GALDERMA LABORATORIES, L.P., Galderma, S.A., and..., 2012 WL 10996687...
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`2012 WL 10996687 (D.Del.) (Expert Trial Transcript)
`United States District Court, D. Delaware.
`
`GALDERMA LABORATORIES, L.P., Galderma, SA., and
`Galderma Research and Development, S.N.C., Plaintiffs,
`v.
`TOLMAR, INC., Defendant.
`
`No. 10-45-LPS.
`March 13, 2012.
`
`Testimony of Plaintiffs' Expert Witness, John C. Jarosz, J.D.
`
`Case Type: Intellectual Property >> Patent
`Jurisdiction: D.Del.
`Name of Expert: John C. Jarosz, Ph.D., J.D.
`Area of Expertise: Accounting & Finance >> Valuation/Appraisal (Non-Real Estate)
`Area of Expertise: Accounting & Finance >> Economics/Economist
`
`Representing: Plaintiff
`
`For Galderma Laboratories, L.P., Galderma, S.A., and Galderma Research and Development, S.N.C.: Morris Nichols Arsht &
`Tunnel], LLP by: Jack B. Blumenfeld, Esq. and Maryellen Noreika, Esq.
`
`Finnegan Henderson Farabow Dunner & Garrett, LLP by: Charles E. Lipsey, Esq., (Reston, Virginia).
`
`Finnegan Henderson Farabow Dunner & Garrett, LLP by: Susan H. Griffen, Esq., Howard W. Levine, Esq., Sanya Sukduang,
`Esq., Rebecca D. Hess, Esq., Victoria S. Lee, Esq., Elizabeth A. Laughton, Esq., and Courtney B. Casp, Ph.D., Esq.,
`(Washington, District of Columbia).
`
`Finnegan Henderson Farabow Dunner & Garrett, LLP by: Mary R. Henninger, Ph.D., Esq., (Atlanta, Georgia).
`
`For Tolmar, Inc.: Young Conaway Stargatt & Taylor, LLP by: Adam W. Poff, Esq. and Pilar G. Kraman, Esq.
`
`McDermott Will & Emery, LLP by: Thomas P. Steindler, Esq., (Washington, District of Columbia).
`
`McDermott Will & Emery, LLP by: Jeffrey R. Gargano, Esq., Krista Vink Venegas, Esq., Keith M. Stolte, Esq., Kevin P.
`Shortsle, Esq., and Lauren Nelson Martin, Esq., (Chicago, Illinois).
`
`Hon. Leonard P. Stark.
`
`MR. SUKDUANG: Good morning, your Honor. Sanya Sukduang.
`
`Galderma would like to call Mr. John Jarosz next.
`
`THE COURT: Okay. Fine.
`
`MR. SUKDUANG: Mr. Jarosz is Galderma's expert in economics and IP evaluation.
`
`

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`GALDERMA LABORATORIES, L.P., Galderma, S.A., and..., 2012 WL 10996687...
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`JOHN C. JAROSZ, having been first duly sworn, was examined and testified as follows:
`
`e
`
`THE COURT: Good morning to you.
`
`MR. SUKDUANG: May I approach, your Honor:
`
`THE COURT: You may approach.
`
`(Binders passed forward.)
`
`DIRECT EXAMINATION
`
`BY MR. SUKDUANG:
`
`Q. Mr. Jarosz, could you state your full name for the record, please?
`
`A. John C. Jarosz.
`
`Q. Could you take a look at PTX-120 for me, please?
`
`A. (Witness complies.)
`
`Q. What is this document?
`
`A. It's a copy of my CV as it existed in September of 2011.
`
`Q. Where are you currently employed?
`
`A. Analysis Group Incorporated.
`
`Q. And what is Analysis Group?
`
`A. We are an economic, financial and strategy consulting firm of about 550 people. We help our clients in a variety of business,
`regulatory and litigation settings.
`
`Q. What is your current position with analysis group?
`
`A. I'm a managing principal of the firm, which means I'm one of the shareowners. There are about five of us in the firm.
