April 22, 2015

Strategies for Pharma Companies Facing Bass-Like Challenges in IPR Proceedings

By Matthew L. Cutler, Principal

Kyle Bass is at it again. On April 20, 2015, Bass filed his sixth inter partes review (IPR) Petition against a patent covering Pharmacyclics, Inc.’s cancer drug, IMBRUVICA®. Then, on April 22, 2015, Bass filed his seventh IPR Petition against a patent covering Biogen’s multiple sclerosis drug, TECFIDERA®. These IPR filings follow a typical strategy for Mr. Bass – identify companies with a limited number of products (in the case of Pharmacyclics, its website seems to indicate that IMBRUVICA® is its only product) – and attack the core patent(s) covering one or more of those products. By attacking patents on a company’s core products, Mr. Bass is likely best able to negatively affect the company’s stock price in a short-sale strategy.

What should you do if you find yourself in the sights of Bass, or some other IPR challenger? The BIO IP Counsels meeting in St. Louis last week featured a robust discussion of IPR practice and the important steps a company can and should take when facing an IPR challenge to one or more core patents. The following insights and strategy were gleaned from comments made at the BIO meeting:

  • Immediately convene a meeting of the CEO, CFO, government relations, investor relations, internal and external general and IP counsel to develop a coordinated strategy.
  • Get out in front of the issue with your general counsel and/or patent counsel. IPR issues are nuanced and complicated, internal and/or external patent counsel should be made available to analysts to answer specific questions about the IPR process in general, and specific questions about the particular IPR filing in question. Your CEO and/or CFO can be available to comment on more general issues. With a precipitous stock price drop, there will be internal pressure to immediately respond, but if your company representative is unprepared or unknowledgeable about IPR proceedings, it will result in more harm than good.
  • In communications with analysts, focus on educating about the IPR process and positive points. For example:
    • Were only some of the claims of the patent-at-issue challenged?
    • Is regulatory approval a high hurdle that makes patent protection less important?
    • An IPR filing is only a request to re-evaluate the patentability of a patent – are there problems with the IPR petition that will make it easy to defend?
    • An IPR proceeding, with appeals, will take over 2.5 years, so there is no immediate threat to the patents-at-issue.
    • IPR filers, like Bass, DO NOT file Abbreviated New Drug Applications (ANDA) or BLA; therefore, even if they invalidate the patents, they do not have a competitive drug application to be approved.
    • Issued, US patents carry a presumption of validity (35 USC 282(a)) and the IPR filer carries the burden of overcoming this presumption by a preponderance of the evidence.
  • Meet with Congress and be proactive to change the process. Many Representatives and Senators are unfamiliar with the IPR process and the effects it is having on pharmaceutical companies, including by the manipulation of the proceedings by individuals like Bass. For example, Mr. James Harrington, Chief IP Counsel for Shire Pharmaceuticals (another Bass target) elaborated on this point: “Shire Pharmaceuticals is working with BIO, Pharma and Congress to help draft proposed amendments to the IPR process to make the procedure equitable for all industries.  It is important that the pharmaceutical and Biotechnology industries can rely on a strong patent system.”

The message from BIO is clear – the IPR process, and specifically the attacks against chemical/bio patents, is a threat to the patent portfolios of pharma companies. As such, it is important to prepare for further Bass-type challenges. Also, more patent reform seems to be on the horizon, so outreach to members of Congress at this critical stage is essential.