UNITED STATES PATENT AND TRADEMARK OFFICE
`_____________________________
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`_____________________________
`
`
`
`MYLAN PHARMACEUTICALS INC.,
`WOCKHARDT BIO AG, TEVA PHARMACEUTICALS USA, INC.
`and AUROBINDO PHARMA U.S.A. INC.,
`Petitioners,
`
`v.
`
`ASTRAZENECA AB,
`Patent Owner.
`
`_____________________________
`
`Case IPR2015-01340
`Patent RE44,186 E1
`_____________________________
`
`
`DECLARATION OF DEFOREST MCDUFF, Ph.D.
`
`
`
`
`
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`1 Petitioners Wockhardt (IPR2016-01209), Teva (IPR2016-01122), and Aurobindo
`
`(IPR2016-01117) have each been joined as Petitioner to this proceeding.
`
`1
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` Case IPR2015-01340
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`
`Declaration of DeForest McDuff, Ph.D.
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`
`
`
`MYLAN - EXHIBIT 1060
`Mylan et al. v. AstraZeneca
`IPR2015-01340
`
`
`_____________________________
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`_____________________________
`
`
`
`MYLAN PHARMACEUTICALS INC.,
`WOCKHARDT BIO AG, TEVA PHARMACEUTICALS USA, INC.
`and AUROBINDO PHARMA U.S.A. INC.,
`Petitioners,
`
`v.
`
`ASTRAZENECA AB,
`Patent Owner.
`
`_____________________________
`
`Case IPR2015-01340
`Patent RE44,186 E1
`_____________________________
`
`
`DECLARATION OF DEFOREST MCDUFF, Ph.D.
`
`
`
`
`
`
`1 Petitioners Wockhardt (IPR2016-01209), Teva (IPR2016-01122), and Aurobindo
`
`(IPR2016-01117) have each been joined as Petitioner to this proceeding.
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`1
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` Case IPR2015-01340
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`Declaration of DeForest McDuff, Ph.D.
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`
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`MYLAN - EXHIBIT 1060
`Mylan et al. v. AstraZeneca
`IPR2015-01340
`
`
`
`
`
`I, DeForest McDuff, Ph.D., declare as follows:
`
`I.
`
`Introduction
` Qualifications
`
`1.
`
`I am a Vice President of Intensity Corporation (“Intensity”) and an
`
`expert in applied business economics, with more than ten years of experience in
`
`consulting, finance, and economic research. I provide expert witness testimony
`
`and consulting in a variety of areas, including lost profits, reasonable royalties,
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`unjust enrichment, commercial success, irreparable harm, finance, statistics,
`
`valuation, and business optimization.
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`2. My expertise and experience span a variety of topics, including
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`intellectual property, competition, business, antitrust, finance, labor, employment,
`
`and class action. I am an expert in the economics of technology and intellectual
`
`property. My work spans the life sciences (including pharmaceuticals,
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`biotechnology, diagnostics, and medical devices), electronics (including consumer
`
`electronics, semiconductors, computers, and telecommunications), and has
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`included projects on a diverse range of other industries.
`
`3.
`
`I have significant experience evaluating the economics of the
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`pharmaceuticals industry. I have provided expert analysis and consulting in over
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`50 cases involving pharmaceuticals and related products, including evaluations of
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`economic damages, competition, commercial success, irreparable harm, and other
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`Declaration of DeForest McDuff, Ph.D.
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`issues. I have evaluated a number of pharmaceutical product launches, both in a
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`litigation setting and an advisory role, and have published articles and taught
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`continuing legal education on pharmaceutical products as well.
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`4.
`
`I earned my Ph.D. in economics from Princeton University. At
`
`Princeton, I received a National Science Foundation Graduate Research Fellowship
`
`for academic research studying economic and statistical properties of housing
`
`markets and financial derivatives. I have published research in several peer-
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`reviewed academic journals. I graduated summa cum laude with undergraduate
`
`degrees in economics and mathematics from the University of Maryland.
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`5. My curriculum vitae, provided in EX1061, Attachment A, contains
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`more details on my background, experience, publications, and prior expert
`
`testimony.
`
`
`
`Scope of Work
`
`6.
