UNITED STATES PATENT AND TRADEMARK OFFICE
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`
`LUPIN LTD., and LUPIN PHARMACEUTICALS INC.,
`
`Petitioners,
`
`v.
`
`SENJU PHARMACEUTICAL CO., LTD., BAUSCH & LOMB, INC., and
`BAUSCH & LOMB PHARMA HOLDINGS CORP.,
`
`Patent Owners.
`
`
`IPR2015-01097 (Patent 8,754,131)
`IPR2015-01099 (Patent 8,669,290)
`IPR2015-01100 (Patent 8,927,606)
`IPR2015-01105 (Patent 8,871,813)
`
`
`
`
`DECLARATION OF IVAN T. HOFMANN, CPA/CFF, CLP1
`
`
`
`
`
`
`1 A word-for-word identical paper has been filed in each proceeding identified
`in the heading. IPR2016-00089 has been joined with IPR2015-01097;
`IPR2016-00091 has been joined with IPR2015-01100; and IPR2016-00090 has
`been joined with IPR2015-01105. Each of these joined proceedings includes
`Petitioners InnoPharma Licensing, Inc., InnoPharma Licensing LLC,
`InnoPharma Inc., Mylan Pharmaceuticals Inc., and Mylan Inc. (collectively,
`“InnoPharma”) in addition to the parties identified above.
`
`IPR2015-01099
`IPR2015-01097
`IPR2015-01100
`IPR2015-01105
`
`Lupin EX1122
`Page 1
`
`
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`
`LUPIN LTD., and LUPIN PHARMACEUTICALS INC.,
`
`Petitioners,
`
`v.
`
`SENJU PHARMACEUTICAL CO., LTD., BAUSCH & LOMB, INC., and
`BAUSCH & LOMB PHARMA HOLDINGS CORP.,
`
`Patent Owners.
`
`
`IPR2015-01097 (Patent 8,754,131)
`IPR2015-01099 (Patent 8,669,290)
`IPR2015-01100 (Patent 8,927,606)
`IPR2015-01105 (Patent 8,871,813)
`
`
`
`
`DECLARATION OF IVAN T. HOFMANN, CPA/CFF, CLP1
`
`
`
`
`
`
`1 A word-for-word identical paper has been filed in each proceeding identified
`in the heading. IPR2016-00089 has been joined with IPR2015-01097;
`IPR2016-00091 has been joined with IPR2015-01100; and IPR2016-00090 has
`been joined with IPR2015-01105. Each of these joined proceedings includes
`Petitioners InnoPharma Licensing, Inc., InnoPharma Licensing LLC,
`InnoPharma Inc., Mylan Pharmaceuticals Inc., and Mylan Inc. (collectively,
`“InnoPharma”) in addition to the parties identified above.
`
`IPR2015-01099
`IPR2015-01097
`IPR2015-01100
`IPR2015-01105
`
`Lupin EX1122
`Page 1
`
`
`
`TABLE OF CONTENTS
`
`
`
`I.
`
`Introduction ............................................................................................ 1
`
`II. Documents I Considered in Formulating My Opinions ....................... 5
`
`III. My Background and Qualifications ...................................................... 5
`
`IV. Case Background .................................................................................... 9
`
`V. Background of Cataracts and the Ophthalmic Anti-inflammatory
`Market ................................................................................................... 14
`
`VI. The Definitions of Commercial Success and Nexus Relative to
`Objective Indicia of Nonobviousness ................................................... 16
`
`VII. Analysis ................................................................................................. 17
`
`VIII. Conclusion ............................................................................................ 80
`
`ii
`
`Page 2
`
`
`
`I.
`
`Introduction
`1.
`I am over the age of eighteen (18) and otherwise competent to make
`
`this declaration.
`
`2.
`
`I am a Managing Director at Gleason IP, a division of Gleason &
`
`Associates, P.C. (“Gleason”). Gleason is an economic, accounting, and financial
`
`consulting firm which provides services primarily in the areas of Valuation,
`
`Litigation Support, Intellectual Property, Forensic Accounting and Financial
`
`Reorganization. I am the leader of the Intellectual Property Practice. Prior to
`
`joining Gleason, I worked for the global firm of Deloitte & Touche, LLP.
`
`3.
