Regeneron Pharmaceuticals, Inc. (REGN) - Overview of Regeneron's Litigation Pertaining to its Eylea® Product.

On January 15, 2021, the United States Patent & Trademark Office’s (“USPTO”) Patent Trial & Appeal Board (“PTAB”) issued a Decision that DENIED Institution of a Petition for Inter Partes Review filed by Regeneron, Inc. (REGN) against a Patent Owned by Novartis (NVS).  In light of this development, this email provides an overview of Regeneron’s remaining outstanding litigation related to its Eylea® product and additionally provides our analysis on the importance of this litigation when valuing Regeneron’s potential future share-price.

According to Eylea.us, Eylea® (Aflibercept) is a 2mg eye injection medication used in the treatment of “… Wet Age-related Macular Degeneration (AMD), Macular Edema following Retinal Vein Occlusion (RVO), Diabetic Macular Edema (DME), and Diabetic Retinopathy (DR).”  Eylea was originally approved for the treatment of AMD on November 21, 2011.  Additional indications were subsequently approved with the indication for the treatment of Diabetic Retinopathy being approved on May 13, 2019.  Dosage seems to vary based on the condition; however, on average it appears that a single 2mg injection is provided once every two months (after the initial Loading Dose).  Please note that according to Regeneron’s Form 10-Q for the period ending September 30, 2020, Eylea sales in the US currently represent approximately 57% of Regeneron’s total revenue ($1,318.3 million net product sales in the US divided by $2,294 million total revenue).

It is worth noting that the Inter Partes Review and the ongoing litigation with Novartis (discussed further below) relates strictly to the administration of Eylea by using prefilled sterilized syringes.  Eylea was originally administered using vials, but was granted approval for administration using prefilled syringes on August 13, 2019 – and Sales of pre-filled syringes seems to have begun on December 6, 2019.  It now appears that approximately 75% of all of Regeneron’s Eylea® injections are administered using prefilled syringes, which replaces the traditional method of using vials (discussed on Regeneron’s Q1-2020 earnings call). 

(More information regarding potential biosimilars & other competitors on the drug itself is discussed following the information on Novartis’ litigation.) 

Please note that the ongoing Cases discussed below relate to Novartis’ U.S. Patent Number 9,220,631.  According to Claim 1 of the Patent, this invention relates to “A pre-filled, terminally sterilized syringe for intravitreal injection … .”  The Claims of the Patent appear to claim certain specifics with regards to the construction of the syringe to ensure that the sterilization and use of the syringe does not compromise the integrity/sterility of what is being injected.  The “Background Art” section of the Patent provides the following overview: “For small volume syringes, for example those for injections into the eye in which it is intended that about 0.1 ml or less of liquid is to be injected the sterilisation can pose difficulties that are not necessarily associated with larger syringes. Changes in pressure, internal or external to the syringe, can cause parts of the syringe to move unpredictably, which may alter sealing characteristics and potentially compromise sterility. Incorrect handling of the syringe can also pose risks to product sterility.  Furthermore, certain therapeutics such as biologic molecules are particularly sensitive to sterilisation, be it cold gas sterilisation, thermal sterilisation, or irradiation. Thus, a careful balancing act is required to ensure that while a suitable level of sterilisation is carried out, the syringe remains suitably sealed, such that the therapeutic is not compromised. Of course, the syringe must also remain easy to use, in that the force required to depress the plunger to administer the medicament must not be too high.  There is therefore a need for a new syringe construct which provides a robust seal for its content, but which maintains ease of use.”

Below is an overview the Cases that are currently pending between Novartis’ and Regeneron:

“Novartis Pharma AG et al v. Regeneron Pharmaceuticals, Inc.” (Investigation #337-TA-1207 at the International Trade Commission):

Novartis filed this this Investigation at the U.S. International Trade Commission (“ITC”) on June 19, 2020.  Novartis seeks a Limited Exclusion Order based on Regeneron’s proposed Infringement of Claims 1-6 and 11-26 of U.S. Patent Number 9,220,631 (which could block the importation of any infringing products into the United States) and a Cease & Desist Order (which could prohibit the Respondent from unlawful importation, sales, distribution, and/or transfer of any infringing products).  The Hearing in this Case is currently scheduled to be held April 19-23, 2021, and the Final Initial Determination is currently scheduled to be issued on July 29, 2021.  The Target Date for completion of this Investigation is currently November 29, 2021.  Given that this Case relates to “pre-filled syringes” rather than the specific compound in Eylea®, it’s worth considering Regeneron’s ability to work-around this Patent in the event that the International Trade Commission does find in Novartis’ favor and issues an Exclusion Order.  While we believe that additional work will need to be done to determine Patent specific workarounds, we wanted to point out that one study that was conducted on the use of pre-filled syringes vs. traditional vials found that the reduction in serious eye infections and the time to administer the drug was greatly improved when pre-filled syringes were used.  This may be a good indication (along with 75% of administrations of Eylea® being pre-filled syringes) that Regeneron may not simply switch back to using vials in the event of an Exclusion Order.

