Lifecycle management – Allergan deploys an innovative patent law strategy to protect the intellectual property and extend the market exclusivity of its key asset, Restasis (Cyclosporine Ophthalmic Emulsion [COE]) 0.05%.
Industry precedent – The success of the innovative deal will cause other biotechnology and pharmaceutical companies to follow suit.
Inter partes review – Allergan’s controversial move will also spark action by the US Supreme Court to end the inter partes review system.
Allergan’s bold deal with the Saint Regis Mohawk Tribe will shore up revenue from its top-selling dry eye drug Restasis in the short term, but potential generic competition still threatens.
Pharmavitae Analytics expects Allergan’s recent deal with the Saint Regis Mohawk Tribe will prove successful in fending off generic competition to its market leading dry eye drug Restasis via the inter partes review (IPR) route. This precedent setting agreement for the pharmaceutical industry will protect Restasis’s intellectual property (IP) and boost Allergan’s revenue in the short term, but will have no impact on the pending federal Abbreviated New Drug Application (ANDA) patent litigations initiated by Allergan against its potential generic competitors.
Restasis remains Allergan’s second-biggest selling product behind Botox, as it continues to maintain a market leading position to treat dry eye. Pharmavitae Analytics predicts if Allergan also wins the pending federal court case, Restasis will reach peak sales of $1.64bn in 2023, but if it loses the federal case, generic entry could come in early 2019, with peak sales at $1.58bn in 2018 (Figure 1).
On 8 September 2017, Allergan announced that the Saint Regis Mohawk Tribe now owns all Orange Book-listed patents to its dry eye drug Restasis (COE) 0.05%, and that Allergan has been granted exclusive licenses in the patents (Allergan, 2017a). The deal will protect Allergan from the IPR process initiated by Mylan in June 2016, in which the validity of the Restasis patents are being scrutinized by the US Patent and Trademark Office Patent Trial and Appeal Board (PTAB).
Under the agreement, the Saint Regis Mohawk Tribe, a US recognized sovereign tribal government, will file a motion to dismiss the IPR of the Restasis patents based on its sovereign immunity from IPR challenge (Allergan, 2017a). The patents transferred to the tribe are due to expire on 27 August 2024 and include US Patent Numbers: 8,629,111; 8,633,162; 8,642,556; 8,648,048; 8,685,930; and 9,248,191 (Allergan, 2017a). The Saint Regis Mohawk Tribe deal will have no impact on the pending ANDA patent litigations concerning the Restasis patents in the US District Court in Marshall, Texas, US in which Allergan is the plaintiff (Allergan, 2017a).
Allergan chief executive officer Brent Saunders noted that "[t]he actions we've taken today with the tribe really allows us to focus on the defense of the Restasis patents in the federal court system under the Hatch-Waxman regime and essentially avoid the double jeopardy created by the upcoming IPR process" (Scrip, 2017).
Market exclusivity – Pharmavitae Analytics predicts that the tribe’s motion to dismiss the IPR of the Restasis patents will be successful based on its sovereign immunity and the prior Covidien versus University of Florida case in which the PTAB dismissed IPR proceedings against the University based on its claim of sovereign immunity as an arm of the state of Florida (Allergan, 2017a). This successful development for Allergan will ensure that the patents hold at least until the pending federal ANDA patent litigations are decided.
Financial impact – The deal itself is a financial benefit for the tribe and is of minimal transactional cost to Allergan. The tribe will receive $13.75m on execution of the agreement and $15m in annual royalties, as long as the patents remain valid (Allergan, 2017a). If Allergan also wins the pending federal court case and the Restasis patents hold until 27 March 2024, Pharmavitae Analytics forecasts that Restasis will reach peak sales of $1.64bn in 2023 (Figure 1). The upfront payment of $13.75m and ongoing annual royalties over this period will amount to less than 1.1% of this predicted revenue.
Figure 1 Restasis’s historical and forecasted total sales and annual growth rate with generic competition beginning in the first quarter of 2024, 2015–26
Vigorously defend the Restasis patents in the IPR proceedings initiated by Mylan
Allergan is aiming to defend its six Orange Book-listed Restasis patents covering Restasis from the IPR process. The company is acting on its previous promise to “pursue all legal options available to protect its… intellectual property rights for this product” (Allergan, 2016).
Foundational revenue stream – Restasis remains Allergan’s second-biggest selling product behind Botox as it continues to maintain a market leading position. Restasis’s sales reached $1.49bn, or 10.2% of Allergan’s revenue, in 2016 (Allergan, 2017b). Pharmavitae Analytics predicts that if Allergan also wins the pending federal court case, Restasis will reach peak sales of $1.64bn in 2023.
