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Pannobhaso
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A researcher into gene silencing as a technology for improving the lives of those suffering from incurable diseases. Benitec Biopharma is my primary investment in this technology as ddRNAi offers one-time treatments for a broad range of these diseases.
  • Is The EPO Patent Decision A Big Deal? 16 comments
    May 26, 2014 7:00 AM | about stocks: BNIKF

    We are again, seeing claim and counter-claim in the ddRNAi intellectual property (NYSE:IP) space.

    The European Patent Office (EPO) has recently upheld Galapagos NV's objections to the Commonwealth Scientific and Industrial Research Organisation (CSIRO) patent EP1555317. EP1555317 is a core, gate-keeping patent for Benitec's ddRNAi technology and is exclusively licensed to Benitec (OTCPK:BNIKF) by the CSIRO for application in humans. This is just the latest round of claim and counter-claim between Benitec, the CSIRO and Galapagos.

    So what does this decision mean for Benitec?

    At face value, this EPO decision could be seen as a serious threat to potential royalty revenue for the company but is this actually the case?

    In examining the issue there are a number of factors to consider.

    First, the decision is not final, it can be appealed. A press release about the decision said,

    This decision came despite the initially favourable opinion from the panel that issued prior to the hearing and the submissions presented at the hearing by CSIRO's legal counsel. The decision was made on the preliminary ground that one claim feature was not clearly and unambiguously disclosed in this particular patent specification. The novelty and inventiveness of the claims were not reviewed. The decision is appealable.

    This tells us that the panel's preliminary assessment rejected the objections. So, what changed? The fact that the patent is both novel and inventive is not in dispute, only the clarity of the first claim. (I say the first claim because if it was only a minor claim that was in dispute, then the patent would likely stand with a deletion or a modification and there would be no reason to licence the Galapagos patent.) The likely source of ambiguity is the "greater than 20 nucleotides" description of the synthetic gene.

    If this is the sole reason for the objection to be upheld, then I would suggest that there are reasonable grounds for appeal. It may also be possible to re-phrase the patent and submit the re-worded claims as a new patent application. I am not a patent lawyer but there certainly seems to be some wiggle room to me.

    Second, the objections have been dismissed in other jurisdictions, such as the US and the UK. This means that, even if an appeal was lodged and lost, the decision would only impact Benitec's ddRNAi licensing revenue for products commercialised in Europe between now and early 2019 (2019 being the expiry date of the CSIRO's patent EP1555317). In this five year period, there will be less than a handful of commercialised ddRNAi products and so any lost revenue streams would be very limited and very short. Should an appeal succeed, the status quo would be maintained.

    In any event, Benitec has taken a license from Galapagos for patent EP1444346. Under the current decision, this is a replacement for the CSIRO patent and this license ensures Benitec and its own licensees can operate in the European market. Under this licensing agreement Benitec will pay royalties for any commercialised pipeline products between the time of going on sale and 2021, when EP1444346 expires. (Should Benitec win its appeal against the Galapagos objections to CSIRO's EP1555317, then I suspect the licensing agreement with Galapagos will lapse.)

    Third, Benitec and others, such as Pfizer and Bayer, have lodged objections to the Galapagos patent EP1444346. These objections have been upheld in the US and UK. The recent EPO decision does not impact on Benitec's ability to prosecute its objection to patent EP1444346, lodged with the EPO. If Benitec is successful in its objection to EP1444346, then there will be void in the ddRNAi patent space in Europe unless Benitec's appeal against the latest EPO decision is upheld.

    Forth, as I pointed out in a previous blog, these gate-keeper patents are coming to the end of their lifespan and are therefore becoming less and less important by the day. Benitec is moving towards pipeline IP where specific patents control the use of specific applications of ddRNAi. The EPO decision will have no impact on this transition. (The Waterhouse patent EP1068311 is also being opposed in the EPO, with possibly similar consequences.)

    Fifth, Benitec is experienced in fighting protracted IP battles. In the US a company called Nucleonics thought that they had successfully dealt a blow to Benitec's IP but they eventually lost that case and went out of business. So there may be a temporary IP setback in Europe but this is not the end of the race and Benitec is a stayer and not a sprinter.

    While it may not be a good look for Benitec to appear to be losing control of ddRNAi IP, the reality is that the control is not lost until the appeal is heard and even then the decision only applies in Europe if the appeal fails. Furthermore, the possible impact on future revenue is likely to be minimal because of the limited commercialisation of ddRNAi products that will take place before the CSIRO patent expires.

    It is important for the CSIRO and Benitec to defend their IP and in that context this is just another round of claim and counter-claim. I fully expect that Benitec will win an appeal but, if they did not, then I do not see the EPO decision as being a big deal.

    Disclosure: I am long BNIKF.

    Additional disclosure: This article is not intended to be investment advice. Readers should do their own research.

    Themes: EPO, patent, Benitec Stocks: BNIKF
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Comments (16)
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  • jsiebel720
    , contributor
    Comments (177) | Send Message
     
    Thank you for dissecting a very complex legal issue. How long do you think will the appeal and decision take? What probability of success do you assign that the decision would be reversed?
    26 May, 08:14 AM Reply Like
  • Pannobhaso
    , contributor
    Comments (162) | Send Message
     
    Author’s reply » Benitec/CSIRO has two months to provide the EPO with a written notice of appeal. The EPO will first deem if the appeal is allowable and, if it is, the EPO will then set a date for the appeal. It will notify all relevant parties. The EPO may then ask for further evidence. How long the process takes from there is anyone's guess; it could be another two years.

