NEW YORK (GenomeWeb) – The recent lawsuit filed by Esoterix Genetic Laboratories against Qiagen over an alleged breached licensing agreement covering EGFR testing may be a message to other labs who have sold tests without a license.
According to the August 5 complaint that LabCorp subsidiary EGL filed with the US District Court for the District of Massachusetts, Genzyme and DxS inked an agreement in 2008 granting DxS a non-exclusive sublicense to use US patent number 7,294,468 to manufacture and sell diagnostic products for detecting EGFR mutations associated with response to certain cancer drugs, namely Iressa (gefitinib) and Tarceva (erlotinib). Under the terms of the agreement, DxS (which later Qiagen acquired) was required to pay Genzyme royalties.
Based on the complaint, it seems Qiagen paid royalties to EGL, but possibly not enough, as far as EGL is concerned. The lab asserts that under the terms of the agreement, DxS could only sell research products, but was forbidden from selling commercial EGFR tests before it garnered US Food and Drug Administration approval for a kit. However, based on the royalties Qiagen paid, EGL estimated that the firm performed 22,000 and 38,000 test kits in 2011 and 2012, respectively, and believes that it's being shortchanged.
"Upon information and belief, a substantial number of sales for these and other years were not for non-commercial research-only purposes but rather were offered by Qiagen for commercial research and diagnostic testing purposes in violation of the license agreement," according to EGL's complaint.
One industry insider knowledgeable of the deal told PGx Reporter that the lawsuit may be LabCorp's bid to recover revenue from EGFR testing performed not just by Qiagen, but also by labs and EGFR kit manufacturers that don't have a license to its diagnostic patent. The source did not have permission to speak on the record from an employer and requested anonymity.
Notably, the relief EGL is seeking from Qiagen is not a remarkable sum – compensatory damages exceeding $75,000, double or treble damages, costs, and attorney's fees. Diagnostic firms have significantly lower revenue margins compared to drug companies. In that context, "it's an onerous license fee" that Qiagen is likely paying EGL, the insider said, without revealing the exact amount. "It's ugly. It's among the highest [fees] that I've come across for a biomarker license patent."
According to life sciences industry legal expert John Conley, an intellectual property lawyer at Robinson, Bradshaw & Hinson, the compensatory damages figure isn't necessarily a reflection of the true amount that EGL believes Qiagen owes. Rather, $75,000 is the minimum amount EGL has to claim in damages in order to have the case heard by the federal district court in the District of Massachusetts. Both LabCorp and Qiagen are located in different legal jurisdictions. "You can't read anything more into that [number]," said Conley. "All [EGL is] saying is that … we meet the minimum amount standard" to have the case heard by the court.
The '468 patent at issue in EGL v. Qiagen came to Genzyme in 2005 from Dana-Farber Cancer Institute and Massachusetts General Hospital.
In 2004, researchers from MGH and Harvard Medical School led by Daniel Haber sequenced genes in non-small cell lung cancer patients – some treated with Iressa and others not – and determined that those with EGFR mutations responded to the drug while those without these mutations didn't. Haber and colleagues published these findings in a New England Journal of Medicine paper. Meanwhile, that same year, another team from Dana-Farber and Harvard led by Matthew Meyerson published a paper in Science, showing that EGFR mutations were more prevalent in certain populations in Asia than those in the US.
Meyerson, Haber, and eight other inventors are named in the '468 patent, entitled a "method to determine responsiveness of cancer to EGFR targeting treatments." In its deal with Dana-Farber and MGH, Genzyme had garnered exclusive worldwide diagnostic rights for this patent and was supposed to develop an EGFR diagnostic kit. According to the 2005 annual report from Harvard Partners Healthcare, Genzyme launched an EGFR Mutation Analysis assay in September of that year, which "combine[d] PCR and gene sequencing testing technologies for detection of somatic mutations in NSCLC tumor tissue."
However, according to the molecular diagnostic industry insider, this test didn't satisfy Harvard, and so Genzyme granted a non-exclusive sublicense to DxS to develop the EGFR kit through an initial deal in 2008. The companies expanded their agreement again in 2009, which gave DxS rights to sell diagnostic and research products based on the '468 patent in the US and Canada.
Qiagen acquired DxS in 2009 and LabCorp purchased Genzyme Genetics in 2010. Subsequently, LabCorp created EGL as a subsidiary, and the exclusive worldwide diagnostic rights to the patent at issue, as well as the licensing rights from the Qiagen deal, were transferred to EGL.
