Bristol-Myers Squibb Company: Patent on $1.4 Billion Hepatitis-B Treatment Invalid; Teva Pharmaceutical Industries Limited to Benefit

Published: Feb 13, 2013

Patent battles are won and lost each day, but a fresh defeat for Bristol-Myers Squibb may prompt greater scrutiny of so-called composition of matter patents, which essentially refers to the mixture of two or more substances. In what appears to have taken some analysts by surprise, a federal court judge yesterday decided that the Bristol-Myers patent on the Baraclude hepatitis B treatment was invalid. Why? The judge ruled that this particular patent is obvious, which is a way of saying the invention would have been obvious to someone ‘skilled in the art’ of designing and developing drugs. In other words, there was nothing so unique about the composition of matter patent for Baraclude that Bristol-Myers could cite this as a reason for fending off generic rivals which, in this instance, is Teva Pharmaceuticals. The potential significance, however, is not the specific fate surrounding Baraclude, which generated $1.4 billion worldwide sales last year. Rather, the ruling appears to raise questions about “the robustness of composition of matter patents on products with only minor modifications from older drugs,” Sanford Bernstein analyst Ronny Gal writes in a research note. “…The case has the potential to reverse well-accepted drug dogma.” The courts have “consistently upheld patents covering the drug industry practice of lead optimization,” which refers to patents that emerge from building on a “known backbone and then testing small modifications until a drug is found,” he writes. “This patentability of new compounds has thus become a core asset of the drug industry and most of us in the financial industry model the expiry of CoM patent as the first potential date of generic entry for a given compound.”

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