Isis has settled a dispute with specialty financing firm Drug Royalty over a payment the antisense drug company was owed when it sold certain of its royalties on the wet age-related macular degeneration drug Macugen, Isis said last week in a filing with the US Securities and Exchange Commission.
As part of the settlement, Isis has agreed to take $1 million less than it was originally owed by Drug Royalty.
In 2001, Macugen’s developer EyeTech Pharmaceuticals licensed from Isis certain intellectual property related to oligonucleotide chemistry that was needed to develop the drug. In late 2004, Isis sold a portion of its royalties on sales of Macugen to Drug Royalty in exchange for $24 million, which was to be paid over three years.
Macugen, a pegylated aptamer targeting vascular endothelial growth factor, was approved by the US Food and Drug Administration in December 2004.
According to Isis, Drug Royalty made the first two payments, but allegedly terminated the agreement early to avoid making the final payment of $9 million, prompting Isis to sue the company in June, according to court documents obtained by RNAi News.
In its SEC filing, Isis said that the terms of the royalty sale have been amended under the settlement agreement to reduce Isis’ final payment to $8 million, $7 million of which was paid by Drug Royalty last week. The remaining $1 million was paid by an “unaffiliated party,” Isis said.
Officials from Drug Royalty were not available for comment.
“In 2004, the future prospects in the marketplace for Macugen were extremely promising,” Isis said in its lawsuit against Drug Royalty. “For example … around December 2002, Pfizer paid an upfront fee of $100 million … to help develop and market Macugen with EyeTech.”
In December 2004, Isis signed a deal selling to Drug Royalty all of its royalties on the first $500 million in annual sales of Macugen. Isis also sold half of its royalties on sales of the drug between $500 million and $1 billion, and 90 percent of its royalties on sales exceeding $1 billion.
In exchange, Isis was to receive $24 million, paid in annual installments of $7 million, $8 million, and $9 million. According to court filings, Drug Royalty had at one time offered Isis up to $62.5 million for royalty rights to Macugen, but lowered the offer after discovering prior art that could potentially undermine patents covering the drug.
According to Isis’ suit, however, Macugen “has not been the commercial success [Drug Royalty] hoped it would be” after Genentech’s top-selling AMD drug Lucentis was approved in the US in June 2006. “As a result, sales of Macugen dropped and the royalty paid to [Drug Royalty] … decreased throughout 2006 and 2007.”
Isis noted in its complaint that between December 2004 and June 2007, Drug Royalty received only $6 million in Macugen royalty payments.
In its suit, Isis alleged that Drug Royalty wrongly terminated the arrangement in order to avoid paying the final $9 million installment to Isis.
Drug Royalty “predicated its termination on the fact that an opposition to an Isis patent covered by the agreement was filed with the European Patent Office in November 2006, and [Drug Royalty] is critical of the manner in which Isis had previously obtained that patent,” Isis said in the suit.
The “alleged grounds for termination are nothing more than a pretext to obfuscate … buyer’s remorse … [since] nothing in the agreement required that the … European patent, which was a pending patent application at the time the parties entered the agreement, even be issued,” Isis noted.
Macugen “has not been the commercial success [Drug Royalty] hoped it would be. As a result, sales of Macugen dropped and the royalty paid to [Drug Royalty] … decreased throughout 2006 and 2007.”
Additionally, under European Patent Office practices, patents remain valid until the completion of the opposition process, which in this case is not expected to occur until 2009 or 2010.
Isis added in its June lawsuit that Drug Royalty did not indicate that it had been damaged by the European patent opposition, and that “not one dollar has been withheld or lost in royalty payments … as a result of the opposition or any alleged conduct by Isis.
“In short, [Drug Royalty] entered into a deal in 2004 that it no longer likes in 2007. Although the royalty payments … under the $24 million agreement were not as high as [Drug Royalty] had hoped, this had nothing to do with any patents relating to Macugen or any opposition,” Isis said in its complaint. “Rather, [Drug Royalty] has lost money because Macugen had not performed well in the marketplace against Lucentis, a fact which has nothing to do with Isis.”
Isis had been seeking a ruling that Drug Royalty did not have valid grounds to terminate its deal for Macugen royalties and owed Isis the remaining $9 million payment. Drug Royalty never filed a response to Isis’ complaint.
With the $8 million in payments to Isis this month, the dispute with Drug Royalty has been settled, Isis said in its SEC filing. The settlement does not constitute an admission of liability by either Isis or Drug Royalty, Isis added.