`
`Intensity has been retained by Wilson Sonsini Goodrich & Rosati on
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`behalf of Mylan Pharmaceuticals, Inc. (“Mylan”) in connection with my work in
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`this matter. Intensity is being compensated at a rate of $700 per hour for my work
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`and at lower rates for time spent by others on my team. The compensation of
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`Intensity is not dependent on the substance of my testimony or the outcome of this
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`matter.
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`Declaration of DeForest McDuff, Ph.D.
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`7.
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`For this declaration, I was asked to review and discuss the declaration
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`(saxagliptin) and Kombiglyze (saxagliptin and metformin HCl extended‐release;
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`of Dr. Christine Meyer relating to the alleged commercial success of Onglyza
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`together, the “products-at-issue”) and U.S. Patent No. RE44,186 E (“the ’186
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`patent” or “patent-at-issue,” EX1001) submitted on August 2, 2016 (“Meyer
`
`Declaration”).2 This declaration is a statement of my opinions in this matter and
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`the basis and reasons for those opinions. In forming the opinions expressed in this
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`declaration, I have relied upon my education, experience, and knowledge of the
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`subjects discussed.
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`8.
`
`This declaration summarizes only my current opinions, which are
`
`subject to change depending upon additional information and/or analysis. The
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`entirety of my declaration, including exhibits EX1061 (CV) & EX1062
`
`(attachments) and referenced materials, supplies the basis for my analysis and
`
`conclusions. The organizational structure of the declaration is for convenience.
`
`To the extent that facts, economic analysis, and other considerations overlap, I
`
`generally discuss such issues only once for the sake of brevity. Neither the specific
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`order in which each issue is addressed nor the organization of my declaration or
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`attachments affects the ultimate outcome of my analysis.
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`4
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`2
`EX2059A: Meyer Declaration.
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`Declaration of DeForest McDuff, Ph.D.
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`
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`II. Background
` Type 2 diabetes
`
`9.
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`Type 2 diabetes is a disease related to improper function of how the
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`body utilizes insulin and metabolizes sugar. (see EX2057 (Declaration of M. James
`
`Lenhard, M.D.) for sources and references) Type 2 diabetes results in a build-up
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`of sugar in the bloodstream and can cause heart disease, stroke, vision loss, kidney
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`failure, sensory loss, amputation, and premature death. Id at ¶ 21. Treatment for
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`Type 2 diabetes includes healthy eating, regular exercise, blood sugar monitoring,
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`and a variety of prescription drug options: sulfonylureas, meglitinides, biguanides,
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`alpha-glucose inhibitors, and thiazolidinediones. Id at ¶¶ 25, 34.
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`
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`Products at issue
`
`10. Onglyza (saxagliptin) is a prescription drug product sold by
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`AstraZeneca that is used to lower blood sugar in adults with type 2 diabetes.3
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`Onglyza is a once-daily oral tablet that was approved in the United States in July
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`2009.4 I understand that Onglyza was co-promoted and sold together between
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`5
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`3
`EX2121.
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`4
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`EX2118, EX2120.
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`Declaration of DeForest McDuff, Ph.D.
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`AstraZeneca and Bristol-Myers Squibb (BMS) for a period of time, before
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`AstraZeneca purchased BMS’s interest in the product in 2014.5
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`11. Kombiglyze XR (saxagliptin and metformin HCL) is an extended-
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`release combination drug product also sold by AstraZeneca and used to help
`
`control blood sugar in adults with type 2 diabetes.6 Kombiglyze XR is a once-
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`daily oral tablet that was approved in the United States in November 2010.7
`
` The ’186 patent
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`12. U.S. Patent No. RE44,186 E, entitled “Cyclopropyl-Fused
`
`Pyrrolidine-Based Inhibitors of Dipeptidyl Peptidase IV and Method,” was issued
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`to Bristol-Myers Squibb on April 30, 2013.8 I understand that the ’186 patent is
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`alleged to claim the chemical entity saxagliptin and methods of treatment relating
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`to type 2 diabetes via use of saxagliptin.9
`
`
`5
`EX2004, EX2115, EX2116, EX2121, EX2122.