     

    I am confident Benitec can win the appeal as I think that it should be possible to show where the Examiners erred, given the contra-rulings given in the US and UK.
    26 May, 10:15 AM Reply Like
  • brama66
    , contributor
    Comments (98) | Send Message
     
    Thanks Panno for another robust response to the EPO issue. Long BNIKF!
    26 May, 12:43 PM Reply Like
  • omcdac
    , contributor
    Comments (124) | Send Message
     
    Pannobhaso @ How come they lost so important patent?

     

    They were not very careful ? I don't know how it works. little info would be helpful.

     

    Thanks
    26 May, 09:03 PM Reply Like
  • Pannobhaso
    , contributor
    Comments (162) | Send Message
     
    Author’s reply » Hi omcdac, as I said in the article, the judgement was that one of the claims was ambiguous. Europe is the ONLY jurisdiction where this has been a problem and so it would have been impossible to foresee this ruling. The US and UK authorities had no problem with claim and the wording of the patent has been in place for 10 years or more.

     

    As I also mention in the article, this patent is not as important as it was two or three years ago because it is coming to the end of its life and new drugs using RNAi technology take many years to develop. In terms of additional licencing deals, this means there will probably be few, if any, new licencees for the general use of ddRNAi.
    26 May, 09:56 PM Reply Like
  • omcdac
    , contributor
    Comments (124) | Send Message
     
    Is this key patent of benitech

     

    http://bit.ly/1pcx8CV

     

    ??
    26 May, 10:17 PM Reply Like
  • Pannobhaso
    , contributor
    Comments (162) | Send Message
     
    Author’s reply » This is the patent in question. It is owned by the CSIRO and exclusively licensed to Benitec for use in humans. A comprehensive list of patents held and licensed by Benitec is available on their website:

     

    http://bit.ly/1lNP7Jh
    26 May, 10:38 PM Reply Like
  • PICOLOMINI
    , contributor
    Comments (625) | Send Message
     
    So until the appeal has been decided on, any catalyst coming up which can revive the stock?

     

    (long back cut back substantially)
    27 May, 03:12 AM Reply Like
  • GreenGrowthGeek
    , contributor
    Comments (736) | Send Message
     
    Looks good for BNIKF in the morn Pico as the first patient was dosed and Benitec is up over 10% in Australia right now.
    28 May, 10:10 PM Reply Like
  • Pannobhaso
    , contributor
    Comments (162) | Send Message
     
    Author’s reply » An announcement about the dosing of the first TT-034 patient may cause a spike in the pps but that is not guaranteed as the prospect of this event has been known about for some time.

     

    Positive TT-034 safety results will certainly see a jump in the pps.

     

    An announcement from Calimmune on their HIV trial could also be a catalyst for a price rise.

     

    The NSCLC trial in Europe is scheduled to start end 2014/early 2015. The should cause a price increase. (Right now I value this more than the TT-034 trial so, no matter what else happens with the company, I won't be selling any shares before I know the results from this trial.)

     

    Early-mid 2015, Genable should announce the details of their clinical trial for Retinitis Pigmentosa. That should seen a rise in the pps.

     

    The CEO has indicated that there are other business opportunities that can now be pursued because we have the cash to do so.

     

    IMO this is a stock whose time is yet to come. Stay long and prosper; or something like.
    27 May, 04:09 AM Reply Like
  • eddybutler
    , contributor
    Comments (9) | Send Message
     
    Pannobhaso!
    Thanks so much for this very clear clarification! With my friends in BNITEK, we has a scare and this calms it.
    By the way, do you have any idea of why Beni takes so long to dose the first patient? Is it reasonable that in their exclusion list they have BMI<30? Americans are all strong big guys/gals, ca they find someone meeting all the criteria?
    Thanks a mil.
    Eddy
    27 May, 06:56 AM Reply Like
  • Pannobhaso
    , contributor
    Comments (162) | Send Message
     
    Author’s reply » Eddy, there is a misconception that is circulating on the Internet that Benitec is in some way controlling the HCV trial. This is complete nonsense. Furthermore, it may well be illegal for the company to try to influence who gets treated and who does not. The clinicians at Duke are running the trial and they are professional people following the protocols approved by the FDA. For good reason, the FDA has been strict in its negotiations with the company over the inclusion/exclusion criteria as this is the first, directly injected human treatment using ddRNAi, which is irreversible once administered.

     

    We are all frustrated by the delay but unless the company sees fit to lobby the FDA to water-down the inclusion/exclusion criteria then we will all have to wait just that little bit longer for dosing to take place.

     

    P
    27 May, 10:08 AM Reply Like
  • eddybutler
    , contributor
    Comments (9) | Send Message
     
    P,
    Thank you for answering so fast, and taking the time to answer.! I love your answer: am long on Beni.
    Patience! Patience.
    Eddy
    28 May, 01:19 AM Reply Like
  • jsiebel720
    , contributor
    Comments (177) | Send Message
     
    Bottom line to BNIKF..This is not an "instant gratification" trading play. As Hal Holbrooke said in Wall Street.."Stick to the fundamentals...Sometimes, good things take time."
    27 May, 03:35 PM Reply Like
  • pga2003
    , contributor
    Comments (37) | Send Message
     
    Another insightful article by Panno, thanks for the diligence and I really like your take on the NSCLC trial. Hopefully management is up to the science!
    27 May, 04:31 PM Reply Like
  • Greenfire87
    , contributor
    Comments (630) | Send Message
     
    Pann,
    Appreciate the update and the insight.
    27 May, 11:29 PM Reply Like
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