Incyte (INCY) appears to have the stronger hand in its patent disputes with Concert (CNCE), regardless of the of the imminent PTAB ruling (expanded version of article)

(For a shorter version of this article with less legal factual detail, please CLICK HERE.)

Concert (CNCE) and Incyte (INCY) have been embroiled in patent disputes related to JAK inhibitors for at least the past several years. An imminent decision, due by April 9, 2019, is expected by the United States Patent And Trademark Office (USPTO) Patent Trial And Appeals Board (PTAB) on the validity of CNCE’s U.S. Pat. No. 9,249,149 (the '149 Patent), which covers its JAK inhibitor drug candidate, CTP-543 (deuterated ruxolitinib).  In an Inter Partes Review (IPR) challenge, INCY alleged, inter alia, that the ‘149 claims are invalid for obviousness over the Jakafi® (ruxolitinib tablets) package insert.  However, this will likely not be the final decision regarding ‘149 Patent validity as the PTAB Final Written Decision, no matter whether it is for or against validity, will almost certainly be appealed to the U.S. Court of Appeals for the Federal Circuit (the “Federal Circuit”) for review.  Furthermore, and more importantly in our view, even if the '149 Patent validity is upheld as valid by the PTAB, the decision will not provide CNCE freedom to commercialize CTP-543 in the U.S. in view of Incyte’s U.S. Pat. No. 9,662,335 ('335 Patent)).  Thus, regardless of the imminent PTAB ‘149 Patent decision, CNCE will still be in an uncertain position, possibly until expiration of the ‘335 Patent in 2026, regarding whether it will be able to commercialize CTP-543 in the U.S. without obtaining a license from INCY or invalidating the ‘335 Patent and possibly additional patents that might issue that cover deuterated ruxolitinib from the same patent family. Finally, especially if CNCE’s ‘149 Patent survives INCY’s challenge, a future agreement whereby CNCE grants to INCY a license to the ‘149 Patent and any other intellectual property it holds in CTP-543 as well as commercial rights to CTP-543, in exchange for milestones and a royalty, could be a good result for both companies and their investors, and for patients.

 

Deuterium is a heavy version of a hydrogen ion that can be substituted for hydrogen in pharmaceutical products to attempt to improve their metabolic properties and extend their half-life (See e.g., Timmins, “Deuterated Drugs; where are we now?” Expert Opin Ther Pat. (2014), 24:1067). CNCE has expertise in deuterium technology and owns many patent families covering deuterated analogs of more than 90 non-deuterated drugs and drug candidates [See CNCE 10-K for 2018 available at http://www.sec.gov]. CNCE's lead wholly-owned drug candidate, CTP-543, has shown promising results for the treatment of Alopecia Areata (See e.g. “Concert Pharmaceuticals Reports Positive CTP-543 Results from Interim Analysis of Phase 2a Trial in Patients with Alopecia Areata,” CNCE Press Release dated Nov 12, 2018). CTP-543 is a deuterated form of INCY's blockbuster JAK inhibitor, ruxolitinib (Jakafi®), which is not deuterated. One of CNCE's patent families includes the '149 Patent, which covers CTP-543 (see, e.g., compound 111 of claim 3 of the ‘149 Patent). The '149 Patent claims priority filing dates between June 15, 2012 and December 15, 2014.

 

It is important to understand that patents do not give a patent owner the right to sell/commercialize anything, but rather give the patent owner the right to block others from making, using, selling, offering to sell, or importing products that fall within the claims of the patent (35 USC  271). Thus, the '149 Patent does not necessarily give CNCE the right to sell/commercialize CTP-543. Rather, CNCE's ability to commercialize CTP-543 in the U.S. in coming years depends not only on its ability to move through the FDA regulatory review process, but in addition likely rests on its ability to either invalidate INCY’s '335 Patent, or to convince INCY to grant it a license to the '335 Patent under acceptable terms*. The '335 Patent is directed to deuterated ruxolitinib (Jakafi®)**. This patent is part of a large INCY patent family that includes patents that cover its blockbuster JAK inhibitor, Jakafi® (ruxolitinib) (See e.g., U.S. Pat. No. 7,598,257), that were filed at least five years before CNCE's '149 patent ***.

 

To be clear, we have not analyzed the validity of either the INCY ‘335 Patent or the CNCE ‘149 Patent in great detail, and there are many grounds under which a patent can be invalidated. It is noteworthy, however, as stated above, that CNCE failed to convince the PTAB that INCY's '335 Patent is invalid in its PGR filing based on requirements of a patent's specification (See DECISION Denying Institution for Post-Grant Review; Entered 1/11/18; Case PGR2017-00034; available at https://ptab.uspto.gov). At a minimum, it seems that this at least creates a bad fact for CNCE if they try to invalidate INCY’s ‘335 Patent in a future litigation, and possibly even an estoppel, although we have not researched that possibility under these facts.  And there may be other grounds (e.g., prior art) with which INCY’s ‘335 Patent could be challenged.  At a minimum, this situation appears to create an uphill battle for CNCE in the future if it attempts to invalidate the ‘335 Patent in litigation, which it likely needs to do in order to commercialize CTP-543 if it successfully navigates clinical trials and FDA review.

