Keryx, Zerenex And IP Protection: A PropThink Conference Call

On April 11, PropThink hosted an Interview and Q&A (via conference call) for PropThink subscribers with Dr. Scott Chambers, a leading patent attorney and former staff at the USPTO. The conference call centered around Keryx Biopharmaceuticals (NASDAQ:KERX) and its lead drug candidate, Zerenex, which has come under scrutiny as questions have arisen about the drug's existing intellectual property. Through this call, Dr. Chambers explained in detail his findings having looked at Zerenex's existing patent estate, particularly in relation to Zerenex obtaining a Patent Term Extension and the strength of the drug's overall IP. To read PropThink's previous coverage of Keryx Biopharmaceuticals, click here.

David: Welcome to PropThink's first Expert Call. We're here to go over the intellectual property position on Zerenex. As most of you know, Zerenex is Keryx Biopharmaceutical's product candidate designed to bind phosphate in patients with end-stage renal disease, with the dual benefit of sparing the use of IV iron and Epogen in patients undergoing dialysis. I'm David Moskowitz, equity analyst and advisor to PropThink, and I'm pleased to have with me today Dr. Scott Chambers, our intellectual property expert for the call. Dr. Chambers has headed the intellectual property practice at Patton Boggs and has served at the US Patent and Trade office as Assistant Solicitor. The use of PropThink's research and analysis is at your own risk. Investors should do their diligence before making any investment decisions with respect to securities covered in this call. As disclosed in our previous articles, PropThink has taken a long position in Keryx. PropThink LLC is not registered as an investment advisor, and to the best of our knowledge and belief, all information on this call is accurate and reliable. Also I mentioned that Dr. Chambers was a paid consultant by PropThink, and he was paid to conduct his own independent due diligence on the subject matter of today's call. Our conversation with Dr. Chambers will be split into two parts: one focused on the potential patent term extension for Zerenex, and the other on the longer-term patent protection on the drug. We'll give participants a chance to ask Dr. Chambers a few questions during the call.

So with that, we're going to get started. Scott, welcome to the call, thanks for joining us.

Scott: Thank you David.

David: Alright, just to get started, could you please go over your background for the benefit of the participants?

Scott: Sure. First I'd like to say that the primary purpose of the call as I see it is to highlight certain facts relevant of the discussion of Keryx's patent portfolio. Neither I, nor my firm, can or do predict the outcome of any patent term extension decisions by the US Patent and Trademark Office or of the FDA, nor can this copy be relied upon by any third party as a substitute for any independent due diligence on potential patent term extensions by Keryx, or for due diligence on their patent portfolio. I'm not an FDA lawyer and I will not be addressing NCE status, but I've been hired by PropThink to explain certain issues regarding the Hatch-Waxman Act. In terms of my background, I have a doctorate in Life Sciences. I was a senior staff fellow at the NIH. After being offered a faculty position at a Research Institution, I decided to leave research and was offered a position at Patent and Trademark Office as a Patent examiner in the life sciences area. Shortly after taking that position, the Patent and Trademark Offices, or the PTO, offered me a chance to go to a law school, which I accepted. After finishing law school, I was offered a clerkship at the Court of Appeals for the Federal Circuit for Judge Rader who's now Chief Judge Rader. So Federal Circuit is the court that all patent cases go to, and it's also the court whose precedent the Patent and Trademark Office must follow. When I was ready to leave the Federal Circuit, PTO made me an offer I couldn't refuse. They indicated that if I'd come back to the solicitor's office, they would let me take any case I wanted to the District Court or Federal Circuit and I took that offer and so then the next five years any chemical, biotechnology, or medical device case that was appealed from the agency was either argued by me or I was addressing it in the briefing. Now while an Associate Solicitor, part of my portfolio was working with the FDA and handling issues that arose from patent term extensions under the Hatch-Waxman Act. I am now on private practice as the Head of the IP section at Patton Boggs. My work involves a good deal of litigation, due diligence, counseling, and some Patton prosecution. I put in a number of hours in due diligence looking at the portfolio for Keryx Biopharmaceuticals, and I've reviewed the case law that would be pertinent in this area and I'm able to answer some of the questions.