“Novartis Pharma AG et al v. Regeneron Pharmaceuticals, Inc.” (Case #20-00690 in the Northern District of New York):

Novartis filed this Patent Infringement Case against Regeneron in the Northern District of New York on June 19, 2020.  In its Complaint, Novartis’ alleges that Novartis’ Pre-filled Eylea® syringes (“Eylea PFS”) are Infringing Novartis’ U.S. Patent Number 9,220,631.  Novartis provides the following introduction in its Complaint: “Wet age-related macular degeneration (“Wet AMD”) is the leading cause of vision loss in individuals over 50. Drugs called vascular endothelial growth factor (“VEGF”)-antagonists can be used to treat Wet AMD and other devastating ophthalmic conditions, but must be injected into the eye by a physician. The injection itself carries a risk of complications including infection, inflammation, introduction of particles into the eye, and even potentially blindness. To address the problems associated with injection of VEGF-antagonists into the eye, Novartis scientists invented groundbreaking pre-filled, sterilized syringes that permit more safe, effective and efficient injections of VEGF-antagonists into the eye. These inventions are disclosed and claimed in the ’631 patent.”  Novartis seeks Treble Damages and a Permanent Injunction against Regeneron.  Please note that on July 30, 2020, the Court Granted an Unopposed Motion to Stay this Case Pending the Investigation at the U.S. International Trade Commission.

“Regeneron Pharmaceuticals Inc. v. Novartis Pharma AG et al” (Case #20-05502 in the Southern District of New York):

Regeneron filed this Case against Novartis and Vetter Pharma International (“Filler” of the pre-filled syringes – and appears to be a “co-exclusive” licensee to the ‘631 Patent) in the Southern District of New York on July 17, 2020.  In its Complaint, Regeneron alleges that the Defendants are in violation of Sections 1 and 2 of the Sherman Antitrust Act by unlawfully attempting to stop Regeneron from selling Eylea® in the United States.  Regeneron provides the following background in its Complaint: “Defendant Novartis developed and recently launched BEOVU® (brolucizumabdbll) injection (“BEOVU”), which competes against EYLEA to treat a certain eye disease. Novartis, together with Genentech, Inc. (“Genentech”), also co-developed LUCENTIS® (ranibizumab) injection (“LUCENTIS”), which competes against EYLEA to treat most of the same eye diseases. … Defendant Vetter is an essential supply chain provider of drug “filling” services and is the exclusive filler for Novartis’s LUCENTIS prefilled syringe (“PFS”) product. Upon information and belief, Vetter will be the filler for Novartis’s BEOVU PFS once it launches in the United States. Vetter also has a longstanding relationship with Regeneron, both as a filler for EYLEA vials and as a prior development partner for an EYLEA PFS. … Defendant Novartis, unwilling to compete on the clinical merits of LUCENTIS or BEOVU against EYLEA, has done everything in its power to try to stop EYLEA through anticompetitive means. BEOVU’s launch has been riddled with serious safety issues, and LUCENTIS is a less effective treatment than EYLEA for certain diabetic eye diseases and requires more frequent injections (per the FDA-approved label). Novartis has therefore resorted to various unlawful means, including the enforcement of a fraudulently procured United States patent and an anticompetitive licensing and settlement agreement with Vetter, all as part of a scheme to attempt to monopolize the market and/or unreasonably restrain competition for PFS ophthalmic drug treatments. Defendants’ purpose and intent throughout this scheme has been to prevent, deter, or at least delay the competitive launch of EYLEA PFS for years, to artificially inflate Regeneron’s costs of entry, and now to stop Regeneron altogether from competing in the U.S. market with EYLEA PFS. In addition to Regeneron, physicians and patients have been the victims of this scheme because Novartis’s and Vetter’s actions are aimed at limiting the availability of the most effective and convenient ophthalmic PFS drug treatment—EYLEA PFS.”  Regeneron primarily seeks an Injunction and Enhanced Damages.  Please note that the Defendants filed two “Motions to Dismiss for Failure to state a Claim” on October 19, 2020, and we are currently awaiting the scheduling of a Hearing or an Order on these Motions.