`
`I have been retained as an expert witness on behalf of Petitioner for
`
`the above captioned inter partes review (“IPR”). Gleason is being compensated
`
`for the work performed on this engagement based on the time incurred by me at a
`
`rate of $435 per hour and by other Gleason personnel working under my direct
`
`supervision at rates ranging from $95 to $275 per hour. Our compensation is in no
`
`way dependent on the outcome of this IPR.
`
`4.
`
`I have been jointly retained by Lupin Ltd. and Lupin Pharmaceuticals
`
`Inc. (collectively, “Lupin” or “Petitioners”) to analyze objective indicia of
`
`nonobviousness, specifically commercial success and nexus related to U.S. Patent
`
`No. 8,754,131 (“the ’131 Patent”), U.S. Patent No. 8,669,290 (“the ’290 Patent”),
`
`U.S. Patent No. 8,927,606 (“the ’606 Patent”), and U.S. Patent No. 8,871,813 (“the
`
`1
`
`Page 3
`
`
`
`’813 Patent”) (collectively, “the patents at issue”). I have also been asked to
`
`respond to the Declaration of John C. Jarosz on objective indicia of
`
`nonobviousness, dated February 23, 2016 (the “Jarosz Declaration”) (EX21302).
`
`5.
`
`To accomplish the objective of this engagement, to date, I have
`
`performed the following tasks:
`
`a. Researched and reviewed information regarding Prolensa®,
`
`Bromday®, Xibrom®, and other prescription ophthalmic
`
`nonsteroidal anti-inflammatory drug (“NSAID”) pharmaceutical
`
`products.
`
`b. Reviewed and analyzed documents, correspondence, pleadings,
`
`and other information produced in this matter.
`
`c. Reviewed the following expert declarations:
`
`i. The Jarosz Declaration (EX2130);
`
`ii. The Declaration of William B. Trattler, M.D., dated
`
`February 23, 2016 (EX2116);
`
`iii. The Declaration of Robert O. Williams, III Ph.D., dated
`
`February 22, 2016 (EX2082).
`
`
`2 Unless otherwise noted, exhibit numbers referenced herein are the same in each
`
`of IPR2015-01097, IPR2015-01099, IPR2015-01100, and IPR2015-01105.
`
`2
`
`Page 4
`
`
`
`d. Performed independent research on various topics and issues.
`
`e. Summarized my analysis and findings to date in this declaration.
`
`6.
`
`This declaration is based on information known to me as of the date I
`
`signed this declaration. I may obtain additional documents, information, and
`
`testimony which may cause me to amend and/or supplement my opinions at a later
`
`date. I also reserve the right to rebut any additional opinions offered by any expert
`
`for Senju Pharmaceutical Co., Ltd. (“Senju”) and Bausch & Lomb Incorporated
`
`and Bausch & Lomb Pharma Holdings Corp. (collectively, “B&L”) (collectively,
`
`the “Patent Owner”).
`
`7.
`
`As I explain more fully below, Prolensa® is not a commercial success
`
`and the performance of Prolensa® is attributable to various extrinsic factors
`
`unrelated to the patents at issue. Specifically, the performance of Prolensa® is
`
`explained by the execution of a coordinated life-cycle management strategy for the
`
`bromfenac franchise which involved the following components: (1) the systematic
`
`migration to new bromfenac products and the discontinuation of legacy bromfenac
`
`products; (2) substantial marketing and promotional efforts; and (3) tactical pricing
`
`of Prolensa®. As a result, the performance of Prolensa® does not provide objective
`
`indicia of nonobviousness of the patents at issue.
`
`8.
`
`The sections below explain the details of my analysis in the following
`
`areas:
`
`3
`
`Page 5
`
`
`
`a. Prolensa® is not a commercial success. Specifically,
`
`i. The Jarosz Declaration significantly overstates the economic
`
`performance of Prolensa®. Indeed, based on available
`
`information,
`
`;
`
`ii. The Jarosz Declaration mischaracterizes the relative
`
`performance of Prolensa®;
`
`iii. The reliance of the Jarosz Declaration on so-called “third-
`
`party perceptions” is misleading and is not meaningful to the
`
`evaluation of objective indicia of nonobviousness; and
`
`iv. The analysis and conclusions in the Jarosz Declaration
`
`regarding licensing of the patents at issue as a result of
`
`certain litigation-induced settlement agreements is flawed
`
`and is not meaningful to the evaluation of objective indicia
`
`of nonobviousness.