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`6
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`7
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`8
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`9
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`
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`EX2048.
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`EX2118, EX2120.
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`EX1001.
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`EX1001.
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`EX2059A: Meyer Declaration, ¶¶ 17–18.
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`Declaration of DeForest McDuff, Ph.D.
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`III. Analysis of the Meyer Declaration
` Overview
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`13. Commercial success is a secondary consideration that a patent owner
`
`may use to argue that a patent is not obvious based on the alleged commercial
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`success of a product embodying the invention of the patent. I understand that
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`commercial success is relevant to the determination of a patent’s obviousness since
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`the law presumes that an idea would have been brought to market sooner, in
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`response to market forces, had it been obvious to persons skilled in the art. I
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`further understand that evidence of commercial success is only relevant if there is a
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`nexus between the alleged commercial success and the patentable features of the
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`asserted claims. In other words, the patent owner must show that the commercial
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`success is attributable to the novel parts of a patent claim, and not on factors that
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`are unrelated or were already known.
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`14.
`
`In my opinion, the Meyer Declaration has a number of shortcomings
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`and has not established that Onglyza and Kombiglyze XR have been a commercial
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`success. There are several other factors separate from the claimed inventions that
`
`have had a significant impact on sales. These opinions are discussed in more detail
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`below.
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`Declaration of DeForest McDuff, Ph.D.
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`The Meyer Declaration does not provide appropriate context for
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`sales and prescriptions
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`15. The Meyer Declaration tabulates sales and prescriptions and declares
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`them to be “substantial” in some abstract, unexplained sense.10 However, the
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`Meyer Declaration fails to provide appropriate context to determine whether those
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`sales are, in fact, substantial or not, or large enough to demonstrate a commercial
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`success and profit opportunity.
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`16. As an initial matter, gross sales are not actually earned or recorded as
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`revenue by AstraZeneca or Bristol-Myers Squibb, and thus should not be
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`interpreted as product sales. For example, when the Meyer Report calculates U.S.
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`sales from IMS Health data and states that the Onglyza Family has generated over
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`$3.5 billion through September 2015,11 this figure is inflated and does not actually
`
`represent earned revenue since it does not take into account discounts and rebates
`
`that are unearned by the selling companies. Nowhere in the Meyer Declaration are
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`
`10
`EX2059A: Meyer Declaration, ¶¶ 32–37.
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`11
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`EX2059A: Meyer Declaration, ¶ 34.
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`there calculations of net revenues separately earned by each product at issue
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`(Onglyza and Kombiglyze XR).12
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`17. More fundamentally, the Meyer Declaration fails to provide sufficient
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`context for determining whether sales and prescriptions are actually substantial
`
`relative to the industry or to other potential benchmarks for evaluating commercial
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`success. The Meyer Declaration also provides no benchmark or comparison to the
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`costs associated with bringing drug products to market (see Section III.D below).
`
`The Meyer Declaration provides limited comparisons only to other DPP4
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`monotherapies in her calculation of market share, but nowhere provides any
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`amount of units, prescriptions, or dollar sales for any of those drugs or any other
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`drugs as points of comparison for the products at issue.13
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`18. For example, as a point of comparison not examined in the Meyer
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`Declaration, net sales of market-leading drug sitagliptin (sold by Merck under the
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`brand names Januvia and Janumet) were more than $6.0 billion in 2015 ($3.9
`
`
`12 Dr. Meyer does calculate net revenues for the two products combined based
`
`on company annual reports, but does not report them separately for each
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`product.
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`EX2059A: Meyer Declaration, ¶¶ 32–37.
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`13
`
`EX2059A: Meyer Declaration, ¶¶ 38–42, Figures 4-5.
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`Declaration of DeForest McDuff, Ph.D.