Given the background above, we currently believe that USPTO’s Denial of Institution on Regeneron’s Petition for Inter Partes Review challenging the ONLY patent at issue in these three Cases above appears to be of seemingly greater importance than was observed in the muted share-price reaction on January 19, 2021.  We believe that this opposite reaction could be the result of a host of factors, which includes Regeneron’s seemingly positive string of news related to COVID-19.  We also believe that it is worth noting that the PTAB’s Denial of Regeneron’s Petition was a “discretionary Denial” based on the ongoing proceedings in other jurisdictions.  The PTAB wrote the following in its Institution Decision:

“We agree with Patent Owner that the advanced stage of the ITC investigation weighs in its favor for this factor. The evidentiary hearing in the ITC Investigation is set for April 19, 2021, and the proceeding will reach a final determination on or before November 29, 2021. Our final written decision is due about two months later in January 2022. These facts weigh against institution.”

Lastly with regards to Novartis, it is worth reiterating that Novartis, in co-development with Genentech, markets LUCENTIS® pre-filled syringes, which competes directly with Eylea.  It appears that LUCENTIS® requires more frequent dosing than Eylea and may not be selling as well.  In addition, Novartis markets its own product, BEOVU® which does not yet appear to have approval by the FDA to be administered in the US with pre-filled syringes.  It also appears that BEOVU® may have been the subject of safety concerns in early 2020 as indicated by Novartis’ Press Release.

Finally, it may be worth pointing out an additional competitor that may have the opportunity to eventually enter the market and compete against Eylea®.  On January 7, 2021, Chengdu Kanghong Biotechnology Co., Ltd. filed two proceedings challenging Patents owned by Regeneron at the Patent Trial and Appeal Board (“PTAB”).  These are IPR2021-00402 and PGR2021-00035 challenging U.S. Patent Numbers 10,464,992 and 10,828,345 respectively.  While we have not yet had the opportunity to analyze these Petitions in depth, it is worth noting that the Petitioner writes the following in its Petition in PGR2021-00035:

“The ’345 patent is premised on the supposed “surprising discovery” that VEGF antagonists are effective with “less frequent dosing . . . compared to prior administration regimens for angiogenic eye disorders which require monthly administrations.” Regeneron was not the first to have this revelation. In a PCT application (“Shams”) filed more than six years and published almost five years earlier, Genentech described the same discovery: “It has been discovered that the treatment effects of a VEGF antagonist, e.g., Ranibizumab, are maintained for an extended period of time, such as more than one month.”

Given that these Petitions were filed on January 7, 2021, we currently expect a Decision on Institution to be issued on or around July 7, 2021, and a Final Written Decision (provided they are instituted) would be issued around July 7, 2022.  Chengdu’s product, Conbercept®, appears to still be in Phase-3 testing.  According to a December 2020 Press Release, Chengdu expects a global launch in 2023.

Taking everything together, we currently believe that although Regeneron’s Eylea® product appears to currently be the best selling treatment available in the US, it appears that Regeneron has a long bumpy road ahead of it with the above legal catalysts providing what we believe will be opportunities for enhanced volatility.  Given that these Cases are all relatively new, we currently plan on closely following and updating our thoughts as the situations progress.

Below is a brief summary of the key dates in the outstanding litigation:

At Any Time – Scheduling of a Hearing or an Order on the Motions to Dismiss in “Regeneron Pharmaceuticals Inc. v. Novartis Pharma AG et al” (Case #20-05502 in the Southern District of New York.

April 19 -23, 2021 – Hearing in “Novartis Pharma AG et al v. Regeneron Pharmaceuticals, Inc.” (Investigation #337-TA-1207 at the U.S. International Trade Commission).

Around July 7, 2021 - Institution Decisions in Chendu’s IPR2021-00402 and PGR2021-00035.

July 29, 2021 – Final Initial Determination (“ID”) in “Novartis Pharma AG, et al v. Regeneron Pharmaceuticals, Inc.” (Investigation #337-TA-1207 at the International Trade Commission).

November 29, 2021 – Target Date for Issuance of Final Determination (“FD”) in “Novartis Pharma AG, et al v. Regeneron Pharmaceuticals, Inc.” (Investigation #337-TA-1207 at the International Trade Commission). 

Around July 7, 2022 – Final Written Decisions (provided the Petitions are instituted) in Chendu’s IPR2021-00402 and PGR2021-00035.