`
`b. The performance of Prolensa® is not surprising and can be
`
`explained by various extrinsic factors unrelated to the patents at
`
`issue. Specifically,
`
`i. The performance of Prolensa® is primarily explained by the
`
`life-cycle management strategy of bromfenac products;
`
`4
`
`Page 6
`
`
`
`ii. Substantial marketing and promotion has significantly
`
`impacted the performance of Prolensa® (especially in light
`
`of the life-cycle management tactics);
`
`iii. The performance of Prolensa® has benefited from coupon
`
`programs and other incentives provided to patients to
`
`encourage the use of Prolensa®; and
`
`iv. The performance of Prolensa® has also benefited from
`
`tactical pricing of Prolensa® compared to Bromday® and
`
`generic bromfenac products.
`
`c. The filing of ANDAs by generic companies does not provide
`
`evidence of alleged commercial success.
`
`II. Documents I Considered in Formulating My Opinions
`9.
`In formulating my opinion, I have considered all documents cited in
`
`this Declaration and all documents cited in the Petitions for Inter Partes Review of
`
`the ’131 Patent, the ’290 Patent, the ’606 Patent, and the ’813 Patent, as well as the
`
`documents cited in the Patent Owner’s Responses thereto. I have included a list of
`
`these documents in Appendix 2 to this declaration.
`
`III. My Background and Qualifications
`10.
`I graduated magna cum laude from the University of Notre Dame in
`
`1994 with a Bachelor of Business Administration degree and a double major in
`
`5
`
`Page 7
`
`
`
`Economics and Accounting. I am a Certified Public Accountant (“CPA”). I am
`
`also Certified in Financial Forensics (“CFF”). I am a member of the Licensing
`
`Executives Society (“LES”) and have received my Certified Licensing Professional
`
`(“CLP”) designation, which is granted by the LES to professionals with
`
`demonstrated knowledge and experience in the areas of intellectual property and
`
`licensing. I have attended and instructed numerous continuing education seminars
`
`since the completion of my formal education and have been a speaker on numerous
`
`occasions on a variety of financial, economic, accounting, intellectual property,
`
`and valuation topics. I have presented to various bar associations and
`
`organizations on the issues of intellectual property, financial damages, valuation,
`
`financial statement analysis, and other topics.
`
`11.
`
`I have extensive knowledge and experience in the areas of economic
`
`and market analysis as it relates to litigation matters. My intellectual property
`
`experience includes valuation of intellectual property, analysis of objective indicia
`
`of nonobviousness, market analysis involving product performance, the
`
`determination of damages associated with patent infringement and other
`
`intellectual property (including lost profits, disgorgement, and reasonable
`
`royalties), consideration of irreparable harm, analysis of Panduit Factors related to
`
`demand for patented features, and market analysis of non-infringing alternatives. I
`
`have analyzed damages claims in trademark infringement, false advertising, and
`
`6
`
`Page 8
`
`
`
`other cases involving the Lanham Act. I have experience in a broad range of
`
`industries including pharmaceuticals, manufacturing, technology, healthcare,
`
`communications, construction, extractive, and other industries.
`
`12. My work experience includes litigation support and consulting
`
`engagements with a variety of pharmaceutical and biologics companies. In my
`
`work in the pharmaceutical industry, I have performed financial and economic
`
`analysis for over one hundred prescription pharmaceutical products, including
`
`virtually every major therapeutic class of drugs. I have been asked to study and
`
`analyze objective indicia of nonobviousness (including commercial success and
`
`nexus), consider claims of irreparable harm, determine and quantify damages,
`
`perform product pipeline consulting, and assist with licensing and settlement
`
`discussions.
`
`13.
`
`In the course of my work in providing consulting and expert services,
`
`I regularly analyze and review data for the pharmaceutical industry, including IMS
`
`Health Services, Inc. (“IMS”) and Symphony Health Solutions, among others. I
`
`am knowledgeable regarding the role of pharmaceutical databases such as First
`
`Databank, Medispan, Gold Standard, and other information sources in the
`
`fulfillment of prescriptions. I am also knowledgeable regarding the process of
`
`prescription writing, fulfillment, and generic substitution in the pharmaceutical
`
`industry. I have analyzed data and information and testified as an expert witness in
`
`7
`
`Page 9
`
`
`
`matters involving the pharmaceutical industry and the role of brand versus generic
`
`competition. I have been qualified as an expert witness in pharmaceutical
`
`economics and specifically to address the issues of commercial success and nexus
`
`by various federal courts and institutions.