`
`I'm also the founder and director of the Washington, D.C. office.
`
`Q. How long have you been employed by the Analysis Group?
`
`A. Since March of 1996.
`
`Q. What did you do prior to joining the Analysis Group?
`
`A. The 10 years prior to that, I was at another economic consulting firm in Washington, D.C. by the name of Putnam Hayes &
`Bartlett. When I left that firm, I was also that firm's Washington, D.C. office director.
`
`

`
`ti
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`GALDERMA LABORATORIES, LP., Galderma, S.A., and..., 2012 WL 10996687...
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`Q. Could you please briefly describe your educational background, starting in college?
`
`A. Yes. I have a B.A. in Economics in Organizational Communication from Creighton University, which is located in Omaha,
`Nebraska.
`
`After that, I was a fellowship student in the Ph.D. program in Economics at Washington University in St. Louis. There, I
`completed most but not all the requirements for a Ph.D. in Economics and was awarded a Master's in Economics.
`
`Q. In addition to your bachelor's and master's degrees, have you received any other advanced degrees?
`
`A. Yes. I then went to law school at the University of Wisconsin and received my J.D. from WU.
`
`Q. Are you licensed to practice law in any state?
`
`A. I'm licensed to practice in the State of Wisconsin, but I have been on inactive status for about the last 26 years. Though I
`have a law degree, I'm a practicing economist.
`
`Q. I'm sure you are happy to have that role as an economist as opposed to a lawyer?
`
`A. I'm the butt of less jokes that way, I think.
`
`Q. As an economist, do you have any particular areas of expertise?
`
`A. Yes. Most of my work is in the area of intellectual property, valuation and evaluation.
`
`Q. And have you offered opinions, expert opinions in other patent cases regarding the issue of commercial success?
`
`A. Yes, many times.
`
`Q. And about how many other cases have you provided a written report or oral testimony regarding the analysis of commercial
`success?
`
`A. It's a dozen or more times over the years. Perhaps two dozen.
`
`Q. And were any of those cases related to pharmaceutical products?
`
`A. Yes, the vast bulk of them were. When I think about it, I think it's all but one actually were in pharmaceutical settings.
`
`Q. Have you done any other work in the pharmaceutical industry?
`
`A. Yes. I do quite a bit of work in the area of damages estimation, and the area in which I do probably more work than any
`other area is pharmaceutical settings. I'm not an industry expert but I apply my training in economics and IP valuation to
`pharmaceutical settings quite frequently.
`
`Q. Have you been previously recognized as an expert in economics and intellectual property protection?
`
`A. Yes, many times.
`
`

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`GALDERMA LABORATORIES, L.P., Galderma, S.A., and..., 2012 WL 10996687...
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`Q. And have you been so recognized in the District of Delaware?
`
`A. Yes, many times here.
`
`Q. Now, are you a member of any professional organizations or associations?
`
`A. Yes. I'm an member of the American Economics Association, the American Law and Economics Association, the American
`Intellectual Property Law Association, and the Licensing Executive Society. Just to name a few.
`
`Q. What is the Licensing Executive Society?
`
`A. We're the group of about 6,000 or 8,000 people across the world who devote most of their professional careers to evaluating
`intellectual property and figuring out the best ways to share intellectual property with other parties.
`
`Q. Have you held any leadership roles in the Licensing Executive Society?
`
`A. Yes. Fairly recently, for a two-year period, I was the Chairman of the Valuation and Taxation Committee. And,
`
`Then a couple years ago, the LES started a certified licensing professional program. I'm a charter member of that group.
`
`I was also asked to be one of the people involved in helping write the exams so that other people can get that certification. It's
`much more fun to be on that side of the table than on the receiving end.
`
`MR. SUKDUANG: Your Honor, I would like to offer Mr. Jarosz as an expert in the field of economics and intellectual property
`evaluation.
`
`MS. VENEGAS: No objection.
`
`THE COURT: So recognized.
`
`BY MR. SUKDUANG:
`
`Q. Mr. Jarosz, I'd like to get into what you have been actually asked to do in this case. Can you explain what you have been
`asked to present testimony on today?
