AUG 15th
First Part of Multi-Pronged Copaxone Legal Battle Goes TEVA's Way.
¦ Bottom Line: The decision by the Patent and Trademark Appeals Board (PTAB) to not institute a Post Grant Review (PGR) on the fourth patent protecting the Copaxone 40mg/ml formulation is an incremental positive for TEVA, although the key decisions that will determine the long-term durability of the franchise are still ahead of us. Today’s ruling ensures that the fourth patent at least will be un-impaired heading into the US District Court, while all but ensuring that Amneal will lose its similar argument for a PGR on the fourth patent and making it highly unlikely that potential competitors will file a PGR against the fifth patent. We could now see IPR requested on patents 4 and 5, but that will start a clock that would not lead to a decision until early 2017, with the appeal of that decision extending out another year beyond that.
Today’s decision does not, however, impact the upcoming ruling on the Inter Partes Review (IPR) on the first three patents (decision expected on or before Aug 25) and likely does not impact how the judge will rule on the first four patents at the upcoming US District Court trial starting on Sept 26. With investors appearing cautious on the ultimate outcome of the challenges from a TEVA perspective and with the generic challengers needing to overturn all patent claims in order to claim a clear victory, we would agree the risk/reward on TEVA likely remains skewed to the upside heading into the remaining events in the timeline (Figure 1).
¦ IPR decision next key milestone. With some added comfort on patents 4 and 5, we await the upcoming IPR decision on the first three patents for Copaxone 40 mg/ml.
Given the claims in the various patents are independent, if any of TEVA’s claims were upheld we would view that as a meaningful positive for TEVA, while the challengers would need to overturn all of TEVA’s claims in order to win. The losing party will almost certainly appeal to the Federal Court of Appeals, and that decision would likely add another year or so to the timeline before we have certainty around the status of patents 1-3.
¦ District Court decision most important regarding a possible injunction. Patents 1-4 will all be debated in the US District Court case set to begin on Sept 26, with a decision expected early next year.
The key factor with the trial process (as opposed to the IPR and PGR) is that a TEVA win on any claims during the District Court case would allow for them to obtain an injunction preventing generic competitors from launching until the final appeals of the case are heard by the Federal Circuit Court of Appeals, with a decision on the appeal not expected until 1H 2018. On the other hand, should the Court invalidate all claims, then we could see generic competitors enter the market at risk after the product’s 3 year exclusivity ends in Jan 2017 and after the 30- month Hatch-Waxman stay expires on Feb 1, 2017. Given many on the Street are already assuming generic entry in early 2017, any TEVA win in the Court case would likely lead to meaningful upside to 2017 numbers, although the question of how much value to assign to the added near-term sales/earnings boost will be hotly debated. We currently model generic entry in mid-2018, but believe we have a much steeper decline in our Copaxone sales after that point than Consensus.
AI