 

On a separate legal issue, in a few days we will learn whether INCY convinced the USPTO that CNCE's '149 Patent is invalid based on, inter alia, certain prior art references including the Jakafi® label, one of the ruxolitinib (Jakafi®) patents in the '335 Patent family, and teachings from a CNCE deuterium chemistry background document that, although the major factual dispute in the case, was apparently available before CNCE filed their patent application that led to the ‘149 Patent. We have not reviewed the entire file history of this IPR, and patent validity determinations in the U.S. can be difficult to predict. In fact, about 50% of IPRs filed against patents covering approved drugs, have resulted in invalidity rulings if they reach final written decisions (https://www.uspto.gov/sites/default/files/documents/chat_with_the_chief_march_2018.pdf; see slides 44-47). With respect to the ‘149 IPR, it appears to us that CNCE has an uphill battle, especially for the claims that issued, although there is a better chance for survival of its contingent claims that focus on the specific deuterated ruxolitinib that is CTP-543 and having at least 95% incorporation of deuterium. INCY’s prior art patent publications disclosed and claimed ruxolitinib and disclosed that the compounds therein could be deuterated. Furthermore, it was known that replacing hydrogen with deuterium at metabolized sites affects metabolism of compounds, and the areas of ruxolitinib that are metabolized were known.  Finally, the properties of the compounds claimed in the ‘149 patent, including the properties of claimed Compound 111, CTP-543, do not appear too surprisingly different than, or clinically significant over ruxolitinib, with an increase in half-life of 12-14 percent (See IPR oral hearing transcript 1/25/19 in IPR2017-01256, available at https://ptab.uspto.gov). However, CNCE presents data for CTP-543, including its Phase 1 results, and argues that there are surprising results at least for this deuterated compound, e.g., slowing down metabolism greater in fast metabolizing individuals and a significantly better therapeutic window than non-deuterated ruxolitinib, despite the overall relatively small difference in half-life (Id.).  

 

Another important consideration for investors with respect to this imminent ‘149 Patent IPR decision is that the decision will almost certainly be appealed to the Federal Circuit.  Both parties, as a matter of right, can appeal the final decision of the PTAB in an IPR to the Federal Circuit (35 USC 141 (c)) no matter whether the decision is for or against validity.  And in situations such as this, where financial stakes are typically high, an appeal to the Federal Circuit would be expected. The Federal Circuit reviews the PTAB’s conclusions of law (e.g., conclusions of obviousness) under a de novo standard and the factual findings underlying such conclusions under a more deferential “substantial evidence” standard (see, e.g., Personal Web Technologies, LLC v. Apple, Inc. Fed. Cir. (March 8, 2019)).  From the most recent data we could find, IPR decisions were upheld over 74% of the time by the Federal Circuit (https://www.finnegan.com/en/insights/blogs/america-invents-act/federal-circuit-ptab-appeal-statistics-january-15-2019.html). Of course, these statistics are interesting, but it really comes down to the facts of the case and whether the PTAB’s ruling in a particular case is supported by the facts and the law. From an investor standpoint, it is important to understand that the imminent PTAB ‘149 IPR obviousness decision will likely not be the last legal decision regarding the validity of the ‘149 Patent over the art cited by INCY, since in the likely event that it is appealed, this PTAB decision will get reviewed without deference, by the Federal Circuit, and could then end up remanded back to the PTAB for another review.

 

In the end, it is possible that both the '149 and the '335 Patents will eventually be held valid and enforceable after all litigations are finally adjudicated. From a high-level viewpoint, INCY's '335 Patent covers any deuterated form of ruxolitinib whereas CNCY's '149 Patent, with a priority filing years after the '335 Patent priority filing, covers certain deuterated forms of ruxolitinib. It is possible and permissible for two or more valid, unexpired patents to exist that cover the same product. This can occur for example when one patent covers a genus of compounds and another covers one or more species under that genus, as long as the species patent meets all the grounds for patentability, for example, that its claims are not obvious in view of the disclosure of the genus patent. Thus, it is possible that the '149 Patent is a valid patent, especially claims directed to the CTP-543 ruxolitinib deuterated species, whereas INCY's 335 Patent covers a genus that includes, inter alia, all ruxolitinib deuterated species.