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`billion from Januvia and $2.5 billion from Janumet) and have exceeded $36 billion
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`worldwide since launch in 2006 ($25.6 billion from Januvia and $11.1 billion from
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`Janumet). See EX1062, Attachments B-1a, B-1b. As another point of comparison,
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`I understand that AstraZeneca’s expert, Dr. James Lenhard, has provided the
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`opinion that vildagliptin (sold by Novartis under the brand names Galvus and
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`Eucreas) is a “failure” from a clinical perspective “because it was not approved by
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`the FDA and is approved in Europe with a twice-daily dosing regimen (once-daily
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`is preferred for patient compliance, as discussed in more detail below) and
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`significant safety precautions due to liver toxicity.” (EX2057 at 31). Yet even its
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`non-US sales of only $1.1 billion in 2015 and $5.7 billion since launch exceed
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`sales by Onglyza and Kombiglyze XR worldwide. See EX1062, Attachments
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`B-1a, B-1c.
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`19. The Meyer Declaration also downplays examination of Onglyza’s and
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`Kombiglyze XR’s limited role within diabetes treatment more broadly. There are a
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`number of prescription drug treatment options for type 2 diabetes, of which DPP4
`
`monotherapies represent just a small share. For example, DPP-4 prescriptions
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`account for just
`
`% of noninsulin anti-diabetic drug (NIAD) prescriptions from
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`2009 to 2015, such that the products at issue have represented no more than %
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`Declaration of DeForest McDuff, Ph.D.
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`for Onglyza and % for Kombiglyze XR relative to this larger market.14 In other
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`words, analysis of a broader market for diabetes treatment shows that the DPP4
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`share of diabetes treatment is relatively low and that Onglyza/Kombiglyze XR
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`have had a relatively minor impact compared to other treatment options.
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`20. Nevertheless, even within DPP4-inhibitors, Onglyza’s and
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`Kombiglyze XR’s prescription shares are not impressive. Onglyza’s prescription
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`share from 2009 to 2015 was %, peaking at
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`%, and Kombiglyze XR’s
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`prescription share from 2011 to 2015 was %, peaking at %. See EX1062,
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`Attachments B-2 and B-3. These market do not provide compelling evidence of
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`commercial success or commercial opportunity.
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`21. The Meyer Declaration essentially rests her conclusion of sales being
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`“substantial” simply on Onglyza and Kombiglyze XR figures in a vacuum and
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`their market shares among DPP-4 monotherapy drugs only,15 an ultimately limited
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`and insufficient basis for establishing commercial success.
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` The Meyer Declaration does not evaluate profits
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`22. A fundamental consideration of commercial success is whether the
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`sales and profits are large enough that the market would have brought a particular
`
`
`14
`EX2059A: Meyer Declaration, ¶¶ 40–42, Table 1, Fig. 4-5.
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`15
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`EX2059A: Meyer Declaration, Table 6(b).
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`Declaration of DeForest McDuff, Ph.D.
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`product or products to market sooner if the claimed subject matter were obvious.
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`Consistent with this, evaluation of commercial success often involves evaluation of
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`profits in relation to costs of bringing a product to market. The Meyer Declaration
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`tabulates and analyzes Onglyza and Kombiglyze sales,16 but provides no
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`information or analysis by which to evaluate profits.
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`23.
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`In particular, a fundamental economic question in the pharmaceutical
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`industry (and more generally) involves a comparison of the expected costs of
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`commercialization and FDA approval against potential sales and profits, occurring
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`with uncertainty and many years into the future.17 Published research shows that
`
`
`16
`EX2059A: Meyer Declaration, ¶¶ 32–37 .
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`17
`
`For a variety of sources and discussion, see:
`
`EX1063: Mestre-Ferrandiz, Jorge, Jon Sussex, and Adrian Towse (2012),
`
`“The R&D Cost of a New Medicine,” Office of Health Economics, London
`
`UK, 1–86.
`
`EX1064: DiMasi, Joseph, Henry Grabowski, and Ronald Hansen (2016),
`
`"Innovation in the pharmaceutical industry: New estimates of R&D costs,"
`
`Journal of Health Economics 47: 20–33.
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`EX1065: David, Jesse and Marion B. Stewart (2005), “Commercial Success:
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`Economic Principles Applied to Patent Litigation,” in Gregory K. Leonard
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`12
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`Declaration of DeForest McDuff, Ph.D.
