A federal appeals court Monday handed Amgen Inc. a setback in the long-running dispute over patents covering Epogen, the Thousand Oaks-based company's best-selling drug.
The U.S. Court of Appeals returned the case to federal district court in Boston, where Amgen prevailed over rival Transkaryotic Therapies Inc. last January.
In a 68-page decision, the appellate court said it agreed with the lower court's ruling that Transkaryotic's Dynepo infringed two Amgen patents. But the higher court said that District Judge William Young "misapplied the law" when he declared the Amgen patents valid.
At stake is the $2-billion-plus market for Epogen, a genetically engineered copy of erythropoietin, the protein that spurs red blood cell production. But the case also has been seen as a test of how much protection a company can expect for its fundamental discoveries. Amgen has argued that if Transkaryotic won, it could use its alternative technology to copy virtually any biotechnology drug.
Amgen produces its drug in hamster cells. Transkaryotic uses human cells.
The lower-court case involved five Amgen patents. Young, in his ruling last January, found that Transkaryotic infringed three of them. But the appeals court, besides questioning the validity of two patents, told Young to reexamine whether the third patent was valid and infringed.
Among other things, the appeals court told Young to weigh discoveries that predated Amgen's patents. One deals with a way of fusing cells to derive erythropoietin, and another concerns the synthesis of naturally occurring erythropoietin from human urine.
The court decision almost certainly delays a final resolution of the dispute, which Amgen Chief Executive Kevin Sharer described at an investors conference in San Francisco on Monday as one of the biggest concerns facing the company.
But time is on the side of Amgen, the world's largest biotechnology company, which has in its arsenal a second-generation version of Epogen that is injected less frequently. Transkaryotic isn't making money and has had regulatory setbacks with its experimental drug for Fabry's disease, which would be its first medication in the United States.
Transkaryotic and its marketing partner Aventis have won approval to sell Dynepo in some European countries, but they have not done so because Transkaryotic's factory is in the U.S. The companies have said they won't market in Europe until Transkaryotic's dispute with Amgen is resolved.
Transkaryotic spokeswoman Justine Koenigsberg said the company's legal team was reviewing the decision but was "encouraged" by it. Transkaryotic was supported in its appeal by the Consumer Federation of America and the National Organization for Rare Disorders, which said the public would benefit from new technology and competitive pricing.
Amgen Chief Financial Officer Richard Nanula and general counsel Steven M. Odre described the ruling as a partial victory for Amgen. Odre said the appeals court significantly narrowed the outstanding issues left to be decided in the case and that Amgen must win on only one issue to prevail.
In addition, he noted, the appeals court directed Young to reconsider his previous decision that two other Amgen patents were not infringed.
"I don't feel like we lost anything," Nanula said. "There was quite a bit more in our favor than was not."
The appeals court decision came after the markets closed. In regular Nasdaq trading, Amgen closed up $1.08 at $50.27 and Transkaryotic rose 1 cent, closing at $10. In after-hours trading, Amgen rose as high as $51.99 and Transkaryotic fell as low as $9.
Separately, Amgen emerged Monday as a possible candidate to partner with Scios Inc. on an experimental drug for arthritis and other inflammatory diseases. Scios executives said at an investors conference that the Sunnyvale, Calif., biotechnology company had narrowed discussions to fewer than five candidates and that the list included large pharmaceutical firms and biotechnology companies that market arthritis medications.
Amgen is the only large biotechnology company with such a drug. The Scios drug is in the second of three phases of human testing required for Food and Drug Administration approval but already is seen by analysts as a potential multibillion-dollar drug and a formidable future competitor to Amgen's Enbrel, which is used to treat rheumatoid arthritis.
Sharer declined to comment when asked if Amgen was in discussions with Scios. Analysts on Monday said Merck & Co. or Pfizer Inc. are more likely partners for Scios, since the two big firms have expertise making medications in pill form and market the two largest arthritis drugs. Merck markets Vioxx and Pfizer is acquiring Pharmacia Corp., which markets Celebrex.