UNITED STATES PATENT AND TRADEMARK OFFICE
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`
`ARGENTUM PHARMACEUTICALS LLC
`Petitioners,
`
`v.
`
`ALCON RESEARCH, LTD.,
`Patent Owner
`
`Case: IPR2017-01053
`U.S. Patent No. 8,268,299
`
`DECLARATION OF JOHN C. STAINES, JR. IN SUPPORT OF
`PETITIONER’S REPLY TO PATENT OWNER’S RESPONSE
`
`MAY 1, 2018
`
`Exhibit 1094
`ARGENTUM
`IPR2017-01053
`
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`Inter Partes Review of U.S. Patent No. 8,268,299
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`Table of Contents
`
`I.
`
`II.
`
`III.
`
`IV.
`
`V.
`
`QUALIFICATIONS ............................................................................................................... 3
`
`OBJECTIVES ......................................................................................................................... 4
`
`SUMMARY OF FINDINGS.................................................................................................. 6
`
`PRODUCT BACKGROUND .............................................................................................. 11
`
`COMMERCIAL SUCCESS ANALYSIS .......................................................................... 17
`
`A.
`
`B.
`
`C.
`
`D.
`
`Dr. Grabowski’s Analysis Does Not Consider Other Patents That Would Have
`Blocked an Alternative Developer of the ’299 Patent .................................... 21
`
`Dr. Grabowski’s Analysis Fails to Consider the Economic Significance of
`Travatan Z®’s “Successor Product” Status ..................................................... 22
`
`1.
`2.
`
`Economics of Successor Products in the Pharmaceutical Industry ......24
`Alcon’s Marketing of Travatan Z® Comports with the Model of a Successor
`Product Developed to Shift Sales Away from Generic Competition .....29
`Implications of Travatan Z® Successor Product Status for Dr. Grabowski’s
`Commercial Success Analysis .............................................................33
`Dr. Grabowski’s Analyses Based on Travatan Z®’s Wholesale Dollar Sales
`Rather Than Net Revenues Lead to Unreliable Conclusions ........................ 45
`
`3.
`
`The Sales Impact of Generic Competition for Other PGA Brands is Not
`Relevant to Assessing if Travatan Z® is a Commercial Success ................... 54
`
`VI.
`
`NEXUS ANALYSIS ............................................................................................................. 60
`
`A.
`
`B.
`
`C.
`
`Travatan Z®’s Commercial Performance Has Primarily Been Driven by
`Original Travatan®’s Previous Performance .................................................. 61
`
`Dr. Grabowski Inappropriately Dismisses Marketing Support as an
`Independent Driver of Travatan Z®’s Commercial Performance ................ 62
`
`Lack of Evidence that the ’299 Patent Technology was a Significant Driver of
`Travatan Z®’s Sales ............................................................................................ 67
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`Inter Partes Review of U.S. Patent No. 8,268,299
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`I.
`
`QUALIFICATIONS
`
`1.
`
`I am a Director and Principal in the Washington, DC office of
`
`Navigant Economics, a subsidiary of Navigant Consulting, Inc., an international
`
`consulting firm. Navigant Economics provides expertise primarily in economics,
`
`finance, public policy, and business strategy. I am knowledgeable in the fields of
`
`microeconomics, industrial organization, financial economics, and statistics, and
`
`have particular expertise in applying the tools of these disciplines to legal disputes
`
`arising in the pharmaceutical and related industries.
`
`2.
`
`My educational background includes a B.A. in Economics and
`
`M.P.M. in Public Policy from the University of Maryland and an M.B.A. in
`
`Business Economics and Finance from the University of Chicago. Since 1984, I
`
`have worked as a consultant on economic, financial, statistical, and general business
`
`issues arising in commercial litigation disputes. My work primarily has involved
`
`analyzing competitive issues and estimating commercial damages associated with
`
`various types of legal and regulatory matters, most often relating to the
`
`pharmaceutical industry. I previously have been accepted as an expert witness in
`
`Federal Court and before the Patent Trial and Appeal Board to opine on economic
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`Inter Partes Review of U.S. Patent No. 8,268,299
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`issues arising in pharmaceutical-related patent and antitrust litigation. A copy of my
`
`curriculum vitae is included as Appendix A to this report.