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`the costs of commercialization and FDA approval are substantial, with fully
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`capitalized and risk-adjusted expenses associated with development and
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`commercialization now exceeding $2.5 billion, on average.18 These estimates of
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`the total economic cost of bringing a drug to market account for the out-of-pocket
`
`
`and Lauren J. Stiroh, ed., Economic Approaches to Intellectual Property
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`Policy, Litigation, and Management, White Plains, NY: National Economic
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`Research Associates, Inc., at 196 (“From an economic perspective,
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`commercial success could in principle be defined by a single criterion: Does
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`the patented invention earn a positive net return (risk-adjusted) on invested
`
`capital after accounting for all relevant costs associated with developing and
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`commercializing the patent as well as any alternatives available to the patent
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`holder?”).
`
`18
`
`EX1064: DiMasi, Joseph, Henry Grabowski, and Ronald Hansen (2016),
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`"Innovation in the pharmaceutical industry: New estimates of R&D costs,"
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`Journal of Health Economics 47: 20–33, at 20.
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`13
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`Declaration of DeForest McDuff, Ph.D.
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`costs, opportunity cost, and uncertainty of failed research and development, which
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`are common and expected in the pharmaceutical industry.19
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`24. Facts and information in this case indicate that commercialization
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`costs for the products at issue here are likely to have been substantial: (1) two
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`products needing FDA approval (both Onglyza and Kombiglyze XR); (2) Onglyza
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`as a new molecular entity (consistent with the cost estimates for new drug
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`development); and (3) more than 8 years from the invention date of October 2000
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`assumed by Dr. Lenhard to the 2009 FDA approval of Onglyza and the 2010 FDA
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`approval of Kombiglyze identified by Dr. Lenhard (EX2057, ¶¶17, 47), compared
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`to 8.1 years for commercialization of the average drug.20 Based on these factors, it
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`19
`EX1063: Mestre-Ferrandiz, Jorge, Jon Sussex, and Adrian Towse (2012),
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`“The R&D Cost of a New Medicine,” Office of Health Economics, London
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`UK, 1–86, at 5.
`
`EX1064: DiMasi, Joseph, Henry Grabowski, and Ronald Hansen (2016),
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`"Innovation in the pharmaceutical industry: New estimates of R&D costs,"
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`Journal of Health Economics 47: 20–33, at 28.
`
`20
`
`EX1064: DiMasi, Joseph, Henry Grabowski, and Ronald Hansen (2016),
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`"Innovation in the pharmaceutical industry: New estimates of R&D costs,"
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`Declaration of DeForest McDuff, Ph.D.
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`is likely that the expected cost of commercializing Onglyza and Kombiglyze were,
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`together, on the greater side of drug commercialization costs.
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`25. Moreover, ongoing costs of earning sales can be significant as well.
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`For example, the IMS Health data relied upon by Dr. Meyer indicates that
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`AstraZeneca spent more than $
`
`million in promotional expenditures on
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`Onglyza and Kombiglyze XR in the United States alone from 2009 to 2015. See
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`EX1062, Attachment B-4. This amounts to approximately
`
`% of total U.S. net
`
`sales over the same time period. See EX1062, Attachment B-4. There are also
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`costs associated with manufacture, distribution, and other cost of sales. Dr. Meyer
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`does not evaluate ongoing costs or profits associated with Onglyza or Kombiglyze
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`XR, much less the cost of commercialization and bringing a drug product to
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`market.
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`26. Ultimately, the Meyer Declaration fails to consider profits of any sort,
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`not only economic profits more generally but even accounting profits earned over
`
`time by AstraZeneca. This is a significant shortcoming of her analysis and calls
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`into question her conclusions on commercial success.
`
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`Journal of Health Economics 47: 20–33, at 24 (96.8 months / 12 = 8.1
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`years).
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`Declaration of DeForest McDuff, Ph.D.
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` A limited market opportunity does not demonstrate commercial
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`success
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`27. The Meyer Declaration argues that the “crowded marketplace,” lack
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`of “first-mover advantage,” and competition from other DD4s provide further
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`evidence of Onglyza’s commercial success.21 This approach attempts to spin
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`negative market factors in favor of finding commercial success, when in fact these
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`limitations are precisely the sorts of factors that discourage companies from
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`pursuing products. Said another way, market constraints emphasized by Dr. Meyer
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`provide examples of reduced commercial opportunity and incentives for
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`development, rather than the opposite.
