hard to win over patients, even going as far as to run a direct-to-consumer TV ad last year that showed people shrugging off their disease by hiking, swimming and doing other activities that some viewers thought were unrealistic. Now the company is embarking on an awareness campaign in MS treatment centers as it tries to boost patients’ perceptions of Tecfidera.

Through it all, though, Forward clearly intends to be a thorn in Biogen’s side, pounding its patent positions in the U.S. and abroad. “We continue to believe in the strength of Forward’s positions in the pending proceedings,” said Schönharting in Forward’s statement.