Eli Lil­ly or­dered to pay roy­al­ties on block­buster di­a­betes drugs, though ex­act dam­ages are un­clear

A fed­er­al court found Eli Lil­ly in breach of a roy­al­ty agree­ment with an Ari­zona com­pa­ny, like­ly send­ing the case — which deals with Lil­ly’s block­buster di­a­betes drugs — to a tri­al.

The Ari­zona Dis­trict Court or­dered Lil­ly to pay the roy­al­ties to Tuc­son, AZ-based Re­search Cor­po­ra­tion Tech­nolo­gies, per an opin­ion de­liv­ered Tues­day, stem­ming from a 1990 agree­ment in­volv­ing ma­te­ri­als used in man­u­fac­tur­ing Lil­ly’s in­sulin prod­ucts. Lil­ly had agreed to pay a 2% roy­al­ty on world­wide sales, and the ex­act amount of dam­ages will be de­ter­mined in a tri­al, Judge Scott Rash wrote.

In re­sponse to the news, a Lil­ly spokesper­son sent End­points News the fol­low­ing state­ment: “We strong­ly dis­agree with the de­ci­sion and vig­or­ous­ly con­tin­ue to de­fend our po­si­tions. The suit does not af­fect Lil­ly’s abil­i­ty to con­tin­ue man­u­fac­tur­ing and dis­trib­ut­ing Hu­mulin (hu­man in­sulin), Hu­ma­log (in­sulin lispro in­jec­tion) or r-glucagon.”

Back in 1990, Lil­ly en­tered in­to an agree­ment with the now-de­funct oil com­pa­ny Phillips Pe­tro­le­um to uti­lize the lat­ter’s yeast ex­pres­sion tech­nol­o­gy for mak­ing reagents, agree­ing to pay roy­al­ties in ex­change for any prod­uct re­sult­ing from the tech. Phillips sold the tech­nol­o­gy to RCT in 1993 and Lil­ly con­tin­ued the agree­ment.

One of the yeast strains and four ex­pres­sion vec­tors from this tech­nol­o­gy end­ed up com­pris­ing key as­pects of Lil­ly’s in­sulin prod­ucts, along with a sep­a­rate E. coli ex­pres­sion sys­tem and oth­er ma­te­ri­als. Though Lil­ly and RCT don’t dis­pute the con­tract’s lan­guage and that none of these plat­forms in­di­vid­u­al­ly make up the drugs’ ac­tive phar­ma­ceu­ti­cal in­gre­di­ent, they in­ter­pret­ed the lan­guage dif­fer­ent­ly and dis­agreed over whether the el­e­ments from RCT’s tech help make up the re­sult­ing drug.

The court was tasked with de­ter­min­ing if Lil­ly’s di­a­betes drugs con­sti­tute an “end prod­uct,” or a ther­a­peu­tic prod­uct sold to con­sumers. RCT ar­gued the orig­i­nal con­tract states any el­e­ment “pro­duced by” the tech­nol­o­gy that ends up in an end prod­uct falls un­der the roy­al­ty agree­ment, which would in­clude the yeast strain and four ex­pres­sion vec­tors.

Lil­ly’s de­fense, how­ev­er, cen­tered on a bit of lin­guis­tic sleight of hand, claim­ing noth­ing in the drugs con­tains any­thing “ex­pressed by” the spe­cif­ic yeast and vec­tor tech­nol­o­gy. As such, Lil­ly ar­gued, the di­a­betes and in­sulin drugs it has sold for bil­lions of dol­lars can­not be con­sid­ered “end prod­ucts.”

Rash sided with RCT’s in­ter­pre­ta­tion, not­ing both sides agreed the con­tract’s lan­guage is un­am­bigu­ous. “To adopt Lil­ly’s in­ter­pre­ta­tion would ren­der the roy­al­ty terms and de­f­i­n­i­tions of ‘End Prod­uct’ and ‘Reagent’ in­ef­fec­tive and mean­ing­less,” Rash wrote in his opin­ion.

He lat­er added:

Un­der Lil­ly’s de­f­i­n­i­tion, where “pro­duced by” means “ex­pressed by,” an End Prod­uct could nev­er be made un­der the Agree­ment, be­cause, as set forth above, ex­pres­sion sys­tems pro­duce pro­teins — not APIs … As such, un­der Lil­ly’s de­f­i­n­i­tion, much of the con­tract would be ren­dered su­per­flu­ous.

On top of this, Rash found Lil­ly in breach of an­oth­er part of the agree­ment, say­ing it failed to no­ti­fy RCT that it had be­gun re­ceiv­ing ma­te­ri­als from else­where to pro­duce its di­a­betes drugs. In 2001, Lil­ly grant­ed No­var­tis’ San­doz unit a sub­li­cense of the RCT tech but didn’t tell RCT un­til 2015. Had RCT known soon­er, it would have act­ed to rene­go­ti­ate the roy­al­ty agree­ment and in­stead was forced to lit­i­gate, the com­pa­ny ar­gued.

Though Lil­ly will have to pay dam­ages about the fail­ure to no­ti­fy, Rash not­ed the big drug­mak­er did not pro­vide San­doz with any con­fi­den­tial in­for­ma­tion. Fur­ther pro­ceed­ings will take place re­gard­ing a three-month pe­ri­od in 2016 over a dis­pute re­gard­ing when the roy­al­ty agree­ment end­ed.

