Value returns to The Medicines Company with court decision

The Medicines Company got yet another reprieve on Angiomax as a court yesterday extended the life of the much-disputed US patent on the anti-coagulant. The district court’s insistence that the US Patent and Trademark Office (USPTO) is misinterpreting deadlines for filing patent term extensions suggests that this legal wrangle is likely to continue, extending the current patent protections and boosting TMC’s bottom line (Court ruling sparks share rally for The Medicines Company, March 17, 2010).

TMC shares surged 34% to $12.47 on news of the decision to an 18-month high, demonstrating how important the Angiomax patent is to the New Jersey company’s fortunes. With Angiomax constituting nearly all of its sales this year and comparatively small forecasts for its remaining marketed and pipeline products, every day TMC can extend the Angiomax patent past the currently estimated expiration of November 23 is welcome extra revenue.

Short term, long term

A response from the USPTO could be swift, given it took just 65 hours in March to reject TMC's third appeal that it had indeed submitted a timely request in 2001 to extend the key '404 patent by five years (EP Vantage Interview – Medicines Company vows to carry on fighting patent decision, March 24, 2010). But from a longer-term standpoint, the court’s decision suggests that TMC may gain precious months or years of protection as it seems the legal wranglings will end up being fought out in appellate courts.

A best-case scenario for the company would be no generic competition until mid-2015, which includes the granting of patent term extension until December 2014 and six months of pediatric exclusivity. As seen in the table below, this would more than double the net present value of the drug for TMC, according to EvaluatePharma’s NPV Analyzer. This is massively important to a company that had a big setback with a phase III failure for cangrelor at the end of last year (Medicines Company tries to look on the bright side, November 16, 2009).

Angiomax NPV model
Current Extended Change
Patent expiry   23-Nov-10  15-Jun-15
Peak sales WW  $404m  $595m  +$191m
NPV (after tax)  $486m  $1.07bn  +$586m
NPV Per Share  $9.13   $20.14  +121%
Share price  $12.47  $24.19  +94%
Market cap  $702m  $1.29bn  +$586m
Share price date  3-Aug-10

Furthermore, the market cap increases 83% under a mid-June 2015 scenario. Tuesday’s closing share price of $12.47 suggests that investors have not gone all-in on TMC, and that there is plenty of room for it to climb should the company continue to get good news.

Analysts from RBC estimate a worst-case scenario is now a generic launch in 2011 or 2012, and have pencilled in a 12-month price target of $16. So far, Teva, Hospira and Fresenius, through APP, have filed abbreviated new drug applications to sell generic Angiomax.

How do you define 'day'?

The decision in the District Court for the Eastern District of Virginia hinged on the USPTO’s interpretation of deadlines for filing patent term extensions, a vital part of protecting pharmaceutical products. The USPTO ruled that TMC was a day late when it applied for the extension on February 14, 2001, but TMC argued successfully that since it received FDA notice of the Angiomax approval at 6:17 p.m. on Friday Dec. 15, 2000, the actual date of approval was the following Monday and therefore the 60-day clock started then.

The failure to file a patent term extension meant a March 23, 2010, patent expiry. The legal merry-go-round with the federal courts and USPTO has until now stretched the expiry by two months to May 23, with six-months paediatric exclusivity extending that to November 23.

For a company with as thin a pipeline as TMC has, every day a patent on a leading product can be extended is worth vital revenue, particularly if it is looking to develop new products. TMC is currently attempting to sue the USPTO, the FDA and the US Department of Health and Human Services, no less, over this issue. Its legal strategy – to run out the clock – has become clear.

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