`
`14. Among the numerous projects on which I have worked involving
`
`objective indicia of nonobviousness, I have been engaged by the United States
`
`Patent and Trademark Office (“USPTO”) and Office of the Solicitor as an expert to
`
`analyze and testify on issues involving objective indicia of nonobviousness,
`
`including commercial success and nexus in proceedings in which both the
`
`Honorable David Kappos, Under Secretary of Commerce for Intellectual Property
`
`and former Director of the USPTO, and the Honorable Michelle Lee, in her official
`
`capacity as Under Secretary of Commerce for Intellectual Property and Director of
`
`the USPTO, were defending the USPTO’s denial of certain patent applications.
`
`15.
`
`I also have extensive experience in analyzing, calculating and
`
`determining damages and other financial and economic issues in various dispute
`
`settings. I have been designated as a testifying expert in federal and state courts,
`
`Chancery Court, the United States International Trade Commission, the United
`
`States Patent Trial and Appeal Board, and on matters before various domestic and
`
`international arbitration panels. I have analyzed damages involving intellectual
`
`property disputes, breach of contract claims, shareholder disputes, insurance
`
`8
`
`Page 10
`
`
`
`recovery, class actions, and others. I also have experience assessing claims of
`
`irreparable harm in connection with temporary restraining orders and preliminary
`
`injunction hearings, and determining whether financial damages are calculable.
`
`16. Attached as Appendix 1 is a copy of my curriculum vitae. I have not
`
`authored any articles in the past ten years.3
`
`IV. Case Background
`17. B&L is the owner of New Drug Application (“NDA”) No. 203168 for
`
`bromfenac sodium ophthalmic solution 0.07%.4 The United States Food and Drug
`
`Administration (“FDA”) approved the NDA on April 5, 2013, and B&L launched
`
`the product as Prolensa® later that same month.5 Prolensa® is a once-daily NSAID
`
`eye drop indicated for the treatment of postoperative inflammation and reduction
`
`of ocular pain in patients who have undergone cataract surgery.6
`
`
`3 I reserve the right to further explain my background and qualifications in deposition
`
`where needed.
`
`4 EX2176.
`
`5 EX1178; EX2211.
`
`6 EX1163.
`
`9
`
`Page 11
`
`
`
`18. The active ingredient in Prolensa® is bromfenac sodium.7 I
`
`understand the bromfenac sodium compound had been covered by U.S. Patent No.
`
`4,910,225 (the “’225 Patent”), which is assigned to Senju and expired January
`
`2009.8 I understand Senju exclusively licensed the ’225 Patent to ISTA
`
`Pharmaceuticals, Inc. (“ISTA”) in March 2002.9
`
`19.
`
`In March 2005, ISTA received FDA approval for Xibrom®
`
`(bromfenac sodium 0.09%), a twice-daily administered NSAID to treat
`
`postoperative inflammation following cataract surgery.10 ISTA later obtained FDA
`
`approval to include the reduction of ocular pain following surgery in 2006.11 On
`
`October 16, 2010, ISTA received FDA approval to market Bromday® (bromfenac
`
`sodium 0.09%), as a once-daily administered NSAID with the same formulation
`
`
`7 EX2176.
`
`8 EX1127, 3, 6; EX1010.
`
`9 I understand that B&L became the exclusive licensee of Senju for the ’225 Patent
`
`and for the patents at issue, which B&L obtained through the acquisition of ISTA in
`
`2012. EX1128. See also EX1129, F66-67.
`
`10 EX2213; EX1156; EX1130.
`
`11 EX2119, 2; EX2189.
`
`10
`
`Page 12
`
`
`
`and indications as Xibrom®.12 ISTA discontinued Xibrom® in February 2011,
`
`three months after the launch of Bromday®.13 Mylan introduced the first generic
`
`version of bromfenac sodium 0.09% in May 2011.14 The FDA granted Bromday®
`
`marketing exclusivity through October 2013.15
`
`
`
` Prolensa® is
`
`currently the only branded marketed bromfenac product in the United States.17
`
`20.
