Merck patents on Hepatitis C treatment found valid in Gilead dispute

SAN JOSE A federal jury on Tuesday upheld the validity of two Merck Co patents in a high-profile dispute with rival Gilead Sciences Inc, which could be forced to hand over a portion of the billions of dollars in revenue from its blockbuster cure for hepatitis C.

The verdict in federal court in San Jose, California, is a major setback for Gilead, whose drugs Sovaldi and Harvoni brought in $19.2 billion in worldwide sales last year. Merck has demanded more than $2 billion in damages and a royalty of 10 percent of Gilead’s sales going forward. The jury must now decide exactly how much Gilead owes.

Gilead shares were down $1.92 to $91.80 in after-hours trading. Merck rose 57 cents to $53.60.

In a statement, Gilead spokeswoman Michele Rest said, “Although we are disappointed by the jury’s verdict today, there are a number of remaining issues to be decided by the jury and the judge.”

A spokeswoman for Merck said the verdict “accurately reflects the evidence in this case,” adding that strong patent protection is essential to innovation.

The trial, which began on March 7, came as pharmaceutical companies race to capture a slice of the lucrative market for the newest hepatitis C treatments, which can cure well over 90 percent of patients with the liver disease.

Insurers, politicians and patient groups have denounced the list prices of the drugs. Harvoni, at $1,125 per pill before discounts, costs $94,000 for a 12-week regimen. In January, the U.S. Food and Drug Administration approved Merck’s Zepatier drug.

In 2013 Merck contacted Gilead saying the active ingredient in Gilead’s drugs, sofosbuvir, infringed Merck’s patents, according to court papers.

Foster City, California-based Gilead then asked the federal court in San Jose to declare the patents invalid, saying they do not clearly describe any disease fighting effects.

Merck, based in Kenilworth, New Jersey, counter sued for infringement, demanding 10 percent royalty on U.S. sales for all past and future sales, a figure Gilead called “outrageous.” Gilead has made $23 billion on the two drugs in the U.S. in 2014 and 2015.

Gilead said in court filings that Merck played no role in the discovery of sofosbuvir, but that when its breakthrough potential became clear, “Merck came knocking on Gilead’s door with its two patents in hand.”

Last month, U.S. District Judge Beth Labson Freeman ruled that the sale and use of Gilead’s drugs infringe Merck’s patents.

The case is Gilead Sciences, Inc v Merck Co, Inc, in the U.S. District Court for the Northern District of California, No. 13-cv-4057.

(Reporting by Rory Carroll in San Jose and Andrew Chung in New York; Editing by Alexia Garamfalvi and Chris Reese)

comments powered by Disqus