 

Despite the fact that INCY’s ‘335 Patent appears to dominate CNCE’s ‘149 Patent, there is value in the ‘149 patent that would increase significantly with a win over INCY in the current battle, especially if there is a future Federal Circuit appeal ruling that affirms the validity of the ‘149 Patent. For example, the patent life of the ‘149 Patent will likely extend some years past the last to expire ruxolitinib patent in the ‘335 Patent family. Therefore, a victory would increase the value of the ‘149 Patent as a potential bargaining chip for CNCE to provide INCY an opportunity to extend the patent-protected commercial life for future deuterated versions of Jakafi® (see possible commercial deal discussed below). On the other hand, it seems that if the '149 Patent validity is not affirmed in the present IPR, then this will be a clear loss for CNCE, since as we understand it, they will have lost their current U.S. patent protection for the CTP-543 composition and still will not have clearance over the ‘335 Patent.****

 

In summary, regardless of how the imminent IPR decision comes out for CNCE's '149 Patent, INCY's '335 Patent remains as an apparent major legal hurdle for a future commercial launch by CNCE of CTP-543. In other words, INCY still has the upper hand in this patent battle, because CNCE's '149 Patent does not cover Jakafi®, whereas INCY's '335 Patent appears to cover CTP-543. Thus, INCY will continue to have the upper-hand in this patent battle as long as the '335 Patent is not invalidated and has not expired. Investors should keep this in mind as the decision from the IPR is announced and the market may over-react in a positive manner to a decision in favor of CNCE.

 

We hope for the sake of patients, that INCY and CNCE will find a way to work through their patent disputes if/when CTP-543 makes it through clinical trials and FDA approval so that CTP-543 is available to Alopecia patients. For example, INCY could grant CNCE an Alopecia field-limited license to the '335 Patent for terms that work for both parties. However, such a resolution may require that CNCE scores a future victory in a court proceeding invalidating Incyte's '335 Patent. A more favorable deal for both parties, especially If CNCE’s ‘149 Patent survives INCY’s current challenge, would be one that provides Incyte the commercial rights to CTP-543 in exchange for milestone and royalty payments to CNCE, similar to the asset purchase agreement entered into between CNCE and Vertex (VRTX) for deuterated forms of VRTX’s drug Kalydeco®, although that agreement apparently did not have a royalty component (See https://www.biospace.com/article/releases/vertex-and-concert-pharma-complete-asset-purchase-agreement-for-ctp-656-/ and https://www.cff.org/Trials/Pipeline/details/10134/CTP-656-Deuterated-ivacaftor). Depending on the terms, this could be a win for CNCE and a win for INCY, and either way would be a win for patients. Unfortunately, until a deal is struck between these companies, the value of CTP-543 to CNCE will be limited by the ‘335 Patent threat, and the future commercial availability of CTP-543 to patients will remain uncertain. Finally, 5 years of exclusivity may be available for CTP-543 from the FDA as a new chemical entity if it is approved.

 

Footnotes:

*CNCE would likely need a license from INCY to commercialize in Europe as well, since INCY’s European patent EP3184526 B1 appears to have claims directed to deutorated ruxolitinib.

 

**Claim 1 of the '335 Patent reads as follows: "1. A compound, which is 3-cyclopentyl-3-[4-(7H-pyrrolo [2,3-d]pyrimi din-4-yl)- I H-pyrazo1- I -yl] propanenitrile, wherein one or more hydrogen atoms are replaced by deuterium; or a pharmaceutically acceptable salt thereof." 

 

***The '335 Patent has priority filing dates between December 13, 2006 and December 12, 2006.

 

****It is interesting to note that CNCE has also filed contingent claims for the '149 Patent in the IPR, which are directed more specifically at CTP-543 (See "CONCERT PHARMACEUTICALS, INC.’S CONTINGENT MOTION TO AMEND" in IPR2017-01256, dated July 2, 2018). If CNCE loses INCY’s challenge to the ‘149 Patent validity, then even these more narrowed claims to the CTP-543 compound will have been invalidated. It is also noteworthy that there are additional pending patent applications in the U.S. (15/454,844 and 16/298,795) (and likely other territories but we have not confirmed) in the same family as the ‘149 Patent, from which CNCE can attempt to cover CTP-543 compositions and methods, although they would have to have different scope than the ‘149 Patent and IPR contingent claims. Finally, 5 years of exclusivity may be available for CTP-543 from the FDA as a new chemical entity if it is approved.

 

 

This document is for information only and is not investment or legal advice. Please confirm the accuracy of all information for yourself as none of this information is warranted as accurate by the authors. Although the authors of this article, Emanuel Vacchiano, JD, PhD and Patrick Halloran, JD, PhD, are licensed U.S. patent attorneys, neither this article, nor any section thereof, should be considered a legal analysis or opinion of the scope of any of the patents discussed herein, or their validity, or to provide any legal advice of any kind. Readers should hire a licensed U.S. patent attorney to perform a patent analysis before making any investment decisions based on any legal issue discussed herein. Furthermore, please consult a licensed financial professional before making any investment decisions based on the contents of this article. More information regarding Amp Biotech Research can be found at ampbiotechresearch.com. More information regarding the authors and their patent law practice can be found at doublehelixlaw.com. The authors also wish to thank Dominic Vacchiano for his assistance in reviewing this document.

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