`
`A. I was asked to evaluate whether the inventions described in the patents in suit here have been a commercial success.
`
`Q. Have you prepared a demonstrative to describe what is necessary to conduct this commercial success analysis?
`
`A. Yes, I have.
`
`MR. SUKDUANG: Could you pull up PDX-312 for me, please?
`
`BY MR. SUKDUANG:
`
`Q. And what does this slide represent?
`
`A. It shows the two components that are frequently undertaken to evaluate whether patented inventions have been a commercial
`success.
`
`

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`GALDERMA LABORATORIES, L.P., Galderma, S.A., and..., 2012 WL 10996687...
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`The first step is to evaluate whether the product embodying the patents have been successful in the marketplace. And,
`
`The second step is to evaluate whether that success in the marketplace is due to the patented inventions or something else. That
`is labeled, that second step, nexus to the patented invention.
`
`Q. Now, do you have an understanding of what the patented features and benefits of the patents in suit are?
`
`A. Yes, I do.
`
`Q. Did you prepare a demonstrative to talk about that topic?
`
`A. Yes, I did.
`
`MR. SUKDUANG: Could you pull up PDX-302 for me, please?
`
`BY MR. SUKDUANG:
`
`Q. What do we have here?
`
`A. This is my understanding of the patented feature and the benefits flowing from that patented feature. The patent, as I
`understand it, allows for increasing the composition of adapalene gel to a concentration of 0.3 percent, and that is effective
`for the treatment of acne.
`
`I understand from that feature flow three benefits:
`
`No. 1. The resulting product is more effective than 0.1 percent adapalene concentration.
`
`No. 2. The resulting product is well tolerated and safe in patients. And,
`
`No. 3. The safety profile of that resulting product is comparable to that of 0.1 percent concentration.
`
`Q. Now, what did you rely on to understand the patented features and benefits that flow from those feature?
`
`A. Galderma marketing and promotional materials and testimony of several witnesses here: Dr. Maibach, Thiboutot and Orlow.
`
`Q. Now, were you in the courtroom listening to the testimony of Drs. Orlow, Thiboutot and Maibach?
`
`A. Yes, I was here for most but not all of the testimony. I didn't hear all of Dr. Maibach's testimony.
`
`Q. Now, does Galderma currently market a pharmaceutical composition of adapalene in the gel formulation of 0.3 percent
`concentration of adapalene here in the U.S.?
`
`A. Yes. That product is called Differin 0.3 percent gel.
`
`Q. For what indications has the FDA approved Differin .3 percent gel for?
`
`A. For the treatment of acne vulgaris, which I understand is common acne.
`
`

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`GALDERMA LABORATORIES, L.P., Galderma, S.A., and..., 2012 WL 10996687...
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`Q. And when was the FDA approval granted?
`
`A. In June of 2007.
`
`Q. Do you know when Differin 0.3 percent gel was first sold in the U.S.?
`
`A. Immediately thereafter, in June of 2007.
`
`Q. Now, other than the 0.3 percent Differin gel, does Galderma sell any other formulation of adapalene that contains a .3 percent
`concentration of adapalene?
`
`A. No, it does not sell any other 0.3 percent concentration. It does sell a 0.1 percent concentration which is called Differin
`0.1 percent gel.
`
`Q. Now, are there other drugs approved in the U.S. for the treatment of acne?
`
`A. Yes, many. Hundreds in fact.
`
`Q. When I say approved, do you understand that to mean FDA approved?
`
`A. Yes. The prescription drugs require FDA approval and many have received FDA approval.
`
`Q. Now, what is your understanding as to what prescription drugs Differin 0.3 percent gel directly competes with?
`
`A. Topical retinoids. And here in the United States there are three forms of retinoids: adapalene, which Differin 0.3 percent
`is one, tazarotene and tretinoin.
`
`Q. And what information did you rely on to form your opinion as to the products with which Differin 0.3 gel competes with?