`
`3. Navigant Economics is being compensated for the work I perform
`
`in connection with this case at my standard hourly rate of $535. Part of the work
`
`underlying this report was performed by staff of Navigant Economics working
`
`under my direction. Payment of fees to Navigant Economics associated with work
`
`performed on this matter is not contingent upon or in any way affected by the nature
`
`of my opinions or the outcome of this litigation.
`
`II. OBJECTIVES
`
`4.
`
`I have been retained by the Petitioners in this matter, Argentum
`
`Pharmaceuticals LLC (“Argentum”) to render independent expert opinions concern-
`
`ing evidence presented by Patent Owner. Alcon Research, Ltd. (“Alcon”), regarding
`
`the existence and sources of any commercial success that may be associated with the
`
`glaucoma treatment, Travatan Z®, as they may relate to the obviousness of the tech-
`
`nology claimed by U.S. Patent Number 8,268,299 (the “’299 patent”), entitled “Self-
`
`Preserved Aqueous Pharmaceutical Compounds,”1 Patent Owner markets Travatan
`
`
`1
`Exhibit 1001.
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`Z® in the United States,2 which it claims to be the “commercial embodiment of the
`
`invention claimed in the ’299 patent.”3 On March 10, 2017, Argentum petitioned
`
`the Patent Trial and Appeal Board (“PTAB”) to institute an inter partes review of
`
`the validity of claims 1 to 28 of the ’299 patent,4 which the PTAB did institute on
`
`September 22, 2017.5
`
`
`Exhibit 2061, p. 53.
`2
`
`3
`
`Argentum Pharmaceuticals LLC v. Alcon Research Ltd., U.S. Patent and
`
`Trademark Office, Patent Trial and Appeals Board, IPR2017-01053, Patent
`
`Owner Response Alcon Research, Ltd.’s Response, December 22, 2017, p.
`
`54.
`
`4
`
`Argentum Pharmaceuticals LLC v. Alcon Research Ltd., U.S. Patent and
`
`Trademark Office, Patent Trial and Appeals Board, IPR2017-01053, Petition
`
`for Inter Partes Review, March 10, 2017, pp. 1-2.
`
`5
`
`Argentum Pharmaceuticals LLC v. Alcon Research Ltd., U.S. Patent and
`
`Trademark Office, Patent Trial and Appeals Board, IPR2017-01053, Deci-
`
`sion, Institution of Inter Parties Review, September 22, 2017, pp. 17-18.
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`5.
`
`I understand that the commercial success of a product practicing
`
`technology claimed by an asserted patent may in some cases represent a secondary
`
`indicium that the patented technology was nonobvious.6 In this context, counsel for
`
`Argentum has asked me to evaluate the opinions and supporting evidence presented
`
`in the Declaration of Henry Grabowski, Ph.D.,7 in which Dr. Grabowski concluded
`
`that Travatan Z® is a commercial success and that there is a nexus between this
`
`commercial success and characteristics of Travatan Z® that are reported to embody
`
`inventions claimed in the ’299 patent.8 Specifically, my evaluation involves as-
`
`sessing whether Dr. Grabowski’s analysis is sufficient to support a conclusion that
`
`Travatan Z®’ has achieved commercial success that represents an indicium that the
`
`’299 patent technology was nonobvious.
`
`III. SUMMARY OF FINDINGS
`
`6. Based on my evaluation, it is my opinion that Dr. Grabowski’s
`
`analysis fails to demonstrate that Travatan Z®’s commercial performance indicates
`
`
`See, e.g., Graham v. John Deere, Co., 383 U.S. 1, 17–18, 36 (1966).
`6
`
`7
`
`8
`
`Exhibit 2029.
`
`Id., at ¶¶14, 114.
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`the technology claimed by the ’299 patent is nonobvious. This failure stems
`
`principally from four fundamental analytical flaws that undermine Dr. Grabowski’s
`
`commercial success conclusion.
`
`• First, Dr. Grabowski fails to consider Petitioner’s claim that two
`previously-issued Alcon patents would have blocked others from
`having developed a product that incorporates the ’299 patent
`technology, and thus, that any commercial success Travatan Z® may
`have enjoyed would not have motivated others to have developed such
`a product earlier even if it had been obvious.