Roy­al­ties have been a con­stant part of court fights in the drug de­vel­op­ment world, with sev­er­al com­pa­nies butting heads over po­ten­tial­ly mas­sive sums. For ex­am­ple, in De­cem­ber 2019, a ju­ry held Gilead li­able for 27.6% of roy­al­ties in a patent case against Bris­tol My­ers Squibb and Sloan Ket­ter­ing. And ear­li­er this year, No­var­tis was or­dered to pay Dai­ichi Sankyo roy­al­ties on the can­cer drug Tafin­lar.

At the In­flec­tion Point for the Next Gen­er­a­tion of Can­cer Im­munother­a­py

While oncology researchers have long pursued the potential of cellular immunotherapies for the treatment of cancer, it was unclear whether these therapies would ever reach patients due to the complexity of manufacturing and costs of development. Fortunately, the recent successful development and regulatory approval of chimeric antigen receptor-engineered T (CAR-T) cells have demonstrated the significant benefit of these therapies to patients.

All about Omi­cron; We need more Covid an­tivi­rals; GSK snags Pfiz­er’s vac­cine ex­ec; Janet Wood­cock’s fu­ture at FDA; and more

Welcome back to Endpoints Weekly, your review of the week’s top biopharma headlines. Want this in your inbox every Saturday morning? Current Endpoints readers can visit their reader profile to add Endpoints Weekly. New to Endpoints? Sign up here.

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Usama Malik

Ex-Im­munomedics CFO charged with in­sid­er trad­ing, faces up to 20 years in prison af­ter al­leged­ly tip­ping off girl­friend and rel­a­tives of a PhI­II suc­cess

The former CFO of Immunomedics, who helped steer the company to its $21 billion buyout by Gilead last year, has been charged with insider trading, the Department of Justice announced Thursday.

Usama Malik tipped off his then-girlfriend and four others that a Phase III study for Trodelvy would be stopped early four days before Immunomedics publicly announced the result in April 2020, DoJ alleged in its complaint. The individuals then purchased Immunomedics shares, selling them after the news broke and Immunomedics’ stock price doubled.

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Merck's new antiviral molnupiravir (Quality Stock Arts / Shutterstock)

As Omi­cron spread looms, oral an­tivi­rals ap­pear to be one of the best de­fens­es — now we just need more

After South African scientists reported a new Covid-19 variant — dubbed Omicron by the WHO — scientists became concerned about how effective vaccines and monoclonal antibodies might be against it, which has more than 30 mutations in the spike protein.

“I think it is super worrisome,” Dartmouth professor and Adagio co-founder and CEO Tillman Gerngross told Endpoints News this weekend. Moderna CEO Stéphane Bancel echoed similar concerns, telling the Financial Times that experts warned him, “This is not going to be good.”

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Common performs onstage, December 2020 (Getty Images)

Com­mon, Jamie Foxx among celebs stand­ing up for clin­i­cal tri­als in star-stud­ded can­cer group's pan­dem­ic push

Healthcare screenings and clinical trial enrollment were battered by the pandemic. But the well-known celebrity-backed Stand Up To Cancer non-profit, along with pharma and advocacy partners, has been working to reverse that and make up lost ground, by stepping up awareness campaigns.

Twelve campaigns launched in 2020 and another five in 2021 amplify the need for cancer screening and care, especially for underserved communities. While pharma companies have long been donors to the cancer research group, Covid brought new support — and increased awareness efforts.

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UP­DAT­ED: Am­gen halts some drug dis­counts for safe­ty net hos­pi­tals as SCO­TUS takes on 340B case

Amgen will soon be the 10th biopharma company to pull back on offering drug discounts to contract pharmacies of safety-net hospitals under a federal program. Like its peers, Amgen argues that the growth of these contract pharmacies has ballooned in recent years and needs to be reigned in.

Beginning Jan. 3, 2022, Amgen’s policy will only allow 340B covered hospitals to designate a single pharmacy location, with the exception of federal grantees and contract pharmacies wholly owned by a 340B hospital, or that have common ownership with a health system.

In­cor­po­rat­ing Ex­ter­nal Da­ta in­to Clin­i­cal Tri­als: Com­par­ing Dig­i­tal Twins to Ex­ter­nal Con­trol Arms

Most drug development professionals are familiar with the nerve-racking wait for the read-out of a large trial. If it’s negative, is the investigational therapy ineffective? Or could the failure result from an unforeseen flaw in the design or execution of the protocol, rather than a lack of efficacy? The team could spend weeks analyzing data, but a definitive answer may be elusive due to insufficient power for such analyses in the already completed trial. These problems are only made worse if the trial had lower enrollment, or higher dropout than expected due to an unanticipated event like COVID-19. And if a trial is negative, the next one is likely to be larger and more costly — if it happens at all.

What's fair? New ICER re­port shows pay­ers gen­er­al­ly en­sur­ing fair ac­cess to drugs

The nonprofit Institute for Clinical and Economic Review on Wednesday released a new report highlighting the ways in which payers are generally ensuring fair access to prescription drugs, even when based on a set of criteria set by the nonprofit.

While noting the lack of transparency hindered the report’s results, ICER said that the “great majority” of payer policies in the formularies evaluated are structured in a way to support many key elements of how ICER defines “fair access.”

Ab­b­Vie tacks on a new warn­ing to Rin­voq la­bel as safe­ty frets crimp JAK class

The safety problems that continue to plague the JAK class as new data highlight some severe side effects are casting a large shadow over AbbVie’s Rinvoq.

As a result of a recent readout highlighting major adverse cardiac events (MACE), malignancy, mortality and thrombosis with Xeljanz a couple of months ago, AbbVie put out a notice late Friday afternoon that it is adding the new class risks to its label for their rival drug.

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