`
`A. The marketing materials from Galderma. The deposition testimony of Galderma witnesses. And the witnesses that I identified
`a moment ago, Dr. Maibach, Dr. Thiboutot, and Dr. Orlow.
`
`Q. Did the trial testimony of Drs. Orlow, Thiboutot and Maibach change your opinion as to what products Differin 0.3 percent
`gel directly competes with?
`
`A. No. They confirm my opinion that the direct competition is with other topical retinoids.
`
`Q. In analyzing whether Differin .3 percent gel is a success in the marketplace, what did you examine?
`
`A. I looked at information about the sales of the drug over time. I looked in particular at the prescriptions and revenues. And
`I also looked at its relative performance, that is, market share.
`
`Q. What conclusions did you draw regarding whether Differin 0.3 percent gel has been successful?
`
`A. It has been a marketplace success.
`
`Q. With respect to the nexus commercial analysis, what information did you consider?
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`

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`GALDERMA LABORATORIES, L.P., Galderma, S.A., and..., 2012 WL 10996687...
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`A. I sought to understand what the feature and benefits were and how those mattered in the marketplace. And to do that I
`considered information from the marketing materials and promotional materials and the testimony of the individuals I identified.
`
`Q. Did you also consider information from third parties in assessing the nexus component of the commercial success analysis?
`
`A. Absolutely. And we will talk about that, I am sure, a little later. We looked at several third-party studies about the dynamics
`of the business.
`
`Q. What were your conclusions regarding the nexus of Differin 0.3 percent gel's success in the marketplace and the patented
`features and benefits of the patents in suit?
`
`A. The success of the product in the marketplace has been due in large part to the patented benefits and features.
`
`Q. I want to focus in on the market success aspect of your analysis. In particular, the sales that you discussed just a moment
`ago, when Differin .3 percent gel was introduced in June 2007, were there other topical retinoids on the market available to
`treat common acne?
`
`A. Absolutely. There were both branded topical retinoids and generic topical retinoids and they had been on the market for
`quite some time. Tazorac, for instance, had been on the market since 1997. Adapalene had been on the market in a 0.1 percent
`concentration since 1996. And tretinoin had been on the market since the early seventies. So there were quite a number of
`products in the marketplace already.
`
`Q. Is the number of products in the market when a new product is launched significant in any way to the analysis you conducted?
`
`A. Absolutely. To we economists, when we evaluate the dynamics of any particular business, we have learned that order of entry
`matters a great deal. In other words, those products that are first to the market tend to have an advantage over the later products.
`So the later you enter a business, the more difficult it is to succeed in that business. That is certainly true in pharmaceutical
`settings. Physicians, when they find a product that works well, tend to stay with that product. There tends to be inertia or
`encumbrance. When patients use products that are working well, we tend to stay with those products as well, because we don't
`want to tinker with our health.
`
`So it's very difficult to break in late in a business and certainly it's difficult to break in late in a pharmaceutical business where
`there already has been established sales of products that have succeeded.
`
`Q. You mentioned this term break in late into a market. Is that also known as late entry?
`
`A. Yes. And Differin .3 percent came into the topical retinoid business about 40 years after that business had first begun.
`
`Q. Would you consider Differin 0.3 gel to be a late entry into the topical retinoid market?
`
`A. Yes.
`
`Q. How did Differin 0.3 percent gel perform after it was introduced in June of 2007?
`
`A. It performed quite well. In fact, just about immediately after its introduction to the business, it realized success.
`
`Q. Have you prepared a demonstrative to talk about this particular success you mentioned?
`
`A. Yes.
`
`

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`GALDERMA LABORATORIES, L.P., Galderma, S.A., and..., 2012 WL 10996687...
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`r
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`Q. Can you pull up PDX-303 for me, please. I believe there is a laser pointer up there if you need it.
`
`A. I have summarized here on a quarterly basis the revenues that have been realized by Galderma in selling Differin 0.3 percent
`gel. The period is quarter 3 2007 through quarter 2 2011. When it came onto the market, the sales were quite substantial. In
`its first full year on the market, the sales were about 50 million. By the last full year on the market, they have been as high
`as a hundred million a year.