David: Okay great, thanks. So wanted to ask you a little bit about due diligence on the IP package on Zerenex which you just talked about. And also just to start the call, what is your overall opinion on the strength of the drug's patent protection?

Scott: I think that Keryx has a number of patents in their portfolio that protect different aspects. I would advise a client that it looks like it's been well done in terms of garnering protection. It's got protection for the method of use, as well as for the important forms that would be able to be used in that particular area and from what I've seen, I'm pretty happy with what they've done.

I would advise the client that there's a high probability that, in my view, this would be able to be maintained and keep a generic competitor off the market.

David: Can you briefly review the key Zerenex patents that we're gonna talk about today?

Scott: Well Keryx has a number of different patents that address ferric citrate. Keryx's ferric citrate is named -- my understanding, is named Zerenex, and it's used for dialysis patients or pre-dialysis patients and patents give a range of protections. The earliest one I'm aware of is the 706 patent, which is a method of use patent to control phosphate retention. Other patent forms or other patents address forms of ferric citrate is the dissolution or dissolution profile that would permit better patient compliance and efficacy such as the 423 patent and the 298 patent and the 647 patent, which address surface area and size. The patent also in their portfolio address methods of manufacturing, it's my understanding that they've had some unexpectedly good results from the testing of the drug and that they have applied for protection for some of those aspects.

David: So let's focus on that 706 patent that you said, the earlier patent. That patent is considered to be very strong even by the skeptics on the intellectual property; however the patent is set to expire in 2017. So is this the patent that you would choose for Keryx to apply for patent term extension should the company do that, and what are the benefits of this patent term extension?

Scott: This patent has not been extended under the Hatch-Waxman Act and so it is a patent that, given the requirements, would appear to be able to be extended. This is one that is a strong patent because under the FDA, the FDA is going to tell a drug provider how something is going to be used. This patent -- the use of this particular drug. So this would seem to be a strong patent to extend.

David: Okay and so would this be the one out of the portfolio that you'd choose? And again, what is the benefit of getting patent term extension on this particular patent?

Scott: I would definitely advise the client that this is the one that they would want to extend. The patent term extension can be -- they can be for up to five years, and they can be anything that would end up giving 14 years or less of patent protection. Some of the other patents that are in play may well give more than 14 years, and so I would definitely think that this would be the one that they would want to extend. Patent term extension would preclude a generic from producing the same component or the same product and using that product or getting regulatory -- marketing actually, that particular product in the United States.

David: Alright, so given your experience at the Patent and Trade Office, can you just step back for a moment and walk us through the process of a patent term extension review?

Scott: Sure. What happens is that within 60 days of approval, the patent applicant has asked to move forward and ask the Patent and Trademark Office for an extension of the patent term. Section 156 of title 35 gives the requirements. I think the most important requirement is 15685, which says "the permission of commercial marketing or use of the product after such regulatory review period is the first permitted commercial marketing under the provisions of law under which such regulatory review period occurred." What would happen is that the applicant would apply for this, the Patent and Trademark Office would review the application for patent term extension, decide if it met the formal requirements, and then they would send it over to the FDA because the FDA has certain records, such as when approval was granted and the length of the regulatory review. The FDA would respond to the Patent and Trademark Office and then the Patent and Trademark Office, before they would grant a certificate, would send back and separately ask the FDA to make a determination of how long the regulatory review period should be.

The FDA at that point will indicate to the Patent and Trademark Office, and they will also publish the length of time they believe the extension should go for in the Federal Register, allowing anyone who has any questions to come forward; and from there, they would -- if no one comes forward, they would then, the Patent and Trademark Office would issue a certificate of extension.

David: Okay. In your opinion, how long could this patent be extended? It's set to expire in 2017. If this patent term extension was granted, how many years extra would it be granted?

Scott: Well, it would not be susceptible to that the 14-year bar that I mentioned earlier. It would be extendable for up to five years, and it's my understanding that the regulatory review period has lasted far longer than five years so there's a good chance to get the maximum.

David: So going from 2017 to 2022 is possible?

Scott: Yes.

