Merck Gilead Patent Trial 3/28/16

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1. Lawsuit Leaves Gilead With Barely a Scratch

   Mar 27, 2016 | The Wall Street Journal

   By Charley Grant
   
   
   Gilead Sciences has dodged one of the threats to its hepatitis C juggernaut.
2. Merck's $200M damages in Gilead hep C case falls far short of expectations

   Mar 28, 2016 | FiercePharma

   By By Tracy Staton
   
   
   Merck & Co. won a hepatitis C patent fight with Gilead Sciences last week, but if the jury's first damages award is any indication, the score could be much smaller than the $3 billion analysts had predicted at the high end.
3. Another look at news in the week to March 25

   Mar 28, 2016 | Pharma Letter

   By By Barbara Obstoj-Cardwell
   
   
   The Merck/Gilead verdict was mentioned in Pharma Letter’s weekly roundup of news. Relevant portions included below.
4. Gilead to Pay $200 Million to Merck for HCV Patent Dispute

   Mar 28, 2016 |

   By Zack
   
   
   Late last week, Gilead Sciences Inc. (GILD - Analyst Report) received disappointing news after a jury in the U.S. District Court, Northern District of California ordered the company to pay $200 million to Merck & Co. Inc. (MRK - Analyst Report) for the damages related to a patent infringement involving its hepatitis C virus (HCV) drugs.

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Client Attorney Privileged/Attorney Work Product/At Request of Counsel

Online Sources

1. Lawsuit Leaves Gilead With Barely a Scratch

   Mar 27, 2016 | The Wall Street Journal

   By Charley Grant

   Gilead Sciences has dodged one of the threats to its hepatitis C juggernaut.

   True, Gilead shares fell after the biotech company lost a legal challenge from Merck to patents surrounding its hepatitis C drugs Sovaldi and Harvoni last week. A federal jury ordered Gilead to pay Merck $200 million in damages.

   But the outcome, which Gilead plans to appeal, could have been far worse: Merck had asked for $2 billion in damages. A separate hearing will take place to decide whether Merck is entitled to a royalty on Gilead’s future sales.

   Investors worry the hepatitis C franchise has matured after generating cumulative sales of more than $30 billion. And those drugs accounted for 60% of Gilead’s 2015 sales. As such, Gilead trades at a significantly lower multiple of forward earnings than large biotech peers.

   The jury’s manageable award doesn’t eliminate those fears. But Gilead can cross one problem off its list.

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2. Merck's $200M damages in Gilead hep C case falls far short of expectations

   Mar 28, 2016 | FiercePharma

   By By Tracy Staton

   Merck & Co. won a hepatitis C patent fight with Gilead Sciences last week, but if the jury's first damages award is any indication, the score could be much smaller than the $3 billion analysts had predicted at the high end.

    The California jury awarded $200 million to Merck ($MRK) and its partner Ionis Pharmaceutical, covering what it considered a fair share of Gilead's ($GILD) sales for sofosbuvir-based drugs through Dec. 31, 2015. Hep C market-watchers know Gilead collected many billions of dollars after its sofosbuvir monotherapy, Sovaldi, launched in 2013, and even more after it rolled out the combo med Harvoni the next year.

    U.S. sales for the two drugs from launch through Dec. 31: $12 billion for Sovaldi and almost $11 billion for Harvoni. Together, more than $23 billion.

    Analysts had theorized a royalty for Merck of around 5%. At that level, the payment through Dec. 31 would have been $1.15 billion. Merck had asked for twice as much in its original demand to Gilead--10%, or $2.3 billion.

    But as Leerink Partners analyst Geoffrey Porges pointed out after the ruling, the jury factored out Gilead's R&D investment when figuring the damages. With Gilead's $11 billion deal for Pharmasset--bringing it sofosbuvir--and follow-up studies costing $7 billion, that left $5 billion. And the jury used a 4% royalty figure, less than analysts estimated.

    Next, the jury will deliberate payments for Merck going forward. If the panel follows its previous logic, Gilead's sales would be cut by ongoing R&D before applying any royalty. And the percentage after that could well be the 4% it previously used.

    That calculation--plus the promise of a years-long appeal process--puts Gilead in a strong position, Porges figures. Plus, the jury was as reasonable as a judge or appeals panel was likely to be, he said--which is always a question when juries take on pharma damages.