Share price confidence – The innovative deal will ensure Restasis’s revenue and boost Allergan’s market value in the short term.
There are numerous risks associated with the deal that will become clearer with time.
Outcome of motion to dismiss – Pharmavitae Analytics predicts that the tribe’s motion to dismiss the IPR proceedings for the Restasis patents will be successful based on its sovereign immunity and the outcome of the Covidien versus University of Florida case (Allergan, 2017a).
Investor perception – The aggressive move was positively received by investors, as Allergan’s stock rose 1.8% on announcement of the deal.
Financial burden – The transactional cost of the agreement to Allergan will be minimal. If Allergan also wins the pending federal court case and the Restasis patents hold until 27 March 2024, Pharmavitae Analytics forecasts that payments to the tribe will amount to less than 1.1% of Restasis’s revenue out to 2024 (Figure 1).
Implications for the Saint Regis Mohawk Tribe and other US sovereign entities
Pharmavitae Analytics expects that there will be no lack of interest from the Saint Regis Mohawk Tribe or other US sovereign entities in similar potential deals with Allergan or other biotechnology or pharmaceutical companies. The agreement is a win-win for the Saint Regis Mohawk Tribe, and the US recognized government of the Saint Regis Mohawk People is open to more deals of this nature in future. According to the Saint Regis Mohawk Tribal Council, the agreement with Allergan “is a viable and sound opportunity for the Saint Regis Mohawk Tribe to enter into the patent, technology and research sector as part of our overall economic diversification strategy” (Allergan, 2017a).
Implications for Allergan and the pharmaceutical industry
Pharmavitae Analytics predicts that Allergan will prevail over the IPR system with this licensing deal, and that other biotechnology and pharmaceutical companies with key late and/or commercial stage assets under imminent threat of IP challenge from potential generic competition through the IPR process, and with the available cash, will now investigate similar lifecycle management opportunities. Such companies include Pfizer for Prevnar 13 (pneumococcal 13-valent conjugate vaccine), Amgen for Enbrel (etanercept), Eli Lilly for Alimta (pemetrexed), and AbbVie for Humira (adalimumab). Allergan CEO Brent Saunders said the company could use the same approach with other patents and remarked that other companies may follow while IPR proceedings continue (Scrip, 2017).
Pharmavitae Analytics expects that the deal will be widely viewed by the public as an inappropriate use by Allergan of the sovereign immunity to invalidity of an independent entity that played no role in the development of Restasis. Pharmavitae Analytics anticipates that this public concern will accelerate the beginning of the end of the IPR process which is often maligned by the pharmaceutical industry. The US Supreme Court is already considering the fairness of the IPR system, given that patents are also challenged in the federal court system in the Oil States versus Greene’s Energy Group case (SCOTUSblog, 2017).
Allergan (2016) Allergan Comments on PTAB Decision Regarding Mylan's Petitions for Inter Partes Review (IPR) of RESTASIS® Patents. Available from: https://www.allergan.com/news/news/thomson-reuters/allergan-comments-on-ptab-decision-regarding-mylan [Accessed 12 September 2017].
Allergan (2017a) Allergan and Saint Regis Mohawk Tribe Announce Agreements Regarding RESTASIS® Patents. Available from: https://www.allergan.com/News/News/Thomson-Reuters/Allergan-and-Saint-Regis-Mohawk-Tribe-Announce-Agr [Accessed 12 September 2017].
Allergan (2017b) Allergan Reports Strong 2016 Finish with 7% Increase in GAAP Net Revenues to $3.9 Billion in Fourth Quarter 2016. Available from: https://www.allergan.com/investors/news/thomson-reuters/allergan-reports-strong-2016-finish-with-7-increas [Accessed 12 September 2017].
SCOTUSblog (2017) Oil States Energy Services, LLC v. Greene’s Energy Group, LLC. Available from: http://www.scotusblog.com/case-files/cases/oil-states-energy-services-llc-v-greenes-energy-group-llc/ [Accessed 12 September 2017].
Scrip (2017) Allergan Shifts Restasis Patents To Native American Tribe To Invoke Immunity From IPR. Available from: https://scrip.pharmamedtechbi.com/SC099455/Allergan-Shifts-Restasis-Patents-To-Native-American-Tribe-To-Invoke-Immunity-From-IPR [Accessed 12 September 2017]