AMGEN FACES MARKETING OF CHUGAI-UPJOHN’s MAROGEN OR COURT INJUNCTION; CHUGAI AND AMGEN MUST CONSENT TO ROYALTY-FREE CROSS-LICENSING AGREEMENT

Amgen must take steps to allow Chugai-Upjohn to market its erythropoietin product Marogen in the U.S., Boston Federal Court Judge William Young ordered on March 14. Any Amgen "objections to Chugai's entry into the market in any other administrative proceeding" must be withdrawn within 60 days, Young ruled. Under the order, an injunction against Amgen would be stayed until completion of the appeals process, which could take up to a year. However, if Amgen refuses to withdraw opposition to Chugai entry into the market, Young said "60 days from today the permanent injunction entered against Amgen is in full force and effect." The threat of a permanent injunction is substantial: the court would require Amgen to remove Epogen from the market. The order paves the way for the market introduction of Chugai-Upjohn's Marogen, thereby ending the monopoly of the EPO market held by Amgen's Epogen. The Chugai-Upjohn product has been at FDA since September 1988. The only apparent delay to the product's approval is Amgen's orphan exclusivity. "The court determines that it is in the overriding interest of the public that there be as many capable and qualified sources of erythropoietin on the market as soon as possible," Judge Young declared. When asked by Chugai's counsel to clarify the intent of his order, Young said: "Interpret it as any obstacle to you coming on the market." In a memo submitted to Judge Young on March 13, Chugai's attorneys had argued that the court has the authority to require Amgen to forfeit its orphan exclusivity for Epogen. Chugai contended that Amgen could relinquish its orphan drug monopoly by providing its consent in writing to FDA. Chugai also argued that the court could enter a brief stay against Amgen "thereby compelling the FDA to find that Amgen can no longer assure the supply of sufficient quantities of EPO to meet the needs of patients." In a March 12 memo to the judge, Amgen argued that the court lacks power to order Amgen to take action before the FDA. Genetics Institute filed suit seeking a preliminary injunction against Amgen on Jan. 30 ("The Pink Sheet" Feb. 5, T&G-1), following a Boston court decision in December affirming the validity of both companies' EPO patient claims. Judge Young had met with attorneys from both companies several times in the past month in an effort to work out a settlement. The order reflects a sense of frustration with the previous settlement negotiations. Under the court order, Chugai and Genetics Institute must consent to a royalty-free, cross-licensing agreement within 30 days. Both companies have the right to appeal Young's decision within 30 days. However, Judge Young noted that "the licenses are only good for the length of the stay" of the injunction, which will terminate following an appeal decision. The judge is essentially staying an injunction against Amgen as long as it meets the requirements of the order, pending an appeal of the case. Although Genetics Institute would be content with a royalty-free cross-licensing agreement, Chugai has opposed such an agreement because it has maintained that it does not infringe Amgen's '008 patent. However the judge emphasized that the withdrawal of Amgen's opposition to Chugai coming onto the market "is provisional on Chugai's reciprocal tender of a royalty-free license." Young remarked that "if Chugai doesn't want to tender that license under the terms and conditions I've explained, which I can't force them to do, then of course Amgen doesn't have to withdraw its opposition and it nevertheless gets its stay." At the hearing, Chugai's attorneys were mostly concerned that damages for the period of the stay not be waived. The judge assured Chugai attorneys that he does "not intend that there be a waiver of the damages in view of the strong patent policy." Instead, Young said he intends "to serve the public good until rights have been adjudicated." The royalty-free agreement would eliminate the need, at the moment, for the companies to deposit sums in escrow pending an appeal. In his order, Young dissolved a preliminary injunction issued in February 1989 that required Amgen to deposit $21 mil. in an escrow account and Genetics Institute to deposit up to $15 mil, returning the monies to the companies within 30 days. "Thirty days gives you a chance to get another court to speak to this" Young said, adding that "there had to be a 30-day breather so that, if anyone thinks that I am way off base, you can try and get that modified." However, if Amgen and Genetics Institute/Chugai consent to the terms of the order, they will have 30 more days to work out the language of such an agreement. Amgen could appeal Young's decision on the grounds that the royalty-free cross-licensing agreement is temporary, and that the withdrawal of orphan exclusivity is an irreversible act. In its March 12 memo to the court, Amgen argued that a royalty-free agreement "is temporary relief because damages for the stay period will ultimately be payable after appeal, depending upon the outcome of the appeal." The surrendering of orphan exclusivity, Amgen asserted, would be "permanent and irreversible relief for Chugai, not temporary relief pending appeal, and it could be worth hundreds of millions of dollars." In addition, Amgen maintained that if the court enters an injunction that is stayed pending an appeal decision, as Young proposed, "the court's action will be grounded upon considerations of public interest, not upon Amgen's equitable position vis-a-vis Chugai." Amgen, in prior briefs, had argued that public interest was the foremost reason why an injunction should not be imposed by the court. Even if Amgen complies with Judge Young's order, the company still has a couple ways it could keep Chugai off the market in the future. The first is a biotech patient protection bill introduced in Congres last month by Reps. Boucher (D-Va.) and Moorhead (R-Calif.). The bill is designed to close the loophole in current trade law that allows a company to import biotechnology products made through the use of a U.S. patented component. Chugai uses Amgen's patented host cells to produce Marogen in Japan. Hearings on the bill could begin as early as this month ("The Pink Sheet" Feb. 12, T&G-2). The second way Amgen could exclude Chugai from the market, without orphan exclusivity, is if the Patent and Trademark Office issues the company's pending process patent. "It follows from Magistrate Saris' decision of priority ("The Pink Sheet" Dec. 18, p. 15) and other '008 validity issues that Amgen will inevitably prevail in the Patent Office interference proceedings which Chugai has used to keep Amgen's otherwise allowed rEPO process and product applications from issuing," the firm maintained. "When either of these patents finally issues, there can be no doubt that Chugai's sale of rEPO in the U.S. will be in violation of Amgen's patent rights," the company asserted. During the hearing, Young also issued a judgment affirming the Dec. 11 Boston court decision by Magistrate Patti Saris that upheld the validity of both Amgen and Genetic Institute's patents for erythropoietin. Young agreed with the magistrate that both Amgen and Genetics Institute infringe claims of each other's EPO patents. However, Young agreed with Saris' decision that Chugai does not infringe Amgen's patent by producing EPO in Japan.