David: Alright, so let's get into the arguments that are being made against Keryx's ability to get patent term extension. So Zerenex is a simple compound; it's ferric citrate, pretty easy to make, and the first argument made against the patent term extension involves a compound called ferric ammonium citrate. A paid service that reviews intellectual property issued a report stating that Zerenex may be ineligible for patent term extension because ferric ammonium citrate was approved by the FDA and closely resembles to Zerenex. As a former patent examiner that evaluated patent term extensions, what are your thoughts on this argument?

Scott: I don't agree with the argument. I mean, ferric ammonium citrate is an entirely different chemical from a ferric citrate. The Hatch-Waxman patent term extension provisions are very specific, and the fact that perhaps one group might believe that ferric ammonium citrate somehow resembles ferric citrate isn't really relevant. Instead, the precise wording of the statute is relevant and under case law that is binding on the Patent and Trademark Office, the terms "product" and "active ingredient" have been construed in the past. I would also like to say that while ferric citrate may appear to be a simple compound, in fact, some the patents that are issued in the portfolio, or some of the patents that are in the portfolio, talk about a different way -- an un-obvious way -- of making that particular product so that it can be used in this pharmaceutical method.

David: Okay, so you're saying that the ferric citrate that Keryx has is somewhat different or substantially different than simple ferric citrate that exists elsewhere?

Scott: It would be different than what you would normally find in a bottle in the laboratory.

David: So going back to the statutes of patent term extension. Are there case precedents on drug salts -- so I guess the ferric ammonium citrate and ferric citrate are two salts -- and so the argument being made about these compounds being similar is about being drug salts. So are there case precedents on drug salts and prior patent term extension decisions that address this ferric ammonium citrate argument?

Scott: Yes I think that there are at least three cases that are very important to looking at this. The earliest one is the Glaxo versus Quigg case, and that's from 1990. And in that particular case, the Federal Circuit reversed the PTO's decision not to grant a patent term extension. The Federal Circuit pointed out quite clearly that the term "product" in the patent term extension statute is not synonymous with "new chemical entity or NCE" that the Patent and Trademark had attempted to argue. That was binding precedent on the Patent and Trademark Office. And then there was some question in the later case -- the Pfizer versus Dr. Reddy -- case whether the Glaxo case was good law. That was subsequently challenged by the Patent and Trademark Office in the Photocure case, which was relatively recent, and in the Photocure case, the Federal Circuit pointed out that there was no problem with the construction found in Dr. Reddy and that found in Glaxo, and it also found that the patent term extension was proper in the Photocure case. In the Photocure case, there was a salt that was trying to get an extension, and another salt had been already approved and was already in use. In the Glaxo case, it was, a salt had been used and approved for use, but the one they were trying to get the patent term extension on was an ester. So in fact, these seem to be on point with what we're talking about now.

David: Okay, just to review that: the GSK and the Photocure case, and the Pfizer versus Dr. Reddy cases that you mentioned, are you saying that they support patent term extension for Zerenex?

Scott: Well certainly the Glaxo case and the Photocure case would seem to support granting an extension. The Pfizer versus Dr. Reddy case would seem to be irrelevant to the case, to the issue.

David: And based on your interaction with the Patent and Trade Office, can you talk about a little bit about your interaction with the Patent and Trade Office? Do you think the reviewers there have a heightened awareness with these cases when it comes to request for patent term extension for drug salts by Zerenex?

Scott: Yes, having been in the agency, I can assure you that the agency is very sensitive when they've gotten reversed; they're very sensitive to making sure they get the statute right; and when the court has gone out of its way to set the precedent and indicate that their interpretation was wrong, the Patent and Trademark Office is very quick to appreciate that and to move in the direction of getting it right. They would be definitely considering these cases when they were looking at the patent term extension, and generally speaking, it's the viewpoint of the agency to grant a patent term extension when that patent satisfies the requirements of 156 -- title 35 156A.

David: Okay, excellent. So let's go into the other argument of Zerenex for obtaining patent term extension. This one involves older versions of ferric citrate that were once allowed by the FDA to be sold. When these formulation were removed from the market by the FDA due to new safety and efficacy regulations in the 1962 Kefauver Harris Amendment, and afterwards these products were pulled from the market. The FDA actually took them off the market. And since those new rules and regulations come out, no ferric citrate formulations have been approved under the new rules. So again, what are your thoughts here? There are these older versions of ferric citrate, they were allowed by the FDA, we think they were food additives; does that worry you in terms of Zerenex being eligible for patent term extension?