`
`• Second, Dr. Grabowski’s analysis does not reflect that Travatan Z® is a
`follow-on “successor” version of its parent drug, Travatan®, which is
`comprised of the same active ingredient as Travatan Z® but does not
`utilize the preservative claimed by the ’299 patent. Given this
`relationship, it is Travatan Z®’s incremental sales beyond what
`Travatan® would have generated if not replaced by Travatan Z® that is
`the measure of commercial success relevant for assessing whether
`others would have been motivated to have developed the ’299 patent
`technology earlier had it been obvious.
`
`• Third, Dr. Grabowski’s evaluation of Travatan Z®’s sales revenue
`performance is based exclusively on analyzing its gross revenue,
`before deduction of customer sales allowances (e.g., price discounts).
`It is the product’s net sales revenue actually generated, after deduction
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`of all customer sales allowances, that is the measure of commercial
`performance relevant for purposes of determining whether others
`would previously have been motivated to develop the ’299 patent
`technology had it been obvious. Based on factors suggesting Travatan
`Z®’s sales allowances have been substantial, Dr. Grabowski’s analysis
`based on Travatan Z®’s gross sales revenue likely provides a
`significantly distorted measure of Travatan Z®’s actual commercial
`performance, and thus, is inadequate to support reliable conclusions
`regarding commercial success or a nexus to the ’299 patent.
`
`• Fourth, the significance Dr. Grabowski attributes to Travatan Z®’s
`sales performance in the presence of significant generic sales in the
`PGA market is misplaced. Generic entry does not lower the threshold
`for commercial success, but may explain why commercial success has
`not been achieved, and thus, why others would not have been
`motivated previously to develop the patented technology if it had been
`obvious. Moreover, there was no generic entry until 2011, and when
`that entry did occur, Travatan Z®’s commercial performance
`deteriorated significantly, even though none of the generic PGA
`products were interchangeable with (A-rated to) Travatan Z®.
`
`7. For similar reasons, I find that even if Travatan Z® could be
`
`construed to represent a commercial success, any such success does not have a
`
`nexus to the preservative technology claimed by the ’299 patent.
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`• First, Travatan Z®’s sales have primarily been driven by its status as a
`successor drug to Travatan®, specifically by leveraging its parent
`Travatan®’s early mover advantage and benefiting from Alcon’s
`lifecycle management policies to shift Travatan®’s sales to Travatan
`Z®. The continuously increasing trend in Travatan® sales to 2006
`indicates that Travatan Z® generated little or no additional sales than
`Travatan® would have generated had its sales not been cut short by
`Travatan Z®’s entry and sales cannibalization.
`
`• Dr. Grabowski’s dismissal of marketing as a primary driver of
`Travatan® Z®’s sales ignores the persuasive role of pharmaceutical
`marketing and inappropriately compares the Travatan Z®’s marketing
`support to that of other PGA brands rather than specifically to
`Travatan®, from which Travatan Z® generated essentially all its sales.
`This comparison shows that a nearly complete shift of Alcon marketing
`from supporting Travatan® sales to opposing them and supporting
`Travatan Z®’s sales was a primary driver of Travatan Z®’s sales.
`
`• In my opinion, the record lacks sufficient evidence to support a
`conclusion that the market ascribed significant commercial value to the
`’299 patent technology that would indicate it was a significant driver of
`Travatan Z®’s sales as compared to factors unrelated to the unique
`features of the ’299 patent technology.
`
`8. The opinions I express herein are based upon my personal
`
`knowledge, experience, and expertise, as well as upon evidence filed in this
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`proceeding and my independent research in this case. This evidence consists of
`
`publicly-available information and documents collected by me and by my staff, as
`
`well as case filings and exhibits filed by the parties in this proceeding, which
`
`include declarations, deposition transcripts, data, tables, graphs, journal articles,
`
`FDA information, etc. Specifically, I have considered the exhibits identified in the
`
`citations throughout this Declaration, including the Grabowski Declaration (Exhibit
`
`2029) and documents referenced therein. The documents and data I cite in this
`
`Declaration are the types that economists consider to be reliable and upon which
`
`economists typically rely.
`
`9.
`
`I reserve the right to amend or supplement my opinions based on
`
`further information I may receive after the date of this report, including, without
`
`limitation, documents and data filed by the parties, deposition transcripts and
`
`exhibits, legal submissions, and affidavits/declarations.