    "[T]he results are a positive for Gilead and a setback for Merck, with Gilead gaining considerable leverage should the two parties settle," he said in a note to investors. "Overall, this judgment was de minimis, and consistent with our original assessment that the impact was likely to be minor."

    Porges estimates the value of 4% royalties at 44 cents per share for Merck; combined with the $200 million in damages, the value would be 59 cents per share. Bernstein analyst Tim Anderson figured last week that a 5% royalty award going forward would boost Merck's earnings by about 4% over five years.

    In a statement about the ruling, Merck called it a victory for the patent-based system of rewarding pharma for R&D. "The jury's verdict upholds patent protections that are essential to the development of new medical treatments," the company said.

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3. Another look at news in the week to March 25

   Mar 28, 2016 | Pharma Letter

   By By Barbara Obstoj-Cardwell

    Gilead Sciences/Merck patent dispute

    Gilead Sciences received some unfortunate news early last week when competitors Merck & Co and Ionis Pharmaceuticals received a favorable ruling that allowed for the litigation to proceed on their patent dispute concerning the Gilead’ Sovaldi and Harvoni, both having sofosbuvir as an active ingredient.

    However, in the ruling on Thursday, the jury ordered Gilead to pay Merck $200 million for patent infringement over a drug compound that cures hepatitis C, just a tenth of the $2 billion that Merck had sought. After siding with Merck on all the patent claims, jurors rejected Merck’s bid for a 10% royalty on the $20.7 billion revenue that Gilead’s hepatitis C drugs generated from 2013 through 2015.

    In an emailed statement to The Pharma Letter, Gilead said: “Since Merck made no contribution and assumed none of the risk in the discovery and development of sofosbuvir, we do not believe Merck is entitled to any amount of damages. We continue to believe the Merck patents are invalid.  In the event the judge maintains the jury's verdict, we will appeal.”

    The jury verdict thus far is a setback for Gilead yet far from a crushing blow, writes Alexander Poulos on Seeking Alpha. Gilead decision to purchase Pharmasset the developer of sofosbuvir for $11 billion has more than paid off for them.

    Yes, Gilead did spend significant funds to bring the compound through Phase III trials yet the team at Gilead deserves the credit for bringing the compound forward, said Mr Poulos, noting that the purchase of Pharmasset and the commercialization of sofosbuvir is easily one of the best medical advances this decade

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4. Gilead to Pay $200 Million to Merck for HCV Patent Dispute

   Mar 28, 2016 |

   By Zack

   Late last week, Gilead Sciences Inc. (GILD - Analyst Report) received disappointing news after a jury in the U.S. District Court, Northern District of California ordered the company to pay $200 million to Merck & Co. Inc. (MRK - Analyst Report) for the damages related to a patent infringement involving its hepatitis C virus (HCV) drugs.

    The compensation for damages came on the heels of the jury’s decision early last week that ruled against Gilead in a patent dispute related to its sofosbuvir-based medicines for the treatment of HCV, including its blockbuster drugs, Sovaldi and Harvoni.

    The jury ruled in favor of Merck and Ionis Pharmaceuticals, Inc. (IONS - Snapshot Report), thereby upholding the validity of the two patents. With Merck and Ionis being co-inventors on the disputed patents, Ionis is eligible to receive 20% of the damages awarded to Merck.

    Though the jury’s order was a huge boost for Merck, the amount of damages fell significantly short of what the company had expected. In fact, Merck had asked for damages amounting to 10% from sales of the two drugs in the U.S. from 2013 through the end of 2015, which totaled a staggering $23.1 billion.

    Gilead, on the other hand, plans to appeal to the decision if the judge upholds the jury's verdict. Meanwhile, the Court will hold a separate hearing to consider royalties owed by Gilead on sales beginning Jan 1, 2016.

    We note that Merck has been looking to capture a share in the highly lucrative HCV market. In January, the company gained FDA approval for its HCV drug, Zepatier. Since HCV drugs like Sovaldi, Harvoni and Viekira all come with premium price tags, Merck took the HCV market by surprise by setting a lower list price for Zepatier.

    Currently, Gilead is a Zacks Rank #2 (Buy) stock. Actelion Ltd. (ALIOF - Snapshot Report) is another favorably ranked stock in the health care sector, sporting a Zacks Rank #1 (Strong Buy).

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