Scott: That certainly is something that you'd want to consider, but remember under 156, the patent term is going to be granted unless the same product was approved under the same section of the Food, Drug and Cosmetic Act. These items that you're describing, I don't believe that they have been approved under the section that this product would be moving under, and if they are, they're certainly not out there now. I don't think I would be too -- I would certainly give this some thought, I don't think that this is gonna be controlling.

David: So it's basically if these formulations were approved under the same section. Now, given that these safety and efficacy regulations came out after these drugs were approved or allowed by the FDA and no formulations have been approved since, would you think that they were approved under the same section, or is that unlikely?

Scott: Certainly there would be an argument either way, but my belief is that these were not approved under the same section, otherwise they'd still be for sale.

David: And there's another point by the skeptics. A brand called Ferriseltz, which is actually a brand of ferric ammonium citrate, was rejected for patent term extension, and there are some that think this is a risk for Zerenex getting patent term extension. However in this case, there were two ferric ammonium citrate formulations already approved under the new safety and efficacy regulations before the company with Ferriseltz applied for patent term extension. So what are your thoughts about this precedent, what does it suggest for Zerenex and potential for patent term extension?

Scott: I don't see how that has actual bearing on the question before us. This is an entirely different salt. Two salts, or at least one salt was already approved, and they came in with request for an extension on the identical salt. And looking at section 156's requirements, I would see that that would not be something that would be approved, but I don't see that it has any bearing on whether ferric citrate, an entirely different salt that has not previously been approved, would be extended.

David: Okay, so I'm just gonna ask you: if you're back on the Patent and Trademark Office, you're evaluating Zerenex for PTE, patent term extension, are you worried about ferric ammonium citrate, are you worried about these other former compounds that were out there? Would you grant patent term extension on this compound?

Scott: I'm not worried that the ferric ammonium citrate would present a problem, given the record that I've seen; I don't see a problem with getting an extension on ferric citrate. If I was at the Patent and Trademark Office I would advise the Commissioner, who is now the Director, that patent term extension should be granted.

David: What is the orientation of the Patent and Trade Office in terms of burden of proof: Which direction is it? Do you have to prove that it deserves patent term extension, or the other way around?

Scott: Well you certainly have to prove that it satisfies 156A. You have to come in when you ask for the extension, you will say that it satisfied these five criteria. And at that point, the burden would shift to the Patent and Trademark Office to show why you didn't really satisfy those. So I would say that once you've put in your patent term extension request, it becomes the burden of, going forward, the Patent and Trademark Office to show a reason why you shouldn't get it.

David: Excellent. Let's move on beyond 706 patents and the potential of patent term extension. Let's talk briefly about the company's other long-term Zerenex patents. So there are four patents that protect Zerenex to 2024, and they're based on intrinsic dissolution rates and surface area claims. The company claims that the 2024 family of patents, these four patents, protect Zerenex API -- that's the active pharmaceutical ingredient -- it's kind of the powder you have before you compress the tablets. So Scott can you give your opinion on these patents and whether or not you think they'll be effective in keeping generics off the market through the mid-2024 time frame?

Scott: Well, yes I can. Looking at these patents, they go to whether or not you can produce the particular form that has these unusual results in the test trials. If you cannot come up with a way to obtain these unusual results then you're going to have trouble getting on the market because you're also going to develop problems with compliance. In the case of a pill that you have to take many times a day or multiple times. You'll have compliance issues, even if you're able to take this and even if you satisfy the compliance, it may not work the same because it's going to have different surface area and dissolution profiles in the body and the generic may well have to do additional testing to show that this would end up decreasing the amount of phosphate in the system. And what I like about these other patents that are out there is that if you are looking at it from an enforcement standpoint -- that is a Paragraph IV litigation or something going to that type of, keeping a generic off the market, then you find that there's a much easier proof of infringement, because it's pretty easy to show how one of these things are, how a component would infringe a particular patent if the patent is going to the dissolution rate.

David: So it's the dissolution rate, it's the specifics of that and the specifics of the surface area...