When Qiagen received FDA approval in July 2013 for the Therascreen EGFR RGQ PCR Kit as a companion diagnostic for predicting response to Boehringer Ingelheim's non-small cell lung cancer drug Gilotrif (afatinib), it acquired the right to sell "licensed products" related to EGFR testing, according to EGL's complaint. Charging that Qiagen had been selling the test commercially before this point, EGL claims that Qiagen's violation of the licensing agreement has resulted in monetary losses in Massachusetts, where "many of Qiagen's sales in violation of the license agreement took place."
In an earlier comment to GenomeWeb Daily News, a Qiagen spokesperson said, "We have strong confidence in our position, and that our current FDA-approved products are not being disputed." Qiagen didn't provide comment for this article.
A warning to other labs
If this lawsuit is indeed EGL/LabCorp's strategy for recovering revenue from labs performing EGFR testing without a license, then the gambit could be lucrative. There are plenty of labs performing such testing, although it is unclear how many may be doing so without a license from EGL. LabCorp did not respond to an interview request for this article.
"In the event they could reach an amicable settlement [with Qiagen], then LabCorp can say, 'Hey! Qiagen settled, and they're the biggest fish in the game,'" the industry source said. "So, anyone else they send a letter to is going think because Qiagen settled, their legal department must have thought this was not substantial enough to fight, and so we should settle, too."
According to the insider, this is a common play in the industry. "You can leverage a big fish and get all the smaller fish to pay," said the source. There may be some incentive for the parties to settle. While Qiagen licensed the EGFR patent from LabCorp, in turn, LabCorp is among Qiagen's biggest customers for diagnostic products.
It is worth noting that before being acquired by Qiagen, DxS signed a distribution agreement with Roche in June 2008 granting Roche exclusive global distribution rights for DxS' TheraScreen KRAS Mutation Test and the TheraScreen EGFR 29 Mutation Test in a number of major markets. However, after the Qiagen acquisition, Roche sued DxS, claiming that the firm was trying to get out of this distribution agreement, which stipulated that DxS' tests would run on Roche platforms.
Eventually, the two firms settled the matter in 2010. The agreement included conditions under which Roche could retain distribution rights for future versions of these tests. Roche also had the option to extend the term of its distribution rights for the EGFR assay beyond 2011, when it was slated to expire.
According to the industry insider, that settlement with Roche increased the "number of companies that had the ability to make an [EGFR] IVD." Last year, the FDA approved Roche's Tarceva as a first line treatment for metastatic NSCLC patients with EGFR mutations. Simultaneously, the agency also approved Roche's Cobas EGFR Mutation Test for predicting best responders to Tarceva. Given this history, EGL's actions against Qiagen raise questions about whether the lab would find Roche was also in breach of the license to the EGFR patent, the source said.
A chink in the strategy?
EGL may also target labs that haven't taken a license to the patent but are providing EGFR testing in the form of LDTs. Since the regulatory environment for LDTs is currently in flux, lab tests that gauge genetic markers generally don't list specific drugs they are likely to predict responses for, lest that attract unwanted FDA attention.
Meanwhile, EGL's '468 patent mentions specifically EGFR testing to predict response to Iressa and Tarceva. The first claim of the patent describes "a method for determining an increased likelihood of pharmacological effectiveness of treatment by gefitinib [Iressa] or erlotinib [Tarceva] in an individual diagnosed with NSCLC."
"Patents are usually construed strictly," Conley said. "You have to infringe literally every element. So, I think if you applied any of these claims to any other drugs, you would not be infringing the patent."
The FDA has exercised "enforcement discretion" over LDTs for several decades, leaving regulatory responsibilities to the Centers for Medicare & Medicaid Services. Recently, the FDA told the US Congress that it would release a draft guidance outlining its regulatory framework for LDTs. Although it will be some years before these requirements are rolled out into the lab industry, eventually under the plan LDTs with the same indication as FDA-approved companion diagnostics will have to garner regulatory approval or clearance, and have to satisfy labeling requirements.
The agency is also clear in its final companion diagnostics guidance that a test that is essential for the safe and effective use of a drug requires regulatory approval. According to the guidance, the labeling of a companion test has to include the name of the specific therapy or the class of therapies it is intended to be used with. For example, Qiagen's FDA-approved test label for the EGFR RGQ PCR Kit notes that it is intended to be used to select NSCLC patients considering treatment with the EGFR inhibitor Gilotrif.
The fact that EGL's '468 patent only mentions Iressa and Tarceva, specifically, may be a chink in its case. "Claim one of the patent mentions those two drugs," Conley said. "So, I don't see how you can infringe unless your assay is directed at one of those two drugs."
Moreover, generally the license agreement that centers on a patent cannot be broader in scope (i.e. include EGFR testing for all EGFR inhibitors) than the patent itself, Conley observed. Maybe the license agreement could cover other terms "if you had … a trade secret, for example," he said. "But a patent license would have to be limited to the actual terms of the patent. You can't license something you don't have."