`
`I understand that the patents at issue allegedly cover Prolensa®.18 The
`
`’290 Patent is also entitled “Aqueous Liquid Preparation Containing 2-Amino-3-
`
`(4-Bromobenzoyl) Phenylacetic Acid,” and issued March 11, 2014 and expires on
`
`January 16, 2024.19 The ’131 Patent is entitled “Aqueous Liquid Preparation
`
`Containing 2-Amino-3-(4- Bromobenzoyl) Phenylacetic Acid,” which issued June
`
`
`12 EX2188; EX1130; EX1131.
`
`13 EX2185; EX2229.
`
`14 EX2130, par. 44; EX1162.
`
`15 EX1132.
`
`16 EX1133.
`
`17 EX1134.
`
`18 EX1135.
`
`19 EX1001; EX1135.
`
`11
`
`Page 13
`
`
`
`17, 2014 and expires on January 16, 2024.20 The ’813 Patent is also entitled
`
`“Aqueous Liquid Preparation Containing 2-Amino-3-(4-Bromobenzoyl)
`
`Phenylacetic Acid,” and issued October 28, 2014 and expires on January 16,
`
`2024.21 The ’606 Patent is also entitled “Aqueous Liquid Preparation Containing
`
`2-Amino-3-(4-Bromobenzoyl) Phenylacetic Acid,” and issued January 6, 2015 and
`
`expires on January 16, 2024.22
`
`21.
`
`I understand that Patent Owner filed suit against InnoPharma
`
`Licensing, Inc., InnoPharma Licensing, LLC, InnoPharma, Inc., InnoPharma,
`
`LLC, Mylan Pharmaceuticals Inc., and Mylan Inc. (collectively, “InnoPharma”)
`
`and the Petitioners alleging infringement of the patents at issue. I understand that
`
`lawsuit is currently ongoing, a trial began on April 4, 2016, and has not yet been
`
`fully adjudicated.
`
`22.
`
`In addition to the lawsuits brought against InnoPharma and the
`
`Petitioners, the Patent Owner filed separate actions against Metrics, Inc. and
`
`certain of its affiliated entities (“Metrics”), Apotex, Inc. (“Apotex”), and Paddock
`
`Laboratories, LLC (“Paddock”) after receiving notice of their respective ANDAs
`
`
`20 EX1002; EX1135.
`
`21 EX1003; EX1135.
`
`22 EX1004; EX1135.
`
`12
`
`Page 14
`
`
`
`and corresponding Paragraph IV certifications.23 I understand that Metrics,
`
`Apotex, and Paddock have each entered into stipulated consent judgments and
`
`injunctions with Senju and B&L and their cases have since been terminated.24
`
`23. The Patent Owner also brought a patent infringement lawsuit against
`
`Watson Laboratories, Inc. (“Watson”) after receiving notice of an ANDA
`
`including Paragraph IV certifications of the patents at issue.25 As of the date of
`
`this declaration, I understand that this matter is ongoing.
`
`24. Furthermore, there have been multiple petitions for inter partes
`
`review (the “IPR Matters”) with the Patent Trial and Appeal Board (“PTAB”)
`
`regarding the patents at issue. A summary of the IPR Matters is shown in the table
`
`below.26
`
`
`23 EX1129, F66-68.
`
`24 EX2027; EX2028; EX2029.
`
`25 EX1136, 2, 5-6.
`
`26 I obtained information for this table through a search of each patent number on the
`
`USPTO PTAB website. EX1137.
`
`13
`
`Page 15
`
`
`
`U.S.
`Patent No.
`
`8,754,131
`
`Case No.
`
`Filing Date
`
`Petitioners
`
`Status
`
`IPR2015-01097 4/23/2015 Lupin Ltd.
`
`Instituted
`
`IPR2016-00089 11/2/2015 InnoPharma Licensing, Inc.
`
`Instituted
`
`IPR2014-01043 6/26/2014 Metrics, Inc.
`
`Settled
`
`8,669,290
`
`IPR2015-00902 3/19/2015 InnoPharma Licensing, Inc.
`
`Instituted
`
`IPR2015-01099 4/23/2015 Lupin Ltd.
`
`8,927,606
`
`8,871,813
`
`IPR2015-01100 4/23/2015 Lupin Ltd.