Scott: The surface area seems to have an effect on how this would be used by the body or the results that the body would provide would come from the use of it, so absolutely.

David: Turning to another point here. In clinical trials for IV irons, oral irons were used in these trials as control groups. And in these trials, no orals irons have ever shown a meaningful change in the iron stores like Zerenex; and these would be changes in TSAT and ferritin, and also hemoglobin levels. So does that have any bearing on the defense of Zerenex's intellectual property?

Scott: Yes, it well could. When you are in litigation, or when somebody is challenging intellectual property, they can say that something is obvious in view of what was done in the past. When you have something that has unexpected properties and has satisfied, perhaps, a long-felt need, those are indicia of non-obviousness so that even if someone were able to somehow craft an argument that, "Gee, this is obvious in view of some study that was done at an earlier date," they would have difficulty showing that that rendered the compositions or the methods of use obvious in view of the fact that you have this unexpected result.

David: Okay. So just back to the dissolution and surface area patents. Besides the fact that they really distinctly carve out what this product does, and the metrics that another product has to achieve, what else do you like about them from a defense standpoint?

Scott: I think that they work hand in hand, that they shore up each other, and so the dissolution rate is connected to the surface area. But if you found some other way to get a dissolution rate that was not within the claimed subject matter, you'd still have to worry about whether or not this dissolution rate was due to surface area, the effect of surface area, and vice versa. So, they go hand in hand in helping to protect the product.

David: So what I'm getting to is, in addition to these dissolution rates and surface area patents and working around them, how does that dovetail in with the effects of the drug? Would a generic company actually have to prove the effects of their drug as well? Would the generic company have to run trials?

Scott: In order to show that something is bioequivalent at the FDA, it's my understanding that they must show that it has a very similar effect. It would be very hard for something to have a similar effect if it had a different dissolution rate or different surface area. It would make it a little more difficult, and the FDA may well require more testing or more evidence.

David: Okay. Just quickly moving to the longer term potential patents here, Keryx's Phase III trials for Zerenex showed unanticipated effects for the drug, in particular Zerenex has enabled a 52 percent reduction in the need for IV iron, in dialysis patients, and also a 27 percent reduction in the need for erythropoietin stimulating agents, or ESA's, in dialysis patients. Really nobody expected these results to be this dramatic, the stock actually tripled on these results. So I guess the question is: are these results patentable, and how strong are these kinds of patents?

Scott: Well, I wouldn't say that the results per se are patentable, but what the results indicate is that there may well be something that's novel and non-obvious within what they're testing. So that points to something that's patentable. Now I haven't seen these results, other than the description that you've given, and I haven't seen any application. It's my understanding that they may well have provisionals or non-provisionals already on file, but the important thing to keep in mind is that if something has not been done before, that is if it's not anticipated, then it could still be attacked for being obvious. And when you have such unexpected results that makes it less likely that someone would be able to prove that the particular composition or the method of use was actually obvious. I mean, when you have some unanticipated results that's an indicia of non-obviousness. In addition this sort of points to what I had mentioned before: a long felt need, which is another aspect of a non-obviousness. So I think that that would make it likely that you would be able to find some sort of intellectual property involved in that, that you could get protection with.

David: As an attorney, assuming that there was a case where you were advising Keryx, are you excited about these unanticipated results? If you were advising a company that got results like this, is this good to cross your desk?

Scott: Absolutely, it makes the job of prosecuting a patent and getting intellectual property protection that much easier, because examiners, once they see unexpected results, they have a different viewpoint as to whether or not something would be obvious. So this makes it easier to obtain intellectual property protection, but also it allows the attorneys that are doing the prosecution to review exactly what was done and how it was done, and look for other aspects of protection that might not have been appreciated before.

Sometimes being the first to get to a point, and being the first to see something, is a key element of getting the patent protection.

David: These results are fairly recent; I'm assuming the company has filed provisionals as you've mentioned. So how long would patents on these unanticipated results, or the prospect of Zerenex resulting in unanticipated effects, how long could those patents protect the drug?

Scott: Well the way that the patent is set up right now is that you file for a provisional application, and then typically one year later you file for the non-provisional. So that first year, plus the non-provisional, gives you 20 years from its filing date. So you can have protection that would reach out 21 years from that initial filing date. And you get your protection as soon as the patent is issued, up until that particular end of the term.