`
`Q. How much in total have the sales of Differin 0.3 percent gel been since its launch?
`
`A. You will see through the second quarter of 2011 the cumulative sales have been 337 million dollars.
`
`Q. Now at the bottom there, there is a source, it says PTX-126. Could you turn to that for me, please. Mr. Jarosz, can you
`explain what we have at PTX-126?
`
`A. Yes. This is a summary of the data that I relied upon to generate the graph that we just saw.
`
`Q. Where did you obtain this data that is tabulated in PTX-126?
`
`A. From IMS.
`
`Q. What is IMS?
`
`A. IMS is a third-party data collection firm that works across a wide range of businesses with a particular strength in the
`pharmaceutical area. Virtually every pharmaceutical company provides data to IMS and subscribes to IMS to understand the
`dynamics of its business. IMS is really the gold standard for pharmaceutical data. And I relied on those data in putting the graph
`that I just saw together and other graphs.
`
`Q. This tabulation that we have at PTX-126, did you tabulate that information out of the IMS data you received?
`
`A. Yes, directly out of that.
`
`Q. Is the IMS data that you received voluminous?
`
`A. Oh, yes. You get electronic files that are quite substantial and it takes a fair amount of work to condense it down to the
`beauty that you see here on the screen.
`
`Q. Can you go back to PDX-303 for me, please. Can you tell me why your graph only goes to quarter 2 of 2011?
`
`A. Yes. Those were the most recent data available to me as of the point that I put my expert report together in this matter. I
`submitted my report in the third quarter of 2011. So I was able to use data through the second quarter of that year.
`
`Q. We just talked about revenues. Let's talk a little bit about prescription numbers. Have you prepared a demonstrative to assess
`how Differin 0.3 percent gel has performed prescription-wise in the market?
`
`A. Yes, I have.
`
`Q. PDX-304, what does this demonstrative show?
`
`

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`GALDERMA LABORATORIES, L.P., Galderma, S.A., and..., 2012 WL 10996687...
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`A. This is the counterpart to the previous bar chart that we saw. This details Differin Gel, 0.3 percent prescriptions over time
`from quarter 3, 2007 through quarter 2, 2011. In the last full year, the prescriptions were running at a rate in excess of 500,000
`per year. You will see over this period of time, the cumulative prescriptions for the product have been 2.1 million.
`
`Q. At the bottom, the source of this data, did that come from PTX-122?
`
`A. Yes.
`
`Q. Could you turn to PTX-122 for me, please.
`
`Mr. Jarosz, what is PTX-122?
`
`A. It is a summary of the data that I obtained from IMS, laying out prescription numbers.
`
`Q. And did the graph that you prepared in PDX-304, did that information come from the information you have in PTX-122?
`
`A. Yes.
`
`Q. Did you tabulate the information in PTX-122 out of the voluminous IMS data that you obtained?
`
`A. Yes. And the result again was this beautiful chart.
`
`Q. Let's talk about Differin .3 percent in the topical retinoid market as a whole. Has the number of topical retinoid prescriptions
`increased or decreased since 2008?
`
`A. Actually, the total number of topical retinoids has fallen from 2008. They have fallen at a rate of about 8.3 percent from
`2008 through 2010.
`
`Q. Did the number of prescriptions for Differin .3 percent gel fall at this same rate, 8.3 percent, I think you said?
`
`A. No. Differin .3 percent pretty much held its own. So as a result its share of topical retinoids has increased over time. So while
`the large bucket, total topical retinoids has shrunk, Differin 0.3 percent prescriptions have not.
`
`Q. Now, what if anything does that piece of information indicate to you?
`
`A. That says that Differin 0.3 percent is distinguished in the marketplace from other topical retinoids. It seems to be more well
`accepted amongst people who are involved in the purchase decision, patients, physicians, pharmacists and payers.
`
`Q. Is there a generic version of 0.1 percent adapalene on the market?
`
`A. Yes, there is.
