Neurontin 1: Interim Status Report

Introduction. Neurontin, is Pfizer’s (formerly Warner-Lambert’s) $ 2 billion a year FDA-approved epilepsy medication.  Warner Lambert’s first generation patents have expired. These patents claimed

(a)   Neurontin’s active ingredient (known as “gabapentin”); and,

(b)  Gabapentin’s use for treating epilepsy.

Pfizer obtained a second generation of patents which include claims for the use of gabapentin to treat neurodegenrative diseases including stroke, Alzheimer’s, Parkinson’s, Huntington’s and amyotropic lateral sclerosis diseases.

(c)   Although the FDA has not approved these treatments, the off-label treatments account for 78% of Neurontin sales.

(d)  Pfizer is using its the second generation patents to block generic competitors, who have filed ANDA’s to launch generic gabapentin as a treatment for epilepsy

(e)   If gabapentin is sold as a generic epilepsy medication, doctors can prescribe it to target the entire Neurontin market.Our preliminary view is that Pfizer is at least 2 years away from generic competition to Neurontin.

The Patents

The Litigation

The lawsuits originally filed in 1998, are pending in two forums against Purepac/Faulding (the first NDA filer and the potential beneficiary of 180-day generic exclusivity), Apotex/TorPharm, Teva, Geneva, Zenith Goldline/IVAX, Danbury, Eon, ESI, Lederle and Watson.

1- The case currently on appeal (#02-1073 in the Federal Circuit Court of Appeals in Washington, D.C  is known as “Warner-Lambert vs. Apotex”) is Pfizer’s appeal of a summary judgment in favor of Apotex from the Chicago federal court that ruled that Apotex’s gabapentin would not induce infringement of Pfizer’s second generation patent claiming various neurodegenrative diseases.

2- The case now in discovery  (# MDL-1384 in New Jersey known as “In re Gabapentin Patent Litigation”) is a consolidation of cases by the Judicial Panel on Multi-District Litigation originating from Illinois, New York, and New Jersey.

Status of Appellate Case

The trial judge held that there was no infringement of the ‘476 patent and 479. The issues with respect to the infringement of the ‘479 patent were:

1- The appropriate standard for determining whether Apotex/TorPharm would “induce infringement;”

2- Whether Apotex/Torpharm engaged in active steps to induce physicians to prescribe its generic gabapentin for patented off label treatments,

3-Whether Apotex/Torpharm executives even knew of the off label uses, and

4- Whether there were any issues of fact concerning such active steps and knowledge.

Verdict will review the appellate briefs when they are filed by the end of May, attend the oral argument and then supplement this memorandum.

Status of Trial Proceedings

Although all the generics are in the MDL cases, Apotex/Torpharm infringement case is limited to ‘482 patent. The other generics are sued for infringement of all three unexpired patents. The MDL Judge has denied Pfizer’s motions to dismiss the generics antitrust counterclaims and he has delayed ruling on several sealed motions for summary judgment filed by defendants. The period for fact discovery ends May 28, 2002. The parties have exchanged expert reports and the parties are currently deposing each others’ experts. The court has held no Markman judicial claim construction hearing.

Current Schedule for MDL cases:

1- A scheduling conference set for May 1, 2002 has been canceled and not yet rescheduled;

2- June 28, 2002 is the deadline for additional summary judgment motions but opposition and reply briefs will follow through the summer. Oral argument on the summary judgment motions and a final pre-trial conference is likely for the fall.

3. After the summary judgment motions are decided, the court must still decide whether to try the cases together in New Jersey, or return them to their original districts for trial.

4– The case could be tried late this year, but trial is more likely in early 2003.

1- Analysis Appellate Case:

Until we obtain and read the appeal briefs, Verdict cannot predict the outcome. However, based solely on the proceedings in open court on the September 13, 2001 trial court summary judgment decision, we make the following guess:

1- The Federal Circuit will reverse summary judgment for Apotex because it will find issues of material fact regarding Apotex’s intent and knowledge;

2- The Federal Circuit will remand to the Chicago court for further proceedings, and         3- After remand, the Chicago court will transfer the case to MDL consolidated cases, provided

• the MDL cases remain consolidated in New Jersey, and
• have not yet been tried when the appellate decision issues.

2- Analysis of Trial Proceedings

a) The ‘476 Patent–The ‘476 will not be a determinative factor in the case because it claims a specific crystalline form of gabapentin that Apotex has avoided infringing, so

i) The other defendants are likely to be able to avoid infringement as well, and           ii) The infringement issue is likely to be disposed of on summary judgment.

b) The ‘479 Patent—

1- We have seen no invalidity arguments with regard to the ‘479 patent.

2- Unless compelling invalidity arguments surface in motions not yet filed, this patent will survive summary judgment because there are factual issues to be tried regarding inducement to infringe. (This is the same reason Verdict guesses that the Federal Circuit is likely to reverse Apotex’s victorious summary judgment motion).

3- Assuming Verdict is correct that the issue (of whether the generics have “induced” infringement of‘479 patent) must be tried, then the issue is will the generics launch:

i) A decision to launch would be very risky because launching and losing could result in a finding of willful infringement and the award of treble damages. damages.

ii) Trial of the inducement to infringement issues will extend the case past the 30 month Hatch-Waxman period expiring early next year.

c) The ‘482 Patent:  The Judicial Panel for Multi-district Litigation consolidated the pre-trial proceedings in New Jersey in the belief that the validity of the ‘482 patent is the common issue to all the cases.  In truth, like the ‘476 patent, the ‘482 patent is so specific in claiming a particular manufacturing process that, more likely than not, its infringement will be clearly avoided by the defendants, perhaps on summary judgment.

d) Other Possible Patents: It is possible that Pfizer will obtain another new patent before the expiration of the 30-month Hatch-Waxman period early in 2003.   Pfizer has already benefited from two 30-month periods. The first 30-month period was about to expire in 2000 when Pfizer was issued the ‘482 patent on April 25, 2000. Another new patent could restart the 30-month clock for a third time.

Concluding Comments:

This case is difficult to call at this stage because:

1-The decision in the appellate case may or may not impact the MDL cases;

2- Much of the record is sealed; a

3- Briefs that will be available have not been filed;

4- There has been no judicial claim interpretation;

5- The decisive issue (inducement to infringe the ‘479 patent) is  based on the subjective intent and conduct of individual generic defendants.  Ultimately this fact issue depends on the credibility of the witnesses and no one can predict credibility until a witness testifies.

6- There may ultimately be a trial by jury:

i) Pfizer’s motion to strike Purepac’s jury demand has already been denied.                                                                                                                                                            ii) Purepac may choose not to demand a trial by jury (like one of the Prilosec defendants) but  the generics continues to have this unpredictable option.

7-The FTC investigations into the “abuse” of the Hatch-Waxman Act may limit Pfizer’s options.

Conversely, many of these factors of unpredictability suggest that Pfizer is unlikely to face generic competition until mid-2004. This conclusion is based on the following assumptions:

• Some  issue will survive summary judgment in the MDL and will be tried;
• No generic will launch without a victory at trial even if the second 30 month period expires;
• The MDL decision will be appealed;
• The generic companies will not launch during appeal;
• Decision on appeal will occur at least a year after the trial ends.