`
`10. In the remaining sections of this Declaration, I provide a detailed
`
`evaluation of Dr. Grabowski’s conclusions and supporting analysis regarding the
`
`commercial success of products allegedly practicing the challenged claims of the
`
`’299 patent as an indicium that the claimed technology was nonobvious. I begin by
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`describing the subject product, Travatan Z®, and related products. I then analyze the
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`validity of Dr. Grabowski’s opinion that the commercial sales performance of
`
`Travatan Z® represents a “commercial success” in the context of this obviousness
`
`inquiry. Finally, I examine Dr. Grabowski’s analysis supporting his opinion of a
`
`nexus between the commercial performance of Travatan Z® and the challenged
`
`claims of the ’299 patent.
`
`IV. PRODUCT BACKGROUND
`
`11. On September 21, 2006, the U.S. Food and Drug Administration
`
`(“FDA”) granted Alcon approval to market Travatan Z® for the reduction of
`
`intraocular pressure (“IOP”) in patients with open angular glaucoma or ocular
`
`tension who are intolerant or insufficiently responsive to other intralocular pressure
`
`lowering medications.9 Alcon began selling Travatan Z® in October 2006.10
`
`
`9
`Exhibit 2060. On August 31, 2010, the FDA approved Alcon’s supplemental
`
`application to change Travatan Z®’s indication to remove the condition limit-
`
`ing usage to patients who are intolerant or insufficiently responsive to other
`
`intraocular pressure lowering medications. (Exhibit 1051. See also Exhibit
`
`2062.)
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`Travatan Z® is an ophthalmic solution containing a 0.004% concentration of
`
`travoprost as its active ingredient, which is a prostaglandin analogue (“PGA”) that
`
`acts to reduce IOP.11 Travatan Z® is a modified version of Alcon’s original
`
`travoprost product, Travatan®, which substitutes an ionic buffered preservative for
`
`the benzalkonium chloride (“BAK”) preservative used in the original Travatan®.12 I
`
`understand that after prolonged use BAK may exacerbate ocular surface disease in
`
`some patients who have this condition.13 Alcon launched the original Travatan® in
`
`April 2001 and subsequently announced its removal from the market in July 2010.14
`
`12. There are three other brand products in the PGA class based on
`
`alternative PGA molecules.
`
` Xalatan®, comprised of the active ingredient
`
`latanoprost, was the breakthrough drug that established the PGA class for the
`
`
`… (Continued)
`10
`Exhibit 2061 at p. 53. Novartis AG completed its full acquisition of Alcon on
`
`April 8, 2011. (Exhibit 1052 at pp. 7, 33)
`
`11
`
`12
`
`13
`
`14
`
`Exhibit 2062 at p. 4.
`
`Exhibit 2061 at p. 53; Exhibit 2062 at p. 7.
`
`Exhibit 1021 at ¶12; Exhibit 2027 at ¶24.
`
`Exhibit 1016 at p. 9; Exhibit 2110.
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`treatment of glaucoma-related IOP when it was approved for marketing by the FDA
`
`in 1996.15 Then in March 2001, the FDA approved Lumigan®, based on the active
`
`ingredient bimatoprost, in the same month it approved Travatan®.16 Finally,
`
`Zioptan®, consisting of the PGA tafluprost. was introduced in 2012.17 A fifth
`
`product, Rescula®, was introduced to treat glaucoma-related IOP in 2000,18 though
`
`its active ingredient, unoprostone, is not strictly a PGA but rather is a docosanoid,
`
`another member of the prostanoid “family.”19 Rescula® was discontinued in 2015.20
`
`Xalatan®, Lumigan®, and Travatan® use BAK as the preservative, while Zioptan®
`
`does not use a preservative.21
`
`
`15
`Exhibit 2114; Exhibit 2040.
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`Exhibit 2113; Exhibit 2040.
`
`Exhibit 1053; Exhibit 2040.
`
`Exhibit 2063 at p. 8; Exhibit 2040. Rescula® subsequently exited the market
`
`and then was reintroduced in 2012.
`
`Exhibit 1054.
`
`Exhibit 2063 at p. 8; Exhibit 2040.
`
`Exhibit 2027 at ¶¶22. 32-33.