`
`Q. Do you know approximately when the generic 0.1 percent adapalene came onto the market?
`
`A. In June of 2010.
`
`Q. Was Differin 0.3 percent gel available when generic 0.1 percent came onto the market?
`
`A. Yes, it had been on the market for about three years prior to generic entry of 0.1 percent.
`
`

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`GALDERMA LABORATORIES, L.P., Galderma, S.A., and..., 2012 WL 10996687...
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`Q. What happened to the prescription numbers of Differin 0.3 percent gel when generic 0.1 percent adapalene gel came onto
`the market?
`
`A. They were barely impacted. For the most part, they held their own. So the generic competition did not substantially eat into
`the 0.3 percent gel prescriptions or revenues.
`
`Q. Did you prepare a graph to address this?
`
`A. Yes.
`
`Q. Can you put up PTX-305 for me, please. What does this show?
`
`A. This shows the total number of prescriptions for topical retinoids by category. You will see the blue line represents 0.1
`percent prescriptions over time from Q2, 2009 through Q2, 2011. You will see a fairly precipitous drop.
`
`You will see Differin 0.3 percent in the red and you will see that that kept moving along at roughly the same rate over this
`entire period.
`
`That was in spite of the fact that generic adapalene, which is the 0.1 percent, came on, that's in the gray line, and came on quite
`strong. So the 0.1 percent seems, the generic form seems to have taken sales away from branded 0.1 percent but has had, based
`on these data, virtually no impact on 0.3 percent prescriptions.
`
`Q. Is the entry of generic 0.1 percent adapalene significant to your analysis of Differin 0.3 percent gel's success in the
`marketplace?
`
`A. Yes. Absolutely. It gives us a natural experiment of whether 0.1 percent and 0.3 percent are in the eyes of consumers the
`same thing.
`
`Q. Where did the information come from that you used to generate PDX-305?
`
`A. It came from PTX-122, which is another one of my summaries of IMS data.
`
`Q. Now, this demonstrative talks about prescriptions. Did you prepare a similar demonstrative to talk about what happened to
`Differin's 0.3 percent gel revenues when generic .1 percent adapalene came onto the market?
`
`A. I did. And you will see, it is a slightly simpler presentation.
`
`Q. Can we go to PDX-306. What does this demonstrative show?
`
`A. It shows the experience for these three adapalene drugs in the United States, or forms of adapalene drugs. And I have just
`focused on the three here as opposed to the previous chart that had more forms of topical retinoids. You will see the revenues for
`Differin 0.1 percent are once again shown in the blue line. They have fallen fairly dramatically from quarter 2, 2010 onwards.
`You will see at that time Differin 0.3 revenues have held fairly constant over that period, in spite of the fact that generic
`adapalene, the 0.1 percent, came on and has done quite well.
`
`Q. The source of this data indicates it's PTX-126. Is that right?
`
`A. Yes.
`
`

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`GALDERMA LABORATORIES, L.P., Galderma, S.A., and..., 2012 WL 10996687...
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`Q. Is that IMS data?
`
`A. That is my summary of IMS, yes.
`
`Q. The information that we have seen in PDX-305 and 306 -- let me back up.
`
`The revenues, what does this mean on this side?
`
`A. Those are dollars realized by Galderma through the sale of Differin 0.3 percent and Differin 0.1 percent, and the dollars
`realized by generic manufacturers of generic adapalene.
`
`Q. And the M, does that indicate millions?
`
`A. That indicates millions, yes.
`
`Q. Looking at the slides PDX-305 and 306, what does this information indicate to you with respect to the success of Differin
`0.3 percent gel in the marketplace?
`
`A. It shows two things. Number one, that 0.3 percent has been quite successful, and that 0.3 percent is quite different from
`0.1 percent.
`
`Q. Now, you indicated that Differin's 0.3 percent revenues maintained or kept the course despite generic entry of 0.1 percent
`adapalene. Have you evaluated whether Galderma's promotional spending had any effect on that?
`
`A. Yes, I have evaluated that question.
`
`Q. Did you prepare a demonstrative to address that?