`IPR2016-00091 11/2/2015 InnoPharma Licensing, Inc.
`IPR2015-01105 4/23/2015 Lupin Ltd.
`IPR2016-00090 2/25/2016 InnoPharma Licensing, Inc.
`
`Instituted
`
`Instituted
`Instituted
`Instituted
`Instituted
`
`Background of Cataracts and the Ophthalmic Anti-inflammatory Market
`25.
`I understand that a cataract is the clouding of the lens in the eye that
`
`
`
`V.
`
`affects one’s vision.27 The lens of the eye is mainly comprised of water and
`
`protein, with the protein arranged in such a way that light may easily pass through
`
`it. As an individual ages, the protein may begin to cloud the lens, which may result
`
`in symptoms that include blurry vision, tinted or faded colors, glare, poor night
`
`vision, among others. It is reported that half of the U.S. population will either have
`
`
`27 I am not an ophthalmologist. I set forth my understanding of cataracts from the
`
`references cited herein throughout this declaration.
`
`14
`
`Page 16
`
`
`
`cataracts or have had cataract surgery by age 80. Early stage cataracts are
`
`frequently treated with new or stronger prescription eyeglasses. A cataract will
`
`require surgery if the related impairment of vision begins to interfere with one’s
`
`daily activities such as driving, reading, or watching television.28
`
`26.
`
`I understand that there are generally two types of surgical procedures
`
`that may be performed to address cataracts. Phacoemulsification is more
`
`frequently used today and entails a small incision made on the side of the cornea
`
`where a probe is inserted that emits ultrasound waves to break up the lens so that it
`
`may be removed with suction. In extracapsular surgery, a larger incision is made
`
`on the side of the cornea and the affected lens is removed in one piece. After the
`
`lens is removed, it is replaced with an artificial lens made of plastic that is referred
`
`to as an intraocular lens.29
`
`27.
`
`I understand that patients are typically prescribed eye drops to
`
`promote healing and reduce the risk of infection, beginning the day before the
`
`procedure and continuing until approximately two weeks after the procedure.
`
`
`28 I obtained information for this paragraph from the National Eye Institute website.
`
`EX1138.
`
`29 I obtained information for this paragraph from the National Eye Institute website.
`
`EX1138.
`
`15
`
`Page 17
`
`
`
`There are four general categories of ophthalmic anti-inflammatory medications,
`
`including corticosteroids, antihistamines, mast cell stabilizers, and NSAIDs. While
`
`antihistamines and mast cell stabilizers are generally used to treat allergic
`
`conjunctivitis, a corticosteroid or NSAID may be prescribed post-surgery to reduce
`
`inflammation and pain. The most common ophthalmic NSAIDs are diclofenac
`
`sodium (marketed as Voltaren®), ketorolac tromethamine (marketed as Acular®,
`
`and Acular LS®), nepafenac sodium (marketed as Nevanac®, and Ilevro®),
`
`ketorolac/phenylephrine (marketed as Omidria®), and bromfenac sodium
`
`(marketed as Bromday®, and Prolensa®).30, 31
`
`VI. The Definitions of Commercial Success and Nexus Relative to Objective
`Indicia of Nonobviousness
`28.
`It is my understanding that “commercial success” is a legal construct
`
`that has been established through case law. Analysis of commercial success is
`
`premised on the concept that if a product is economically successful, it may
`
`provide objective evidence of nonobviousness. I understand that, according to case
`
`law, when certain requirements are met, “[c]ommercial success is relevant because
`
`the law presumes an idea would successfully have been brought to market sooner,
`
`
`30 EX1139.
`
`31 EX1140.
`
`16
`
`Page 18
`
`
`
`in response to market forces, had the idea been obvious to persons skilled in the
`
`art.”32
`
`29.
`
`It is also my understanding that the commercial success of the product
`
`must be attributable to the alleged novel features of the claimed invention. I
`
`understand this to mean that, to support a finding of nonobviousness, any alleged
`
`commercial success must be driven primarily by and attributable to the purported
`
`merits of the claimed invention, and not by other factors unrelated to the allegedly
`
`novel features of the claimed invention. In other words, there must be a causal
`
`correlation, or “nexus,” between the unique merit of the claimed invention and the
`
`success of the product. I am also informed by counsel that if purported
`
`commercial success is due to an element in the prior art, no nexus exists. In
`
`essence, I understand that if the feature that creates the purported success was
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`known in the prior art, such success is not pertinent.
