Taxus Stent Launch by Boston Scientific to be Delayed
September 29, 2003
Final FDA approval for Boston Scientific’s Taxus stent is expected by year-end, but Johnson & Johnson has a motion for a preliminary injunction (that would block the stent’s launch) pending in a Delaware court. According to some of our investors, the current market price of BSX assumes the injunction will be denied, and Wall Street thinks that the probability of an injunction issuing is less than 10%. Although probability estimates can be misleading,1 Verdict for Investors believes that there is 60 or 70% probability that BSX will not be able to launch its Taxus stent during 2004. Even if the motion for preliminary injunction is denied, JNJ would probably ask for an expedited appeal and it is likely that the Federal Circuit would issue some form of interim relief before the FDA gives BSX final approval to launch the Taxus stent.
In another stent case, this trial judge (Sue Robinson) denied an injunction and announced her belief that public policy disfavors injunctions. The judge’s opinion in an earlier stent case said:
“the court is not inclined to enter injunctive relief on a preliminary basis in this or any similar case, given the public’s interest in a competitive medical device market, the inter related issues among the cases, the fact that none of the manufacturers have respected their competitors’ patents, and the fact that licenses have been granted under various…patents [so] there is no irreparable harm.” Scimed Life Systems, Inc. v Johnson & Johnson, 2001 WL652027 (Del. 2001).
Although the Taxus stent case presents similar policy issues, the procedural history of this case indicates that most judges would more be inclined to enjoin the Taxus stent than Wall Street currently thinks. The Federal Circuit issued an opinion in the Taxus case in late August but the appellate decision was issued after the evidentiary hearing was held on the injunction motion. Before the injunction hearing, the trial judge told Boston Scientific that it had to decide either to release the Taxus data to JNJ or to exclude it from consideration in the injunction hearing. Because Boston Scientific thought it could establish non-infringement under Judge’s Robinsons claims interpretation, Boston Scientific chose to withhold the data from the hearing.
After the hearing, the Federal Circuit reversed Robinson’s order granting Boston Scientific a new trial. Appellate reversals of orders granting new trials are very rare because trial judges normally given wide discretion to use new trials to correct “miscarriages of justice”. The curt tone of decision is unmistakable: the appellate court thought Judge Robinson’s definitions regarding the wall thickness of the stent strut were arbitrarily favorable to Boston Scientific.
Normally, preliminary injunctions in patent cases are granted approximately 20% of the time and Wall Street apparently handicaps the odds with Taxus at less than 10%. Verdict thinks the chances on an injunction issuing against Taxus are at least twice the norm: somewhere in the range of 40 to 60%.
The reversal was also significant because the new claims interpretation by the appellate court makes infringement far easier for JNJ to prove. The appellate court redefined the term “substantially uniformed wall thickness”, and JNJ now appears to have proved infringement. In its brief, Boston Scientific does a very poor job of arguing non- infringement under this new definition. Normally Boston Scientific would have to persuade the trial judge that it had established proof of probable non- infringement in order to convince the judge to deny the motion for preliminary injunction. Since Boston Scientific failed to carry this burden, JNJ’s chances for success on its motion for injunction should be higher than current Wall Street expectations.
The indented language (quoted above from an earlier opinion by Judge Robinson) is apparently the basis of Wall Street’s belief that the injunction will be denied. Because Boston Scientific relies primarily on public policy without making a plausible case for non-infringement, Verdict believes the probability for granting the injunction are significantly higher that current expectations.
From JNJ’s point of view, the argument that public policy favors Boston Scientific amounts to nothing more than a bias against the “ intellectual property rights” of the patent owner. The Federal Circuit has already reversed this judge in this case on a matter normally reserved for her discretion. The judge risks a second reversal in the same case if she denies the injunction, and JNJ can subtly suggest that her decision is based on bias.
Although no one can reliably predict how a judge’s publicly stated bias will affect any one decision, Verdict believes the threat of an appeal (implicitly contained in JNJ’s recent letter to the judge) and the probable issuance of some form of interim relief by the Federal Circuit are adequate reasons for the judge to grant the injunction. In addition, the judge may feel bound by her earlier ruling requiring Boston Scientific to either introduce the Taxus data at the injunction hearing or waive it.
If Judge Robinson denies the motion for the injunction, Verdict thinks the Federal Circuit will grant some form of relief that would delay the Taxus launch, but there is one way for the judge to protect Boston Scientific. JNJ cannot appeal until the judge rules. So if the judge delays her ruling on the injunction motion and does not issue a decision denying the injunction until after the FDA issues final approval on Taxus, then Boston Scientific could launch at risk before JNJ could ask for a stay pending appeal.