`
`A. I did.
`
`Q. Can you put up PDX-307 for me, please. What does this slide show?
`
`A. You will see that I have charted promotional spending from the Differin brand in the black line and Differin 0.3 revenues
`in the red line. You will see while promotional spending in the brand increased slightly from 2006 through 2008, the spending
`decreased a fair amount thereafter.
`
`In spite of that, Differin 0.3 percent revenues rose each year. So there seems to be very little linkage between the precise level
`of promotional spending and 0.3 percent's success, particularly in the late years, particularly after the product was introduced
`to the marketplace and information was disseminated about the product.
`
`Q. The source of this information, we see, is PTX-126, which we have discussed. You also have listed here DTX-277. Could
`you turn to that document for me in your binder, please?
`
`What do we have in DTX-277?
`
`A. This is a chart from Dr. Vander Veen's report. Dr. Vander Veen is the economist working on behalf of Tolmar evaluating
`the commercial success issues.
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`GALDERMA LABORATORIES, L.P., Galderma, S.A., and..., 2012 WL 10996687...
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`In his report he summarized promotional spending for these various drugs. So I took the information that he had obtained from
`IMS to understand the promotional spending levels were different.
`
`Q. Did you use the information in DTX-277 to generate PDX-307, the promotional spending versus revenues we saw?
`
`A. Yes, the data that you see here on the screen in 277 were the inputs to the black line, the promotional spending line on the
`previous demonstrative slide.
`
`Q. I would like to talk a little bit about how Differin 0.3 percent gel has performed in comparison to other topical retinoids.
`
`Have you prepared a demonstrative to address this issue?
`
`A. Yes.
`
`Q. What do we have here in this slide?
`
`A. I have charted market share information for the various topical retinoids that have been sold in the United States, and I have
`charted here prescription data.
`
`So, once again, you will see Differin 0.1 percent in the blue line. You will see that has fallen gradually over time and then fairly
`dramatically in the second quarter of 2010.
`
`Differin 0.3 percent is in the red line. It came to the market initially and obtained about a 5 percent share. And its share increased
`to about 14 percent shortly thereafter and is held at about that 12 to 14 percent level since then.
`
`You will see, again, at the same time, generic adapalene, which is the gray line, came to the market later in time and has done
`quite well because of its favorable pricing.
`
`Q. There is also a green line here. What drug is represented by this green line?
`
`A. That is Retin-A and Retin-A-Micro, which is a tretinoin.
`
`Q. And then there is a lavender line. What does this lavender line -- you know, I just want to say lavender instead of purple.
`
`A. Can we refer to the different lines as fuchsia and fire engine red perhaps?
`
`Q. What is this lavender line? What is that?
`
`A. That represents Tazorac sales. So that is tazarotene, and that is branded sales over this entire period.
`
`Q. Looking at this information as a whole, what does that indicate to you with respect to Differin 0.3 percent's success in the
`marketplace as compared to other topical retinoids?
`
`A. Well, it has realized success in comparison to the performance of some other drugs; namely, branded Differin 0.1 percent.
`It's done quite well, so it must be different from 0.1 percent.
`
`MR. SUKDUANG: Now, you indicate that the source of this information came from PTX-124.
`
`Can we bring that up, please?
`
`

`
`GALDERMA LABORATORIES, L.P., Ga{derma, S.A., and..., 2012 WL 10996687...
`
`BY MR. SUKDUANG:
`
`Q. And, Mr. Jarosz, can you explain what we have in PTX-124?
`
`A. That is my summary, again, of IMS data. It reports prescription topical retinoid shares.
`
`Q. And did you tabulate the information represented in PTX-124 out of the IMS data that you received?
`
`A. Yes. IMS does not give you market share information, it gives you the data to be able to calculate a market share. So the
`underlying data are from IMS and simply dividing one number from another allows me to obtain the shares that you see there.
`
`MR. SUKDUANG: Now, in PDX-308, we talked about prescription shares. I want to talk about revenue shares now.
`
`Can you bring up PDX-309 for me, please?