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`13. A number of derivative products in addition to Travatan Z® have
`
`been introduced based on the active ingredients comprising the first three original
`
`PGAs. A lower 0.01% concentration of Lumigan®, compared to the 0.03% of the
`
`original Lumigan®, was approved in mid-2010.22 Brand Lumigan® 0.03% was
`
`subsequently removed from the market in mid-2012.23 Generic versions of Xalatan®
`
`were approved for marketing in early 2011, followed by generic versions of the
`
`original Travatan® in 2013, and generics for the original Lumigan® 0.03%
`
`concentration in 2015.24 Throughout the period, latanoprost has accounted for more
`
`than half of PGA unit sales and prescriptions, in the form of brand Xalatan® through
`
`2010, and through its generics since 2011.25 By 2017, generic versions of Xalatan®
`
`
`22
`Exhibit 2116 at p. 4; Exhibit 2040.
`
`23
`
`24
`
`25
`
`Exhibit 2111.
`
`Exhibit 2112; Exhibit 2113; Exhibit 2114; Exhibit 2115; Exhibit 2040.
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`Exhibit 2044; Exhibit 2048.
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`represented approximately 70% of PGA prescriptions.26 In contrast, the generics for
`
`Travatan® and Lumigan® 0.03% have only generated trivial sales. 27
`
`14. A number of non-PGA products are also available for treating
`
`glaucoma-related IOP as alternatives to, or in combination with, PGAs.28 These
`
`treatments
`
`include beta blockers
`
`(e.g.,
`
`timolol), alpha-2 agonists
`
`(e.g.,
`
`apraclonidine), carbonic anhydrase inhibitors (e.g., dorzolamide), and fixed
`
`combinations of these drugs.29 Certain of these products do not contain the BAK
`
`preservative.30 The non-PGA treatments were eventually supplanted as first-line
`
`therapy for glaucoma-related IOP after the introduction of PGAs based on PGA’s
`
`
`26
`Exhibit 2044.
`
`27
`
`28
`
`29
`
`30
`
`Id.
`
`Exhibit 1055; Exhibit 1056 at pp. 5-7; Exhibit 2027 at ¶20; Exhibit 2129 at
`
`pp. 64-66.
`
`Id.
`
`Exhibit 1057; Exhibit 2127 at p. 15; Exhibit 2027 at ¶34; Exhibit 1092 at ¶14.
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`generally higher efficacy.31 However, the non-PGA treatments reportedly still
`
`account for nearly half of glaucoma IOP prescriptions.32, 33
`
`
`31
`Exhibit 1058.
`
`32
`
`See, e.g., Exhibit 1059 at p. 1; Exhibit 1060 at p. 4; Exhibit 1061 at p. 5.
`
`33 Dr. Grabowski’s analysis of Travatan Z®’s sales shares is based on calcula-
`
`tions that exclude these non-PGA treatments. He justifies these exclusions on
`
`the opinions of Patent Owner’s medical expert, Dr. Parrish, that non-PGAs
`
`are not comparable to PGAs, are not considered to be therapeutic alternatives
`
`to Travatan Z®, are generally not as efficacious as PGAs, and are generally
`
`prescribed with far less frequency than PGAs. (Exhibit 2029 at ¶21.) Peti-
`
`tioner’s medical expert, Dr. Buys suggests that the attendance at conferences
`
`and conversations with other physicians on which Dr. Parrish relies for his
`
`generalizations are not reliable. (Exhibit 1092 at ¶47.) At a minimum, the
`
`last of these opinions appears to contradict the references cited in the previous
`
`footnote, that non-PGAs account for nearly half of all glaucoma IOP drug
`
`prescriptions. To the extent these non-PGA products are reasonably substi-
`
`tutable with PGAs, including them in Dr. Grabowski’s share calculations
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`… (Continued)
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`V. COMMERCIAL SUCCESS ANALYSIS
`
`15. I understand that the commercial success of a product practicing
`
`features of a patented invention can represent a secondary indicium of that
`
`invention’s nonobviousness in the context of determining the patent’s legal
`
`validity.34 The underlying rationale is that the product’s actual commercial success
`
`suggests others would have been motivated previously to have developed and
`
`marketed such a product before the Patent Owner, had the invention been obvious.35
`
`I further understand that a Patent Owner’s claim of the subject product’s actual
`
`“commercial success [is] usually shown by significant sales in a relevant market.”36
`
`
`… (Continued)
`would be expected to reduce his Travatan Z® quantity shares by nearly one-
`
`third.
