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MIT, Repligen Win $65M Settlement from ImClone in Erbitux IP Infringement Row

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ImClone Systems has agreed to pay $65 million to settle a lawsuit with Repligen and the Massachusetts Institute of Technology claiming ImClone infringed upon a core protein-production patent with its manufacture and sale of the monoclonal antibody cancer drug Erbitux.
 
The settlement, MIT’s second major patent-related litigation win in the past three months, will net the school as much as $25 million, less Repligen’s legal fees.
 
And although the patent in question provides broad protection in the area of enhancing protein production in cells, its expiration in 2004 makes it unlikely that MIT and Repligen will be able to pursue infringement claims against other entities, according to sources.
 
Terms of the settlement call for ImClone to make a one-time payment of $65 million to Repligen and MIT, who were co-plaintiffs in the suit. The payment also grants to ImClone a royalty-free, irrevocable worldwide sublicense to technology patented under US Patent No. 4,663,281, entitled “Enhanced production of proteinaceous materials in eukaryotic cells.”
 
ImClone said that the $65 million payment will be made to Repligen, which is responsible for providing MIT with its portion of the settlement.
 
The exact amount of MIT’s stake is unknown. A spokesperson from MIT said that the school is declining comment on the settlement at this time. Similarly, Walter Herlihy, president and CEO of Repligen, declined to comment, citing confidentiality agreements.
 
However, according to a statement from Repligen, its net proceeds from the $65 million settlement will be approximately $40 million after its payment of obligations to MIT and legal expenses. Therefore, MIT’s stake is likely at least several million dollars, though no more than $25 million less the undisclosed legal fees.
 
MIT and Repligen originally filed suit against ImClone in the United States District Court for the District of Massachusetts in May 2004 for infringing the ‘281 patent based on ImClone's manufacture and sale of Erbitux.
 
The patent covers the use of genetic elements that increase protein production in mammalian cells. MIT is the sole assignee on the patent, and Repligen holds an exclusive license. MIT and Repligen specifically alleged that the cell line that ImClone uses to produce Erbitux uses the technology claimed in the patent.
 
In July 2006, the US District Court of Massachusetts issued a summary judgment ruling in favor of Repligen and MIT, and rejecting ImClone’s request to dismiss all claims of the suit on the basis that the patent rights were exhausted as a matter of law. The case proceeded to trial, and was pending until ImClone, Repligen, and MIT agreed to the settlement.
 
The settlement amount has already widely been reported as somewhat of a disappointment for Repligen’s investors, who expected a larger settlement and, as a result, punished Repligen’s stock last week. On the Friday before the announcement the company’s stock was trading at $5.01 per share. Following the announcement on Monday, Sept. 10, shares had plunged approximately 18 percent to $4.12. Since then, the stock has recovered slightly and was trading at $4.29 at close of market last week.
 
The idea of a larger settlement, according to various news outlets, was based primarily on previous reports that ImClone produced approximately $1 billion worth of Erbitux prior to the expiration of the ‘281 patent in 2004, though total sales of the drug during that time are unknown. Also, it was reported that Bristol-Myers Squibb, ImClone's US commercial partner, has paid ImClone $900 million in license payments as well as a 39 percent royalty on the net US sales of Erbitux, totaling about $1.5 billion to date.
 
However, both Repligen and MIT may have been happy with a modest settlement considering that the patent in question expired on May 5, 2004, following the typical 17-year patent lifespan. ImClone only started selling Erbitux in February 2004, meaning that Repligen and MIT would only have been able to collect on royalties generated during that three-month period.
 

“It does seem like they targeted Erbitux, and that there may not be that many other drugs out there for which they could do that.”

Repligen has filed an application with the US Patent and Trademark Office asking it to extend the term of the patent until 2009 based on the relatively long time it took for Erbitux to be approved, a request that MIT made in 2004 but had rejected by the USPTO. It is unclear what the status of Repligen’s request to the USPTO is. Therefore, although it is possible that Repligen and MIT could have made claims on royalties from Erbitux sales through 2009, there was no guarantee that the patent life would have been extended to allow such claims.
 
“There was only so much they could get,” Peg Brivanlou, a partner in the intellectual property practice group of law firm King and Spalding, told BTW. “If they weren’t successful in getting their patent term extension, then there wasn’t that much they could get anyway.”
 
It is also unclear whether Repligen and MIT will pursue additional lawsuits against entities for infringing what appears to be a relatively broad patent. Herlihy told BTW that there “are no active infringement cases under prosecution in the courts right now,” but that “there may be people who will eventually use the technology. I can’t predict that.”
 
Brivanlou agreed that the patent provided broad coverage, but said that it was unlikely that MIT and Repligen would be able to bring suit against another infringer, unless that infringer had been manufacturing and selling a product based on the technology prior to the May 2004 expiration of the patent.
 
“Because it’s specific for a particular product, even if they got an extension, it would only be good for Erbitux,” Brivanlou said. “If somebody had something on the market before May 2004, they could go back [and sue] … and the latest somebody could have infringed the patent was May 5, 2004. Even then, I don’t know how well a judge would look at them waiting so long to sue on an expired patent.”
 
Added Brivanlou, “it does seem like they targeted Erbitux, and that there may not be that many other drugs out there for which they could do that.”
 
For MIT, the settlement is the school’s second major patent litigation win in the last three months. In July, a federal judge ruled that Eli Lilly had infringed upon US Patent No. 6,410,516, entitled “Nuclear factors associated with transcriptional regulation,” issued jointly to MIT, Whitehead Institute for Biomedical Research, and Harvard University in 2002; and exclusively licensed by Ariad Pharmaceuticals.
 
As a result of the decision, MIT, Whitehead, and Harvard stand to split $16.3 million of a total of $65.2 million awarded to the plaintiffs in back damages, as well as another $4.4 million per year, based on current sales of the infringing Lilly drugs, until the patent expires in 2019; while Ariad will pocket the remaining $48.3 million in back damages and $13.3 million per year (see BTW, 7/16/07).
 
It remains to be seen, however, how much of the future royalties the schools and Ariad stand to garner, as the USPTO in a separate ruling found that certain claims in the ‘516 patent, including claims asserted in the lawsuit, were unpatentable. In addition, Ariad and the institutions remain embroiled in separate lawsuits related to the same patent with Amgen and Wyeth, the results of which have yet to be decided.

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