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`VII.
`
` Analysis
`A.
`Prolensa® is not a commercial success
`30. The Jarosz Declaration discusses the overall level of sales,
`
`prescription volume, and market share of Prolensa® compared to competing
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`32 Merck & Co., Inc. v. Teva Pharmaceuticals USA, Inc., 395 F.3d 1364, 1376 (Fed.
`
`Cir. 2005).
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`17
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`Page 19
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`
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`NSAIDs as purported evidence of claimed commercial success.33 The Jarosz
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`Declaration also refers to certain analyst reports and forecasts, as well as licensing
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`activity as a result of litigation-induced settlement agreements, as purportedly
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`indicative of the claimed success of Prolensa® in the marketplace.34 I disagree with
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`the assertions and conclusions in the Jarosz Declaration and address each of these
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`purported performance metrics in turn.
`
`1.
`
`31.
`
`The Jarosz Declaration significantly overstates the economic
`
`performance of Prolensa® and
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`In order to analyze the dollar sales of Prolensa®, the Jarosz
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`
`
`Declaration claims to analyze both the absolute and relative performance of
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`Prolensa®.35 In fact, the Jarosz Declaration relies solely on gross sales data
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`obtained from IMS and contains no calculation or analysis of the profitability of
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`Prolensa® or the incremental impact of the patents at issue.36 Indeed, despite not
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`performing an analysis of the profitability of Prolensa®, the Jarosz Declaration
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`offers the opinion that, “Bausch & Lomb would not devote significant resources to
`
`
`33 EX2130, par. 56.
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`34 EX2130, par. 71-80.
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`35 EX2130, par. 57-65.
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`36 EX2130, Appendices 2-4.
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`18
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`Page 20
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`
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`the marketing and promotion of Prolensa® unless it were rational to do so (i.e., it
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`would generate profits that justified the investment).” 37 From an economic
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`perspective, the logic at the core of the Jarosz Declaration does not provide
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`objective indicia of nonobviousness as it incorrectly implies that any product a
`
`company chooses to continue to sell is a de facto commercial success.
`
`32. While it is true that IMS data (gross sales in particular) allows for
`
`certain comparisons across competing drugs, the analysis of commercial success
`
`typically includes consideration of both absolute and relative measures of
`
`performance. In fact, in an article authored by Mr. Jarosz, titled “Assessing
`
`Commercial Success at the U.S. Patent Trial and Appeal Board,” he states, “[t]he
`
`next step in the marketplace success inquiry is an evaluation of the success of the
`
`practicing products in absolute terms. Depending on the product and data
`
`available, this is often done by identifying one or more of several financial
`
`performance metrics: 1) units sold, 2) volumes shipped, 3) revenues received, 4)
`
`profits earned, and 5) prescriptions written.”38
`
`33. By failing to analyze both net sales and profitability
`
`
`
`for Prolensa®, the analysis presented within the Jarosz Declaration is incomplete
`
`
`37 EX2130, par. 125.
`
`38 EX1160, 4. (Emphasis in original)
`
`19
`
`Page 21
`
`
`
`and the conclusions therein are misleading and unreliable. Based upon my analysis
`
`of net sales and profitability using available information, the economic
`
`performance of Prolensa® does not demonstrate alleged commercial success.
`
`a.
`34.
`
`Analysis of gross-to-net sales adjustments of Prolensa®
`IMS data does not reflect actual net sales dollars of Prolensa® from
`
`the accounting records of the Patent Owner prepared in the normal course of
`
`business. Rather, the IMS data is an estimate of gross sales from a third-party data
`
`provider. Although IMS data is regularly used and relied upon in the
`
`pharmaceutical industry for certain purposes, the IMS data cited in the Jarosz
`
`Declaration does not reflect net sales of products.39 The gross sales from IMS
`
`generally do not include reductions for the following:
`
`a. Rebates,
`
`b. Discounts,
`
`c. Allowances,
`
`d. Coupons,
`
`e. Chargebacks, or
`
`
`39 Indeed, the Jarosz Declaration acknowledges this limitation in IMS data but fails
`
`to perform any analysis of gross-to-net adjustments despite this deficiency.
