FLC | Patent ruling against BARDA partner Moderna could affect COVID-19 vaccine

Patent ruling against BARDA partner Moderna could affect COVID-19 vaccine

July 24, 2020

Moderna, racing to develop a vaccine for COVID-19, lost a key patent decision on July 23, one that could delay the company’s progress or force it to hand over a cut of profits. The U.S. Patent and Trademark Office denied Moderna’s claim that a patent held by a rival company was invalid. The patent, which covers technology used to deliver messenger RNA treatments, is held by the Canadian firm Arbutus.

That sets up a situation in which Arbutus might file for an injunction that, if successful, would block Moderna from selling its Covid-19 vaccine, which is expected to enter a Phase 3 trial this month. It might also lead Moderna to negotiate a license agreement in exchange for royalties, which, if the company’s vaccine becomes the multibillion-dollar product Wall Street expects, could bring in hundreds of millions of dollars for Arbutus.

Moderna’s vaccine was the first coronavirus vaccine to be tested in humans, and has been funded in part by the Biomedical Advanced Research and Development Authority (BARDA).

Moderna’s share price fell about 10% on the patent news, losing roughly $3 billion in value. Arbutus, a small-cap company, nearly doubled.

In a statement, Moderna said it “may further pursue” the question of whether Arbutus’s patents are valid, adding that the company is “not aware of any significant intellectual property impediments for any products we intend to commercialize,” including its vaccine for Covid-19. Arbutus did not immediately respond to a request for comment.

Despite the outsize stock reaction, it’s unclear whether the ruling will apply to Moderna’s vaccine, said Madhu Kumar, an analyst at R.W. Baird who covers Arbutus. The patent in question relates to lipid nanoparticles, which are fatty molecular envelopes that help strands of mRNA evade the body’s biological gatekeepers and reach their target cells. Moderna’s mRNA drugs appear to rely on Arbutus-patented nanoparticles, but, based on what’s been published to date, there’s no “clear and convincing evidence” than the company’s Covid-19 vaccine does, too, Kumar said.

“The interesting thing now is the game of chicken that’s going to be played,” he said.

On the one side is Arbutus, which could sue to block Moderna’s vaccine, called mRNA-1273, in hopes of getting a royalty. But that would mean taking the substantial risk that it would be perceived as the company holding up a desperately needed medicine out of concern for its bottom line.

On the other side is Moderna, which could preemptively pay Arbutus for a license to the patent, knowing that its negotiating power is weakened considering the immediacy of mRNA-1273. Conversely the company could take its chances in court, betting that it can either win outright or negotiate for a modest royalty years down the road, once it has already established a revenue stream from the vaccine. But that risks being on the losing side of an injunction that would let Moderna’s many Covid-19 rivals get to the market first.

“In our view, this decision opens the door to a fascinating (and likely protracted) period of investor controversy and debate around the implications of any potential infringement of claims” from Arbutus by Moderna, SVB Leerink analyst Mani Foroohar wrote in a note to clients.

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What’s clear from the legal proceedings is that Moderna takes seriously the potential threat of Arbutus’s intellectual property. Thursday’s ruling concluded one of three patent challenges mounted by Moderna against Arbutus. The first, decided in September, was a unanimous victory for Moderna. The second was split between the two companies, invalidating some of Arbutus’s claims but leaving others be.

Moderna’s legal entanglement with Arbutus dates back to at least 2016, when the companies got into a proxy fight over the same intellectual property. Moderna got access to Arbutus’s nanoparticles by taking out a sublicense with a third firm, called Acuitas. Arbutus got wind of that and successfully sued to have Acuitas’s license revoked, leaving Moderna in the cold.

Moderna later said that it had invented lipid nanoparticles of its own and no longer needed Arbutus’s technology. Arbutus has maintained that nothing Moderna has patented is free of infringement.

The answer may yet be decided in court.