Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

Inter Partes Review (IPR) Being Used To Challenge Pharma Monopolies

|Includes: Allergan plc (AGN)

Hedge funds like Ferrum Ferro and Dallas-based Hayman Capital Management are taking advantage of the PTAB's new methods of post-grant patent challenges like Inter Partes Review (IPR) as part of an investment strategy targeting large pharmaceutical companies. The aim is to short-sell the pharmaceutical stocks ahead of the announcement of the IPR challenge and the potential patent invalidations, which would threaten proprietary cashflows generated by the companies' blockbuster drug therapies. If these patents are invalidated, it potentially allows for generic pharmaceutical compounds to be sold in the United States.

In February, The New York Times reported that Hayman is looking to bring IPR challenges based on patent obviousness against companies with a combined market capitalization of $450 billion.[1] Hayman founder Kyle Bass was quoted in a Reuters report as saying that Hayman's strategy is "…to challenge and invalidate patents through the IPR process ... (NYSEARCA:AND) we are not going to settle."[2] Thus far, Hayman has filed IPR challenges against one of Acorda Therapeutics' patents which protect the proprietary cashflows of the multiple sclerosis drug Ampyra®[3] and against Shire Plc's patents which protect the gastrointestinal drugs Lialda® and Gattex®.[4]

On March 10, 2015, Ferrum Ferro Capital filed an IPR challenge with PTAB against U.S. patent 7,030,149 (the '149 patent) which belongs to the pharmaceutical company Allergan. [5] The '149 patent is one of seven patents which protect Allergan's proprietary cashflows for the drug Combigan®, a medicated eye drop formulation for the treatment of glaucoma.[6] Combigan's formulation combines the pharmaceutical agents brimonidine tartrate and timolol maleate.

In 2013, the Federal Circuit Court heard the case of Allergan, Inc. v Sandoz, Inc. (726 F.3d 1286) which arose from Sandoz's filing of an Abbreviated New Drug Application (ANDA) with the U.S. Food and Drug Administration as the first step in producing a generic version of Combigan. Allergan filed the Federal Circuit suit in response to the ANDA, alleging that Sandoz's action infringed all claims of four of Allergan's FDA Orange Book-listed Combigan patents, including the '149 patent. The court initially upheld all of the Combigan patents' claims, but on appeal from Sandoz it declared the claims of Allergan's U.S. patent 7,323,463 (the '463 patent), invalid for obviousness under 35 U.S.C. § 103(NYSE:A).[7] The court's ruling in that case explained how the '463 patent was an obvious extension of the prior art, stating that U.S. patent 5,502,052 "expressly provided a motivation to formulate fixed combinations of alpha2-agonists [the class of drugs in which brimonidine fell] and beta blockers, including timolol, in order to increase patient compliance."[8] The Federal Circuit Court also addressed Claim 4 of the '149 patent in the 2013 case, but the narrow standard of claim construction required in the Federal court system meant that the claim was found to be valid. In its PTAB filing, Ferrum Ferro argues that under the "broadest reasonable interpretation" standard of claim construction used by PTAB, Claim 4 of the '149 patent would have been found invalid on the same grounds of obviousness.


Below is a view of the two Allergan patents on Combigan mentioned in the PTAB challenge.

Document #


Assignee Name




US 7,030,149

Combination of brimonidine timolol for topical ophthalmic use

Allergan, Inc.




US 7,323,463

Combination of brimonidine timolol for topical ophthalmic use

Allergan, Inc.




M·CAM analyzed Allergan's '149 patent using our Innovation Clearance™ platform. Innovation Clearance™ uses M·CAM's proprietary linguistic genomics algorithms which associate syntactical structures, words, and the ideas behind words to produce an accurate and comprehensive view of the relevant innovation space. This analysis concluded that prior art for Allergan's claimed composition incorporating both brimonidine tartrate and timolol maleate does not exist in the innovation space. The Innovation Clearance™ platform found only precedent innovation claiming one or the other of these ingredients. This finding is consistent with the Federal Circuit's ruling and Ferrum Ferro Capital's current PTAB filing.

Although there is not a clear path to invalidation for Allergan's '149 patent which protects Combigan, M·CAM also performed analysis on the company's U.S. patents 8,629,111 (the '111 patent) and 8,685,930 (the '930 patent), which cover the drug Restasis®, a medicated eye drop treatment for chronic dry eye. This analysis through the Innovation Clearance™ platform identified numerous pieces of precedent innovation which have significant points of overlap with the ingredients and uses claimed in the '111 and '930 patents. One particularly notable example of precedent innovation that M·CAM identified through the Innovation Clearance™ analysis is U.S. patent 4,839,342 (the '342 patent) assigned to the University of Georgia (NYSEARCA:UGA) Research Foundation, which Allergan paid $70 million to license in 2008.[9] A side-by-side comparison of selected claims from Allergan's '111 patent and the '342 patent is displayed below.

Allergan '111

University of Georgia Research Foundation '342

1. A topical ophthalmic emulsion for treating an eye of a human comprising cyclosporin A in an amount of about 0.05% by weight, polysorbate 80, acrylate/C10-30 alkyl acrylate cross-polymer, water, and castor oil in an amount of about 1.25% by weight;

wherein cyclosporin A is the only peptide present in the topical ophthalmic emulsion.

17. The topical ophthalmic emulsion of claim 13, wherein the topical ophthalmic emulsion is effective in treating keratoconjunctivitis sicca.

1. A method for enhancing or restoring lacrimal gland tearing comprising topically administering cyclosporin to the eye in a pharmaceutically acceptable vehicle.

5. The method of claim 3 wherein the pharmaceutically acceptable excipient is olive oil, arachis oil, castor oil, polyoxyethylated castor oil, mineral oil, petroleum jelly, dimethyl sulphoxide, an alcohol, liposome, silicone fluid or a mixture thereof.

As evidenced by the above, were the Restasis patents to face an IPR challenge before the PTAB, there is precedent innovation that could be used by a challenger to attempt to invalidate the claims of Allergan's '111 and '930 patents on the basis of novelty under 35 U.S.C. § 102 . However, if the 2008 license with UGA is still in effect, it may prove more difficult to erode Allergan's monopoly on Restasis and its generic forms.


Allergan has already been challenged before the PTAB and faces potential future challenges to other parts of its patent portfolio. As revealed by M·CAM's Innovation Clearance™ analyses, the company's portfolio which protects the drugs Combigan and Restasis has vulnerabilities which could be exploited by entities taking part in the expanded opportunities to bring IPR challenges. This shifting landscape may force Allergan and other large pharmaceutical companies to weigh the costs of licensing agreements with the holders of precedent innovation against the potential for a key patent to be invalidated as part of a third party's investment strategy. Allergan's situation may also serve as a warning sign to other companies in pharmaceuticals, automation, communications, information technology, and other sectors which are now exposed to the risk of losing proprietary cashflows.