`
`34 Graham v. John Deere, Co., 383 U.S. 1, 17–18, 36 (1966).
`
`35
`
`See, e.g., Exhibit 1062 at pp. 997-998; Exhibit 1063 at p. 38; Merck & Co.,
`
`Inc. v. Teva Pharms. USA, Inc., 395 F.3d 1364, 1376 (Fed. Cir. 2005).
`
`36
`
`J.T. Eaton & Co. Inc. v. Alt. Paste & Glue Co., 106 F.3d at 1563, 1571 (Fed.
`
`Cir. 1997).
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`16. In his declaration, Dr. Grabowski assesses whether Travatan Z®
`
`represents a commercial success by analyzing its absolute levels of sales revenues
`
`and quantities (both unit sales and prescriptions), the rates of growth in these sales,
`
`and the shares these sales represent of total sales in the PGA product class.37 Based
`
`on this analysis, he observes that the 27.6 million prescriptions written for Travatan
`
`Z® from its 2006 launch through October 2017 have generated $4.2 billion in sales
`
`revenue,38 which reflects an average 27% average annual growth rate from $65
`
`million in 2007 to $554 million in 2016.39 He further notes that this increase
`
`translates into corresponding increases in Travatan Z®’s share of all PGA dollar
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`sales from 6% in 2007, to 12% in 2008, 24% in 2010, and 40% in 2011 where it has
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`remained since then.40
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`17. Dr. Grabowski judges this history of Travatan Z®’s dollar sales to
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`represent a “strong sales performance” in the presence of: 1) what he claims to be a
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`
`Exhibit 2029 at ¶24.
`37
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`38
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`39
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`40
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`Id. at ¶25.
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`Id. at ¶26.
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`Id. at ¶29.
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`late entrant disadvantage of launching multiple years after three PGA brands were
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`already established in the market; and 2) the subsequent entry of generics for these
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`other PGA brands beginning in 2011.41 He also concludes that Travatan Z®’s
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`commercial success is further evident from a similar “steep” increase in prescription
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`and unit sale quantities,42 which he describes as rising from a 5% share of the total
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`PGA quantity in 2007, to between a 27% (prescriptions) and a 30% (unit sales)
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`share in 2011 (though he acknowledges that after 2011, these shares “gradually
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`declined” to between 10% (unit sales) and 14% (prescriptions) by 2016).43
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`18. Dr. Grabowski opines that this sales level and share performance
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`supports the conclusion that Travatan Z® has been a commercially successful drug.44
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`He also concludes that Travatan Z®’s sales exceeded the levels that “would normally
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`be expected in the market,” based on his observation that Travatan Z®’s peak-year
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`dollar sales of $553.9 million in 2016 exceed the peak-year $192.0 million in sales
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`Id. at ¶¶30-33.
`41
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`42
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`43
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`44
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`Id. at ¶¶31, 33.
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`Id. at ¶¶31, 33.
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`Id. at ¶34.
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`achieved by its parent product, Travatan®, in 2006, and that Travatan Z “is on track”
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`to exceed the cumulative sales generated by Travatan® and Lumigan®.45
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`19.
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`In my opinion, the analysis presented by Dr. Grabowski does not
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`support his conclusion that Travatan Z® has achieved commercial success indicative
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`of the’229 patent’s nonobviousness for four reasons: 1) his opinion does not
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`consider two patents issued prior to the ’299 patent that Petitioner claims would
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`have blocked an alternative developer from marketing a product based on the ’299
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`patent technology, even if it had been obvious; 2) his opinion does not consider the
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`economic significance of Travatan Z®’s status as a successor product to its original
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`parent product, Travatan®; 3) his opinion is inappropriately based on Travatan Z®’s
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`gross sales revenues at list price, rather than the net sales revenue actually
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`generated; and 4) the generic entry impediment to Travatan Z®’s sales that he asserts
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`does not reduce the threshold of sales that constitutes commercial success, but rather
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`is a factor reducing Travatan Z®’s commercial performance incentive for others to
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`have developed a product based on the ’299 patent technology. I discuss each of the
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`reasons in detail below.
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`45
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`Id. at ¶35.
