Insmed Inc (INSM)

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Growth Drug Is Caught Up in Patent Fight

http://www.nytimes.com/2007/02/17/business/17patent.html?pagewanted=1&_r=2&adxnnl=0&adxn...


By ANDREW POLLACK
Published: February 17, 2007

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Gregg Matthews for The New York Times
Ian Jackson, left, is 16 months older than his neighbor Salem Khalfan, 8.
Salem Khalfan is nearly 9 years old but only a little over three feet tall. His mother says he has grown a couple of inches in the last five months, though, since he began taking a new drug to replace a hormone his body lacks.

But his mother, Kelly Mullins, is worried that the drug, called Iplex, may be taken off the market.

The manufacturer of Iplex, a company called Insmed, has been found to infringe patents licensed by Tercica, the maker of a rival drug. Tercica is now trying to get a federal judge to ban sales of Iplex. Although Tercica’s drug will be available, it requires two injections a day instead of one. And some doctors say it may be less safe.

Insmed has submitted to the court letters from more than 20 doctors from around the world urging that Iplex continue to be made available. The letters say Iplex might be useful in treating not only growth deficiency, but also Lou Gehrig’s disease, burns, eye diseases, adult muscular dystrophy and the side effects of H.I.V. medications.

A hearing in Federal District Court in Oakland, Calif., at which Judge Claudia Wilken was to consider the fate of Iplex had been scheduled for yesterday but was postponed at the last minute. That suggests that the parties may be working out a settlement, although the companies and lawyers involved declined to comment.

The number of patients potentially affected would be small. Only about 6,000 children in this country have the growth factor deficiency for which the drugs are approved and only a few hundred are now using either of the drugs. But the two products are potentially lucrative for their makers, selling for $20,000 to $40,000 a year.

Patent lawyers said it would be highly unusual for a drug to be taken off the market for patent infringement because judges, in considering any sort of injunction request, must consider the public interest, not just those of the parties involved.

In the case of drug distribution, monetary damages would generally be a court’s preferred remedy.

But there is a precedent. A product for improving bone marrow transplantation was removed from the market in the late 1990s after an equivalent product from the patent-holding company became available.

The case stems from a long-running and bitter dispute between Insmed, a publicly traded company based in Richmond, Va., and Tercica, based in Brisbane, Calif., and also publicly traded. Both sell drugs that were approved in 2005 to treat extremely short children who are deficient in a hormone called insulinlike growth factor one, or IGF-1.

In December a jury ruled that Insmed had infringed patents that are owned by Genentech and licensed to Tercica and ordered Insmed to pay $7.5 million, plus royalties. On one of three patents in dispute, the jury found the infringement to be willful.

In seeking an injunction against further sales of Iplex, Tercica and Genentech have proposed to the court that Insmed be allowed to continue providing Iplex to patients who were using it before the jury decision on Dec. 6.

But all new patients since then, they say, could be adequately treated with Tercica’s own drug, Increlex.

The companies argue that Insmed’s patent infringement causes harm to Tercica, which built its entire business around the Genentech patents.

They say that Genentech, as was its right, refused to license the patent rights to Insmed over a period of 10 years. But they say Insmed continued to develop its drug in a calculated gamble that even if the company were found to have infringed on the patents, it would have to pay only monetary damages.

“Insmed knew this day would come and ignored or squandered many opportunities to avoid it,” Genentech and Tercica said in a filing in support of the injunction. They said that allowing Insmed to continue selling Iplex would just be “rewarding Insmed’s illegal misconduct.”

Insmed counters that if it cannot add patients it may go out of business, meaning it could no longer supply even existing patients. It also argues that its drug has advantages over Tercica’s.

Some doctors agree. “Definitely having to give a child a shot once a day instead of twice a day is a huge advantage,” said Dr. Emily C. Walvoord, an assistant clinical professor at Indiana University, who wrote a letter to the court in support of Insmed.

Some doctors also say that Insmed’s drug may carry a lower risk of hypoglycemia — low blood sugar that can cause convulsions or loss of consciousness — than Tercica’s.

The letters in support of Iplex by Insmed also note that it is being tested for various other uses.

For instance, Dr. Lois Smith, an associate professor of pediatric ophthalmology at Harvard Medical School, is testing whether Iplex could prevent the eye disease retinopathy, which can occur in premature babies.

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If Iplex were taken off the market, it “would put all premature infants at risk and our study at risk,” Dr. Smith said in a letter in support of Iplex. “This work has the potential to prevent blindness in the ever-growing number of premature infants.”

Tercica is testing its drug for a less extreme form of IGF-1 deficiency but has not revealed what other diseases it is exploring, said Fredrik Wiklund, senior director of investor relations for the company.

Studies aimed at winning approval of drugs are exempt under federal law from patent infringement. So Insmed’s studies could theoretically continue even if an injunction were granted — although the new uses might also eventually be blocked by the patents if they reached the market.

As for Insmed’s contention that it might go out of business, Tercica and Genentech said that if the new uses were truly promising, Insmed would be able to raise money from investors. Shares of Insmed rose 17 percent, to $1.18, in regular trading. Shares of Tercica fell 5 cents, to $5.51.

Both drugs contain IGF-1, the missing growth factor, that is made in genetically engineered bacteria. And both drugs appear to spur growth to about the same degree. But while Tercica’s drug consists of only IGF-1, Insmed’s consists of IGF-1 that is bound to another protein called BP-3.

Because IGF-1 is often bound to BP-3 in the bloodstream, Insmed argues that its drug more closely matches the natural condition and enables IGF-1 to last longer in the bloodstream. That is what allows for the once-a-day dosing.

But Tercica’s drug has been studied in more patients and for a longer period of time. It also does not have to be thawed before use like Iplex does.

Dr. Mitchell E. Geffner, a professor of pediatrics at the University of Southern California, said the advantages of Iplex were “more theoretical than real,” and that it would probably not make a difference to patients if they had to switch to Tercica’s drug.

Ms. Mullins, who lives in Palm Bay, Fla., said she might not want to put Salem on the Tercica drug if the side effects like hypoglycemia are worse. “I’d rather he be short than have bad side effects,” she said.

He had not tried Tercica’s Increlex or other drugs before starting on the Iplex. Ms. Mullins said her insurer, Aetna, was completely covering the cost of the drug, at about $27,000 a year at Salem’s dosage.

Joyce Schrock of Winter Park, Fla., whose 11-year-old son, Logan, is using Iplex, was more angry. “We just feel like it’s an answered prayer, and now we think the door’s being slammed in our face again,” Ms. Schrock said.

Dr. Paul Desrosiers, who treats both Salem and Logan and is medical director for pediatric endocrinology at Arnold Palmer Children’s Hospital in Orlando, said if Iplex were not available he would put patients on Increlex. While they would complain about the extra injection, he said, “Would it kill them? No.”

Dr. Desrosiers, who has been an adviser to Tercica but favors Insmed’s drug, said he wished the dispute would go away. “I wish they wouldn’t eat each other, whoever wins,” he said.

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