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`28. A limited market opportunity – by entering a crowded market, not
`
`being the first to market, facing competitors, or otherwise – does not provide
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`evidence in favor of commercial success. Rather, it shows a more limited
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`commercial opportunity and reduced incentives for market forces to bring such a
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`product to market sooner.
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`
`21
`EX2059A: Meyer Declaration, ¶¶ 42–44.
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`Declaration of DeForest McDuff, Ph.D.
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`Sales and use of Onglyza and Kombiglyze XR do not demonstrate
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`particularly differentiated or unique products
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`29. Sales and use of Onglyza and Kombiglyze XR do not demonstrate
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`particularly differentiated or superior treatment options. Analysis of drug
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`prescriptions shows that other DPP4 treatment options are more widely utilized in
`
`comparison. Analysis of some of the primary comparisons made in the Meyer
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`Declaration (comparisons against Januvia, Tradjenta, etc.)22 shows that Onglyza
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`and Kombiglyze XR have underperformed.
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`30. For example, Onglyza has significantly underperformed the Januvia
`
`Family, the leading DPP4 product. At Onglyza’s launch in mid-2009, Januvia
`
`prescriptions were running around
`
` per month. Onglyza launched
`
`and earned less than
`
` prescriptions per month for the first year and peaked
`
`in 2012 at less than
`
` per month before declining down to approximately
`
` per month in 2015. At the same time, Januvia prescriptions were
`
`
`
`to more than
`
` prescriptions per month and, as of 2015, were approximately
`
`. See EX1062, Attachment B-5. In other words, Onglyza use
`
`has amounted to just a fraction of Januvia and has declined whereas Januvia use
`
`.
`
`
`22
`EX2059A: Meyer Declaration, ¶ 15, Table 1.
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`31. Similarly, Onglyza has significantly underperformed Tradjenta, even
`
`though Tradjenta was launched later in time. As described, Onglyza launched in
`
`2009 and grew to just less than
`
` prescriptions per month by mid-2012 and
`
`declined thereafter. By comparison, Tradjenta launched several years later in early
`
`2011, but grew rapidly to surpass Onglyza at
`
` prescriptions per month in
`
`2014, surpassed
`
` prescriptions per month in 2015, and
`
`
`
`. See EX1062, Attachment B-6. In other words, Onglyza use was
`
`quickly surpassed by Tradjenta despite Onglyza’s relative “first-mover advantage”
`
`and being on the market for several years.
`
`32. Similarly, Kombiglyze XR has significantly underperformed Janumet
`
`and Janumet XR (fixed-dose combinations of sitagliptin with metformin), which
`
`compete most directly against Kombiglyze XR. Kombiglyze XR launched in mid-
`
`2010 and grew prescriptions to just under
`
` per month by 2012 before
`
`declining thereafter. By comparison, Janumet and Janumet XR prescriptions were
`
`greater than
`
` per month by 2010 (following launch in 2007) and
`
`
`
`
`
` prescriptions per month by 2015. See EX1062,
`
`Attachment B-7. In other words, Kombiglyze XR use has been just a fraction of its
`
`most comparable products and has declined while Janumet
`
`.
`
`33. Documentary evidence confirms that Onglyza’s unimpressive
`
`commercial performance was noted contemporaneously by the market even shortly
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`18
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` Case IPR2015-01340
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`Declaration of DeForest McDuff, Ph.D.
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`
`
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`
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`after its initial product launch. For example, a January 2010 market analysis report
`
`noted that
`
` and that
`
`
`
`
`
` EX1066 at 27, 71. As another example, a June 2010 market analysis report
`
`reaffirmed that
`
` EX1067 at 140. The latter report
`
`
`
`also noted that Onglyza’s lackluster commercial performance coincided with it
`
`having an efficacy that merely “
`
`
`
`.” Id. As another example, a Credit Suisse
`
`
`
`
`
`
`
`23 As a further example, a
`
`
`
`
`
`
`
`analyst report (April 2009) states: “
`
`J.P. Morgan analyst report (June 2008) states:
`
`
`23
`EX1068: Credit Suisse, “AstraZeneca: FDA Panel Supports Saxagliptin CV
`
`19
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` Case IPR2015-01340
`
`Safety,” 4/2/2009, at 1.