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`A. Dr. Grabowski’s Analysis Does Not Consider Other Patents That
`Would Have Blocked an Alternative Developer of the ’299 Patent
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`20. I understand that Petitioner contends that two previously issued
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`patents owned by Alcon would have blocked earlier development of a product
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`containing the technology claimed in the ’299 patent, even if that technology had
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`been obvious.46 The patents identified are U.S. Patent Numbers 6,011,062 (the
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`“Schneider patent”) and 5,631,287, both entitled, “Storage Stable Prostaglandin
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`Compositions,”47 and reportedly expiring on December 22, 2014,48 as well as U.S.
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`Patent No. 6,143,799, entitled, “Use of Borate-Polyol Complexes in Ophthalmic
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`Compositions”49 (the “Chowhan patent”), reportedly expiring May 6, 2012.50 To
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`the extent other potential developers of the ’299 patent technology would have been
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`blocked from developing a product incorporating that technology by these earlier
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`46
`Exhibit 1093 at ¶86.
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`47
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`48
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`49
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`50
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`Exhibit 1007; Exhibit 1103.
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`Exhibit 1093 at ¶86.
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`Exhibit 1004.
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`Exhibit 1093 at ¶86.
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`patents, any commercial success the Travatan Z® product may have achieved would
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`not represent an indication that the ’299 patent technology was nonobvious.
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`B. Dr. Grabowski’s Analysis Fails to Consider the Economic Signifi-
`cance of Travatan Z®’s “Successor Product” Status
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`21. Although Dr. Grabowski explicitly acknowledges that Travatan Z®
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`is a “successor product” to Travatan®,51 both of which were marketed by Patent
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`Owner Alcon,52 his analysis of Travatan Z®’s commercial success does not reflect
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`the critical economic significance of this fact. In particular, his simple recording of
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`Travatan Z®’s nominal sales levels to measure commercial performance as it relates
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`to this obviousness inquiry fails to consider that an alternative developer of a
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`product incorporating the ’299 patent technology would be marketing that product
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`as a competitor to Alcon’s Travatan® rather than as a successor to it its own
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`travoprost product. This implies that Travatan®’s early mover advantage to which
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`Dr. Grabowski attributes considerable significance,53 in conjunction with Alcon’s
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`51
`Exhibit 2029 at ¶20.
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`52
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`53
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`Exhibit 1064 at p. 32.
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`Exhibit 2029 at ¶¶26-27, 35, 48, 50.
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`accommodative marketing, pricing and other policies that promoted the shift of
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`Travatan® sales to Travatan Z®, would be completely redirected to prevent the shift
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`of Travatan® sales to an alternative developer’s competitive product using the ’299
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`patent technology.
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`22. Consequently, the observed levels of Travatan Z®’s sales that Dr.
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`Grabowski considers overrepresent the sales an alternative developer of the ’299
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`patent technology could have expected to generate from a competitive product.
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`Only those incremental sales that Travatan Z® generated above the sales that would
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`otherwise have been generated by Travatan® without Travatan Z® on the market
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`(i.e., sales that were not cannibalized from Travatan®) represent sales that an
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`alternative developer of the ’299 patent could have counted on generating from a
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`product incorporating that technology. But the evidence Dr. Grabowski has
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`provided suggests that Travatan Z® has not generated significant incremental sales
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`over the sales Travatan® would have generated in the absence of Travatan Z®, and
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`for this reason his analysis does not demonstrate that Travatan Z® has achieved
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`commercial success as it relates to the ’299 patent’s obviousness.
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`23. In support of this conclusion, I discuss below the economics of
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`successor products in the pharmaceutical industry, how Travatan Z® fits this model,
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`and the implications of Travatan Z’®s successor product status to the analysis of
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`commercial success as an indicium of the ’299 patent’s nonobviousness.
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`1. Economics of Successor Products in the Pharmaceutical Industry
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`24. Upon introducing an innovative brand drug, usually based on a
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`new chemical entity as its active ingredient, brand suppliers routinely develop
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`“lifecycle management” strategies designed to extend the lifecycle of the original
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`drug by extending the time period of patent-protected sales beyond the period
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`covered by patents protecting the original drug from generic competition.54 One of
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`the main such lifecycle strategies entails introducing successor products based on
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`patentable reformulations of the original brand’s active ingredient.55 Examples of
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`these reformulations include modifications for sustained/extended/controlled/slow
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`release,56 once-per-day administration, single