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XOMA ARGUES IN COURT THAT E5 AND CENTOCOR's HA-1A ACT ON SAME BINDING SITE: CENTOCOR CALLS XOMA's PATENT "NARROW"; JURY TRIAL BEGINS JULY 15

Executive Summary

Xoma is arguing that its E5 gram negative sepsis monoclonal antibody-based product and Centocor's HA-1A (Centoxin) MAb product act on the same binding sites and therefore are both covered under a broad patent licensed to Xoma. In opening arguments in the Xoma v. Centocor patent dispute in San Francisco federal court, Xoma attorney Gerald Sobel (New York law firm Kaye, Scholer, Fierman, Hays & Handler) asserted that a study by David Benjamin, MD, University of Virginia Medical School, proves that E5 and HA-1A demonstrate "competitive inhibition." Explaining competitive inhibition to the jury, Sobel made an analogy to rubber-tipped darts fired at a wall: only one dart will be able to stick to a particular spot at a given time. If a second dart does not stick to the wall, Sobel continued, it is because it hit the first dart. Only two of the nine jurors in the technical biotech patent case hold four-year college degrees. Four of the jurors have no formal education beyond high school. Xoma is contending that if there is competitive inhibition between the two monoclonal antibodies for the treatment of septic shock, then Centocor would be infringing the use patent, i.e. the Young patent (#4,918,163; Lowell Young, MD, inventor; University of California at Berkeley, assignee) licensed to Xoma. Responding for Centocor, attorney Donald Dunner (D.C. law firm of Finnegan, Henderson, Farabow, Garrett & Dunner) questioned the validity of the Benjamin study, claiming that the test was conducted under narrowly constricted conditions. Dunner also maintained that the Benjamin study notwithstanding, there is no proof that the two drugs exhibit competitive inhibition. Xoma contends that Centocor's HA-1A infringes two of the seven claims in the Young patent. Those two claims cover the administration of a "therapeutically effective amount of an antilipid A region monoclonal antibody of the IgM isotype that competitively inhibits the binding of the monoclonal antibody by the cell line ATCC Accession No. HB9081." The two claims differ only in the region addressed by the antibody: claim 6 defines the region as "purified lipopolysaccharide from the JS mutant of E. coli as measured by an enzyme immunoassay or other competitive inhibition immunoassay," while claim 7 further specifies the region as "purified lipid A from the lipopolysaccharide." Otherwise, the two claims are identical. On July 17, Xoma dropped its claim 6 dispute in order to "concentrate" on claim 7 and "simplify" the proceedings. With claim 6 out of the case, Centocor's arguments can focus only on antibody binding occurring in the specific lipid A region of the antigen. Xoma may have dropped claim 6 as an argument because it was the less defensible of the two claims. The day before, Centocor counsel Dunner said: "I know of no evidence that there is competitive inhibition of E5 by HA-1A to satisfy the limitations of claim 6. And why claim 6 is still in this case, I don't really know." Since a lipopolysaccharide -- the subject of claim 6 -- is a large molecule made up in part of lipids, it would be harder to demonstrate competitive inhibition over the entire molecule. Competitive inhibition at the specific lipid is also competitive inhibition at the larger polysaccharide which contains the lipid, but the reverse is not true: an antibody might bind to the polysaccharide without binding at the specific lipid site mentioned in claim 7. During the trial, which began on July 15, Xoma and Centocor will be arguing their respective cases to the nine-member jury. The jury format of the trial will affect the complexity of the legal arguments. The previous major biotech patent case, Amgen v. Genetics Institute, was determined by a federal magistrate. Sobel described the Young patent '163 as broad, encompassing a wide range of monoclonal antibodies beyond E5. According to Sobel, Centocor's HA-1A falls within the patent's limits. Centocor's attorney, however, is questioning the validity of the Young patent, characterizing it as narrow and "nothing resembling a pioneer patent." Centocor is arguing that in order for Xoma's patent protection to extend to HA-1A, it would also have to extend to the prior art published in the field of gram negative bacterial infection research. Therefore, Centocor contends, two claims in the patent are overbroad and were improvidently issued. If the patent is valid, however, Centocor claims it only covers E5 "and its close cousins." Centocor plans to call to the stand Rene Tegtmeyer, a patent examiner with the U.S. Patent & Trademark Office who, Dunner says, will testify that had Xoma "claimed belief that there was competitive inhibition" between E5 and HA-1A, then the patent examiner "would not have issued claim 6 and 7 in this patent, and