`
`
`Declaration of DeForest McDuff, Ph.D.
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`.”24
`
`34. Taken together, the above information and analysis shows that
`
`Onglyza and Kombiglyze XR do not have differentiated or superior performance
`
`within the marketplace. By contrast, prescription shares within DPP4-inhibitor
`
`products indicate a strong correlation with order of entry (
`
`
`
`), with the exception that Onglyza and
`
`Kombiglyze XR were launched third but were still surpassed by Tradjenta, as
`
`described above. See EX1062, Attachments B-2 and B-3.
`
`
`
`Limited future opportunity
`
`35. Looking forward, Onglyza and Kombiglyze XR have limited future
`
`opportunity for growth and expansion, in light of the FDA warning for heart failure
`
`and their declining sales in recent years.
`
`
`24
`EX1069: J.P. Morgan, “Merck & Co., Inc.: Playing the Januvia and Gardasil
`
`20
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` Case IPR2015-01340
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`Product Cycle,” 6/24/2008, at 6.
`
`
`Declaration of DeForest McDuff, Ph.D.
`
`
`
`
`
`
`
`
`36.
`
`In 2016, the FDA issued a warning that patients who received
`
`saxagliptin- or alogliptin-containing medicines had greater risk of hospitalization
`
`for heart failure, and identified hospitalization for heart failure as a warning listed
`
`on the FDA label in April 2016.25 Economically, this kind of FDA warning can
`
`and often does have an adverse impact on sales and prescriptions of products on
`
`which the warning occurs.
`
`37. Sales and prescription data show that Onglyza and Kombiglyze XR
`
`use has been
`
`since 2012 (see EX1062, Attachments B-2 and B-3), and
`
`will likely decline even more in light of this FDA warning. Had the FDA
`
`discovered and issued its heart failure warning even earlier, past sales would likely
`
`have been even lower than those relied upon in the Meyer Declaration.
`
` Other factors have had significant contributions to sales
`
`38. Evidence indicates several factors separate from the claimed
`
`technology that appear to have had significant contributions to sales: (1) broader
`
`
`EX1032: AstraZeneca AB v. Aurobindo, et al., Trial EX JTX-146 (FDA
`25
`
`Drug Safety Communication for Onglyza and Kombiglyze XR).
`
`
`
`EX1033: AstraZeneca AB v. Aurobindo, et al., Trial EX JTX-196 (Onglyza
`
`21
`
` Case IPR2015-01340
`
`Label).
`
`
`Declaration of DeForest McDuff, Ph.D.
`
`
`
`
`
`
`
`
`demand for DPP4 inhibitors, (2) substantial price discounts for Onglyza and
`
`Kombiglyze XR, and (3) substantial marketing expenditures.
`
`39. First, evidence indicates that demand for DPP4 inhibitors was
`
`growing more generally, such that Onglyza and Kombiglyze XR benefitted from
`
`that growth. For example, the first DPP4-inhibitor and current market leader,
`
`Januvia, launched in late 2006 and was followed by Janumet’s launch in 2007.
`
`Prescriptions of DPP4-inhibitors grew steadily to more than
`
` per month by
`
`2010 (the time of Onglyza’s launch) and then to
`
` per month by 2015.
`
`See EX1062, Attachment B-2. During that time, Onglyza and Kombiglyze XR
`
`prescriptions together have never exceeded
`
` per month. See EX1062,
`
`Attachments B-2 and B-3.
`
`40. Documentary evidence confirms that demand for DPP4 treatments
`
`was growing more generally as a result of Merck’s Januvia product, which
`
`benefitted Onglyza and Kombiglyze XR as relatively smaller but follow-on
`
`therapies in the market. For example, a Piper Jaffray analyst report (December
`
`2008) states:
`
`
`
`,
`
`22
`
` Case IPR2015-01340
`
`
`Declaration of DeForest McDuff, Ph.D.