David: So just wrapping up. So your overall impression on the patent portfolio. How long do you think Zerenex can be an exclusive product in the US? How confident are you in the whole overall IP package here?

Scott: Looking at the particular patents that I've seen that have been issued, it looks like they go out to 2024 and periods like that. If we have something coming from these unexpected results that would be patentable for the same use or for a similar use, that could stretch it out for another 21 years from when they first filed for the patent. I'm not aware of any particular dates that they filed, so I can't say anything about those new patents, but I would say that we're going out to the 2024-2026 time period. Some of the patents that have been issued have what are called patent term adjustments, which are time added due to regulatory review lost at the Patent and Trademark Office. Sometimes those particular extensions for time lost at the Patent and Trademark Office can be compromised by terminal disclaimers or something like that. Now I have not looked at that particular issue other than to note that some of them have already been given patent term extensions that would extend the term.

David: Just to clarify that. So you're saying that some of the patents that you reviewed, the Patent and Trade Office has already issued extensions?

Scott: Well they've already issued extensions for time lost for review that went on the Patent and Trademark Office. If the Patent and Trademark Office is not putting the patent out there and moving it along at a fast enough rate, you can get an extension that is added to the term of the patent just for time lost at the Patent Office. That's different and distinct from the time lost during regulatory review, which the patent term extension covers.

David: But that doesn't impact the regulatory review lost application or it depends --

Scott: That's a totally separate statutory right.

David: Okay. So I do wanna open up the call for questions from the audience. I wanna give them a little bit of time to pick your brain, but once again before we wrap up. Again your overall impression on the strength of the intellectual property portfolio here. If you're advising a client, what can you tell them? If one of your clients is looking to acquire the company or partner with Keryx, what's your advice?

Scott: Looking at the whole portfolio, I'd say based on the work I've done and seen, I'm comfortable that this portfolio would do a good job of deterring generics. I would advise the client that I believe there's a high degree of probability that they would be able to get a patent term extension under Hatch-Waxman on it.

David: Okay, great. Thank you.

Operator: We do have a question from Kyle Steinhauser from DaVita.

Kyle: Thank you Dr. Chambers. Just wanted to see if you had a moment to comment on what your view might be on any Paragraph IV challenges for Zerenex. Assuming patent extension, do you think there's a high likelihood that we would see significant Paragraph IV challenges?

Scott: I think whether or not there's an extension, it would not surprise me to find Paragraph IV challenges. Generally, generics benefit so much from that 180-day exclusivity that they will cook up any kind of argument that something is not obvious, that something is not patentable; so it would surprise me if there were no Paragraph IV challenges. It's simply too valuable to not have that kind of challenge.

Kyle: Alright, thank you.

Operator: And at this time, there are no guests in the question queue.

David: Thanks for the question, we appreciate it. And of course, I would like to thank Dr. Chambers for his contribution on the call. I would also like to thank all the participants for your interest. Remember, that subscriptions are what helps PropThink run and fund calls like these, and we do plan to do more expert calls. So if you haven't signed up for a trial (Free sign up here) or monthly subscription, now would be a good time to do so. I'll just say have a profitable day, and we'll speak with you on the next call.

Disclosure: I am long KERX. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: PropThink is a team of editors, analysts, and writers. This article was written by Jake King. We did not receive compensation for this article, and we have no business relationship with any company whose stock is mentioned in this article. Use of PropThink’s research is at your own risk. You should do your own research and due diligence before making any investment decision with respect to securities covered herein. You should assume that as of the publication date of any report or letter, PropThink, LLC and persons or entities with whom it has relationships (collectively referred to as "PropThink") has a position in all stocks (and/or options of the stock) covered herein that is consistent with the position set forth in our research report. Following publication of any report or letter, PropThink intends to continue transacting in the securities covered herein, and we may be long, short, or neutral at any time hereafter regardless of our initial recommendation. To the best of our knowledge and belief, all information contained herein is accurate and reliable, and has been obtained from public sources we believe to be accurate and reliable, and not from company insiders or persons who have a relationship with company insiders. Our full disclaimer is available at www.propthink.com/disclaimer.