we would never be here today." Tegtmeyer was not an examiner for the '163 patent. Dunner maintained that the only specific assay defining competitive inhibition mentioned in the patent -- an enzyme immunoassay -- has not demonstrated competitive inhibition in tests performed by both Xoma and Centocor. Dunner said that other immunoassays only demonstrate competitive inhibition under very limited testing conditions. Centocor indicated that it will make much of the study of HA- 1A for the treatment of septic shock published in the Feb. 14 The New England Journal of Medicine. In a 100-patient subgroup, HA-1A significantly reduced mortality in patients already in shock ("The Pink Sheet" Apr. 23, 1990, p. 3). Dunner called the study "a key issue" of the trial. Xoma's attorney Sobel, however, said Centocor's emphasis on the HA-1A study results were "a digression" from the central issues involved in the patent case. In addition, Sobel called the study "sloppy," maintaining that "20%" of the patients in the trial "were enrolled in violation of Centocor's own rules" for the study and argued that the efficacy results were based on "a razor- thin margin." Sobel also highlighted what he called "the Amsterdam problem": all eight patients assigned to placebo in the Amsterdam portion of the study died. Sobel asserted that this group was "sicker" at the outset of the trial. "When you compare another group to 100% dead people," Sobel declared, "it's bound to look pretty damned good." Another major debate in the trial will concern two articles included in the list of prior research publications printed in the Young patient, which was issued April 17, 1990. Statutory construction of laws concerning patent issuance puts the onus of invalidating Young's patent on Centocor. Xoma, however, must convince the jury that Young's patented method was not an obvious extension of prior art. Centocor will argue that an article published by Elizabeth Ziegler, MD, University of California at San Diego School of Medicine, in November 1982 and a March 1985 article by Nelson Teng, MD/PhD, Stanford University School of Medicine, laid the technological groundwork for the disputed method of treatment, and that Young's method patent in particular is an obvious extension of Teng's work. Both Ziegler and Teng are scheduled to testify at the trial. Sobel said he will employ a statement made by Centocor's chief scientist, Director of Scientific Affairs Warren Bogard, MD, which, in Sobel's words, concedes that "in view of the Ziegler 1982 article, the achievement of a monoclonal antibody that would work in humans was not obvious." He will argue that Teng's article showed only that HA-1A "protected only mice. Not humans, only mice." He said this achievement was "old hat" in 1985, and moreover, that Teng's results could not be reproduced by Centocor scientists. Ziegler's article discusses the use of polyclonal antibodies in the treatment of gram negative infection and Teng's article makes reference to the use of MAbs to combat lipid A endotoxins. Centocor counsel Dunner offered an analogy for Teng's article: "If you described in a book a new tool, and how to make it, but you had never made it; and then I came along and decided to patent it, it would be certainly unseemly for me to sue you, with you having come up with the idea before me. And that's exactly what happened here." Absent from the opening arguments of both sides was any mention of Centocor's antitrust counterclaim against Xoma. Xoma filed a motion to bifurcate proceedings with regard to the claim and to stay any hearings on it until the infringement suit is decided. This motion was denied by Senior Federal Judge Robert Schnacke, and the claim will be decided by the jury. Mentioned only briefly was the dispute regarding the licensing arrangement for the patent. In Sobel's brief discussion of the licensing arrangement, he called Centocor's position "a convoluted theory under which Centocor says it was the recipient of an implied license to practice Dr. Young's patent." Under an arrangement between the University of California at Berkeley and Stanford, the cell-line, or hybridoma for HA-1A was transferred to Stanford where it was licensed to Centocor with an agreement that Centocor use its best efforts to commercialize it. UC-Berkeley also licensed Young's patent to Xoma; Centocor argues that this puts it in an "impossible position" of having invested $ 100 mil. in development and then, as Dunner put it, having Young's patent "used as a club" against them. The trial began with jury selection on July 15 and opening arguments on July 16. Addressing the jury, Judge Schnacke predicted that the trial will end in the second half of August "if all goes well." However, he also provided a "worst case scenario," whereby the trial could last into September. Both sides are forbidden to discuss the case pursuant to an opening day order from the judge.

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