US jury rules in Merck & Co.'s favour in hepatitis C drug patent dispute with Gilead

A US federal jury on Tuesday upheld the validity of two patents held by Merck & Co., allowing the company to seek royalties on sales of Gilead Sciences' hepatitis C drugs Harvoni (ledipasvir/sofosbuvir) and Sovaldi (sofosbuvir). "Although we are disappointed by the jury's verdict...there are a number of remaining issues to be decided by the jury and the judge," stated Gilead spokeswoman Michele Rest, adding "therefore, it is premature to comment any further."

The case was launched in 2013 when Gilead sought a declaratory judgment that sofosbuvir, which at the time was not approved in the US, did not infringe patents held by Merck and partner Ionis Pharmaceuticals. Merck had requested that Gilead license two of its patents, which it claimed were related to sofosbuvir, and wanted the latter to pay a 10-percent royalty on net sales of the medicine until the patents expire. Gilead has argued that the drug was developed on the basis of research performed by Pharmasset, which it acquired in 2012.

According to Ionis, the jury in the District Court for the Northern District of California upheld all claims from the two patents in the case, including two methods and eight composition-of-matter claims. Merck spokeswoman Lainie Keller remarked that the verdict "accurately reflects the evidence in this case." The drugmaker is seeking more than $2 billion in damages and a royalty on sales of Gilead's sofosbuvir-based drugs going forward, while the jury is expected to hear more evidence before making a decision. Ionis explained that it will receive 20 percent of any damages awarded to Merck after the latter covers its legal expenses, as well as 20 percent of all future payments.

Sovaldi was approved by the FDA in 2013 for the treatment of hepatitis C in patients with genotypes 1, 2, 3 or 4, while Harvoni was cleared in the US for genotype 1 hepatitis C virus infection the following year. The indication for Harvoni was expanded last November to include genotypes 4, 5 and 6. Combined global sales for the drugs were $19.1 billion last year, including US revenue of $12.5 billion.

Meanwhile, Merck received FDA approval for its hepatitis C therapy Zepatier (elbasvir/grazoprevir) in January, with the company pricing the product at $54 600 for a 12-week course, putting it at a discount to Sovaldi and Harvoni, which are priced at about $84 000 and $94 500, respectively, for a typical course.

Commenting on the latest ruling, Bloomberg Intelligence analyst Asthika Goonewardene said "for Merck, it's half a win," adding "what they really want is to see [Zepatier] do well." RBC Capital Markets analysts Michael Yee and Judy Liu said while the verdict isn't optimal for Gilead, its big-picture impact will be small. The analysts noted that Gilead is expected to appeal, adding that it's significant that Merck is not seeking a court-ordered ban on sales of Gilead products that allegedly infringe its patents.

For related analysis, see ViewPoints: Gilead's (interim) loss in HCV patent case will do little to quell calls for M&A

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