`
`EX2130, par. 14.
`
`20
`
`Page 22
`
`
`
`f. Returns.
`
`35. During deposition, Mr. Jarosz confirmed that the IMS data he relied
`
`upon reports gross sales revenue and does not include the reductions from
`
`discounts, allowances, or coupons.40 As a result, the gross sales from IMS cited in
`
`the Jarosz Declaration significantly overstate the performance of Prolensa®.
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`36.
`
`
`40 EX1121, 77-78.
`
`41 Exhibit A.
`
`42 Exhibit A.
`
`43 Exhibit B. For example, as explained below, B&L currently offers coupon
`
`21
`
`Page 23
`
`
`
`
`
`
`
` By not addressing the gross-to-net sales adjustments
`
`incurred in the normal course of business, the Jarosz Declaration significantly
`
`overstates the economic performance of Prolensa®. The graph below compares the
`
`gross sales figures presented in the Jarosz Declaration and the net sales after
`
`accounting for estimated gross-to-net sales adjustments.45
`
`
`programs which limit most insured patients’ copay to $30 and most cash-paying and
`
`
`
`Medicare Part D patients’ copay to $60.
`
`44
`
` See Exhibits B and C.
`
`45 EX2130, Appendix 2; Exhibit C.
`
`22
`
`
`
`
`
`Page 24
`
`
`
`
`
`37. The Jarosz Declaration fails to analyze the profitability (if any) of
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`Prolensa®. By only addressing gross revenues according to IMS and failing to
`
`address whether Prolensa® has even been profitable, the Jarosz Declaration
`
`incorrectly concludes that the economic performance of Prolensa® provides
`
`evidence of alleged commercial success. In fact, based upon my analysis,
`
` and therefore the performance does not
`
`demonstrate alleged commercial success.
`
`38.
`
`I calculated estimated cumulative profits (losses) of Prolensa® for the
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`period from April 2013 through September 2015, and summarized the results
`
`below:46
`
`
`46 Exhibit C.
`
`23
`
`Page 25
`
`
`
`
`
`39.
`
`In order to calculate the estimated net operating profits (losses) of
`
`Prolensa®, I analyzed the following:
`
`a. Net Sales: In order to calculate estimated net sales I adjusted gross
`
`sales of Prolensa® from IMS Data relied upon by Mr. Jarosz for
`
`estimated discounts, allowances, rebates, coupons, chargebacks,
`
`and returns using available documents and actual information for
`
`certain periods from the Patent Owner.47
`
`b. Cost of goods sold: I analyzed the cost of goods sold of both ISTA
`
`and Valeant using publicly available information.48 Based on my
`
`analysis, I estimate that the cost of goods sold for Prolensa® is 23.9
`
`percent of net sales.49
`
`
`47 Exhibits A and B. In my experience, overall discounts typically increase over time
`
`as a product provides increasing discounts to formularies. For the purposes of my
`
`analysis, I have assumed that discounts have remained flat since 2013 based on the
`
`most recent period for which data is available.
`
`48 Exhibits D.1 and D.2.
`
`49 For the periods analyzed, the cost of goods sold as a percentage of net revenues
`
`were 23.9 percent (ISTA) and 27.7 percent (Valeant). I utilized the ISTA percentage
`
`24
`
`Page 26
`
`
`
`c. Marketing and promotional expenses: In order to estimate
`
`marketing and promotional expenses, I utilized the IMS data relied
`
`upon in the Jarosz Declaration.50
`
`d. Research and development and other corporate costs: I have not
`
`included an estimate for these expenses in my analysis since
`
`insufficient documents have been produced and/or are not publicly
`
`available to estimate such expenses. Including the additional costs
`
`associated with the research and development, sale, distribution,
`
`and management of Prolensa® would only further increase the
`
`overall cumulative net losses. I reserve the right to supplement my
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`declaration should additional information become available.
`
`40. Based upon my analysis, the Jarosz Declaration significantly
`
`overstates the economic performance of Prolensa®,
`
`
`
`
`as an estimate of the cost of goods sold for Prolensa®, since the bromfenac products
`
`comprised over 60 percent of ISTA revenues during the time period. I reserve the
`
`right to supplement my analysis should documents regarding actual cost of goods
`sold for Prolensa® become available. See Exhibits D.1 and D.2.
`
`50 I res
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