`
`BY MR. SUKDUANG:
`
`Q. And what do we have in PDX-309?
`
`A. It's the counterpart to the prescription share chart that we're looking at. And this is market shares in revenue terms. In other
`words, U.S. topical retinoid dollar sales in the United States and then broken by the shares of the various products.
`
`Once again, Differin 0.1 percent is the blue line. You will see that falling over time.
`
`Differin 0.3 percent is the red line. You will see that rising. And, Generic adapalene, the 0.1 percent is the gray line.
`
`With regard to shares on a revenue basis, Differin 0.3 percent began at 10 percent and bumped up to about 18 percent and has
`held roughly in that range since then.
`
`Q. And looking at this data, how has Differin 0.3 percent gel performed revenue-wise in comparison to other topical retinoids?
`
`A. Quite well.
`
`Q. You have indicated that the source of this data comes from PTX-128. Can you turn to that document in your binder for
`me, please?
`
`A. (Witness complies.)
`
`Q. And can you explain what we have in PTX-128?
`
`A. This is another summary of mine from IMS data. It is the revenue shares for the various topical retinoid products over time.
`
`Q. And you relied on this data to generate the information we saw in PDX-309?
`
`A. Yes.
`
`Q. Now, you mentioned Galderma's Differin 0.1 percent adapalene product and Differin 0.3 percent adapalene product. Does
`Galderma sell any other prescription products for the treatment of acne?
`
`

`
`GALDERMA LABORATORIES, L.P., Galderma, S.A., and..., 2012 WL 10996687...
`
`A. Yes. It sells a product called Epiduo.
`
`Q. What is Epiduo?
`
`A. It's a combination product. It's a combination of benzoyl peroxide and adapalene 0.1 percent.
`
`Q. Now, when you say combination, is the adapalene and the benzoyl peroxide in one formulation or is it in two different
`formulations that you take together?
`
`A. One formulation, as I understand it.
`
`Q. And do you recall what the concentration of adapalene is in Epiduo?
`
`A. 0.1 percent.
`
`Q. Now, did you include Epiduo in the analysis you conducted for your testimony today?
`
`A. Not in the charts that we have seen so far, but in analysis that we're about to see, I did.
`
`Q. Now, is Epiduo classified by IMS as a topical retinoid?
`
`A. No, it's classified as a benzoyl peroxide.
`
`MR. SUKDUANG: Can you pull up PDX-310 for me, please?
`
`BY MR. SUKDUANG:
`
`Q. What does this slide represent?
`
`A. I have summarized here the top 10 products when I look at a much larger market. That is, all topical acne treatments. And
`I have summarized these data looking at prescription information that I have obtained.
`
`What this shows is that in relation to all topical acne prescriptions, Differin 0.3 percent was the seventh largest of the roughly
`250 products in this class. It results in a share in the range of four to five percent.
`
`Q. And what time period is represented by this chart?
`
`A. That covers the period Quarter 3, 2007 through Quarter 2, 2011.
`
`Q. And the first three products that are listed here, are those topical retinoids?
`
`A. They are not.
`
`Q. Now, you mentioned that there were approximately 250 topical retinoids available on the market. Does the --
`
`A. I'm sorry. Not topical retinoids.
`
`Q. I'm sorry. You're right. Topical acne products available on the market. Let me start that over.
`
`

`
`GALDERMA LABORATORIES, L.P., Galderma, S.A., and..., 2012 WL 10996687...
`
`A. I'm sorry for interrupting you.
`
`Q. Yes. You mentioned there are about 250 topical acne products available on the market; is that right?
`
`A. Yes.
`
`Q. Now, does that number of topical acne products have any economic significance in your analysis?
`
`A. Yes. We economists, in evaluating market dynamics, look at the extent of competition. We look at order of entry, we look
`at a number of things.
`
`But how deep and severe the competition is matters to we economists, so I realize Differin 0.3 percent enter a very busy, a very
`competitive marketplace, so not only was it late in time but it entered one that had very vigorous competition. It's difficult for
`any product