`
`
`
`
`
`
`
`
`”26 As another example, a Barclays
`
`Capital analyst report (January 2010) states:
`
`
`
`
`
`.”27
`
`41. Second, evidence indicates that price discounts for Onglyza and
`
`Kombiglyze XR have been substantial relative to the pharmaceutical industry and
`
`to DPP4 competitors. Comparisons of gross prices (before discounts and rebates)
`
`and net prices (after discounts and rebates) shows that discounts and rebates were
`
`substantial, ranging from
`
` in early years up to
`
` as of 2015
`
`for Onglyza and from
`
` in early years up to
`
` as of 2015 for
`
`Kombiglyze XR. See EX1062, Attachments B-8a and B-8b. These discounts are
`
`large and substantially above average, based on my experience evaluating these
`
`types of discounts in the pharmaceutical industry.
`
`42. As a point of comparison, Novartis, a competitor of AstraZeneca and
`
`the manufacturer of vildagliptin, reports total gross-to-net sales adjustments for its
`
`
`26
`EX1070: Piper Jaffray, “Forest Laboratories, Inc. – Victim of its Own
`
`Success,” 12/15/2008, at 3.
`
`27
`
`EX1071: Barclays Capital, “Bristol Myers Squibb Co. – Low Tax Rate
`
`23
`
` Case IPR2015-01340
`
`Drives EPS Beat,” 1/28/2010, at 3.
`
`
`Declaration of DeForest McDuff, Ph.D.
`
`
`
`
`
`
`
`
`pharmaceuticals products (which include vildagliptin) of just 19.6% for each of
`
`2014 and 2015.28 EX1051 (Novartis 2015 Annual Report) at 159 of 264. See
`
`EX1062, Attachment B-9. In 2014 and 2015, AstraZeneca’s net sales adjustments
`
`were % and % of gross sales for Onglyza and % and % for Kombiglyze.
`
`See EX1062, Attachments B-8a and B-8b. In other words, AstraZeneca’s net sales
`
`adjustments for the saxagliptin-containing products are
`
` than the average net
`
`sales adjustment for Novartis’s pharmaceutical products.
`
`
`28 Novartis’s net sales adjustment percentages in 2014 and 2015 are generally
`
`consistent with its prior years during which vildagliptin was sold. See e.g.,
`
`EX1049 (2013 Novartis Annual Report) at 166 (total net sales adjustments of
`
`19.8% of gross sales of pharmaceuticals in 2013 and 19.4% of gross sales of
`
`pharmaceuticals in 2012); EX1047 (2011 Novartis Annual Report at 125 of 346
`
`(total net sales adjustments of 18.7% of gross sales of pharmaceuticals in 2011,
`
`16.7% of gross sales of pharmaceuticals in 2010, and 14.3% of gross sales of
`
`pharmaceuticals in 2009); EX1044 (2008 Novartis Annual Report) at 105 of 328
`
`(total net sales adjustments of 17.1% of gross sales of pharmaceuticals in 2008,
`
`17.9% of gross sales of pharmaceuticals in 2007, and 17.5% of gross sales of
`
`pharmaceuticals in 2006). See EX1062, Attachment B-9. Similar information was
`
`not available from public filings from Merck, seller of sitagliptin
`
`24
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` Case IPR2015-01340
`
`
`Declaration of DeForest McDuff, Ph.D.
`
`
`
`
`
`
`
`
`43. As another point of comparison, AstraZeneca’s managed market
`
`rebates are
`
`
`
` than the average managed market rebate for Novartis’s
`
`pharmaceutical products. For example, Novartis reported for 2014 and 2015 that
`
`its “Non-US-specific healthcare plans and program rebates” were 5.1-5.3% and
`
`that its “US-specific healthcare plans and program rebates” were 3.8%-4.6% across
`
`all pharmaceutical products. EX1051 (Novartis 2015 Annual Report) at 159. In
`
`contrast, the managed market discounts during the same years at AstraZeneca were
`
`% and % for Onglyza and % and % for Kombiglyze. In other words,
`
`these examples confirm my experience that the discounts for Onglyza and
`
`Kombiglyze are large and substantially above average.
`
`44. Third, analysis of Onglyza and Kombiglyze XR marketing indicate
`
`that marketing was above-average relative to sales for its time period. For
`
`example, calculations indicate
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