HIGHLY CONFIDENTIAL
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`UNITED STATES PATENT AND TRADEMARK OFFICE
`_____________________________
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`_____________________________
`
`WATSON LABORATORIES, INC.
`
`Petitioner,
`
`v.
`
`UNITED THERAPEUTICS CORPORATION
`Patent Owner.
`
`_____________________________
`
`Case IPR2017-01622
`Patent 9,339,507
`_____________________________
`
`DECLARATION OF DEFOREST MCDUFF, Ph.D.
`
`Mail Stop Patent Board
`Patent Trial and Appeal Board
`U.S. Patent and Trademark Office
`P.O. Box 1450
`Alexandria, VA 22313-1450
`
`Declaration of DeForest McDuff, Ph.D.
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`1
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`WATSON LABORATORIES, INC. , IPR2017-01622, Ex. 1055, p. 1 of 45
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`
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`UNITED STATES PATENT AND TRADEMARK OFFICE
`_____________________________
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`_____________________________
`
`WATSON LABORATORIES, INC.
`
`Petitioner,
`
`v.
`
`UNITED THERAPEUTICS CORPORATION
`Patent Owner.
`
`_____________________________
`
`Case IPR2017-01622
`Patent 9,339,507
`_____________________________
`
`DECLARATION OF DEFOREST MCDUFF, Ph.D.
`
`Mail Stop Patent Board
`Patent Trial and Appeal Board
`U.S. Patent and Trademark Office
`P.O. Box 1450
`Alexandria, VA 22313-1450
`
`Declaration of DeForest McDuff, Ph.D.
`
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`I, DeForest McDuff, Ph.D., declare as follows:
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`I.
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`Introduction
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`Qualifications
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`1.
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`I am a Partner at Insight Economics and an expert in applied business
`
`economics, with more than ten years of experience in consulting, finance, and
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`economic research. I provide expert witness testimony and consulting in a variety
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`of areas, including lost profits, reasonable royalties, unjust enrichment, commercial
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`success, irreparable harm, finance, statistics, valuation, and business optimization.
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`2.
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`My expertise and experience span a variety of topics, including
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`intellectual property, competition, business, antitrust, finance, labor, employment,
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`and class action. My work spans the life sciences (including pharmaceuticals,
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`biotechnology, diagnostics, and medical devices), electronics (including consumer
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`electronics, semiconductors, computers, and telecommunications), and has
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`included projects on a diverse range of other industries.
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`3.
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`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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`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 topics as well.
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`4.
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`I earned my Ph.D. in economics from Princeton University. At
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`Princeton, I received a National Science Foundation Graduate Research Fellowship
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`for academic research studying economic and statistical properties of housing
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`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
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`degrees in economics and mathematics from the University of Maryland.
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`5.
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`My curriculum vitae, provided as Attachment A, contains more details
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`on my background, education, experience, and expert testimony.
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`Scope of Work
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`6.
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`In connection with my work on this matter, Insight Economics has
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`been retained by Winston & Strawn LLP on behalf of Watson Laboratories, Inc.
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`(“Watson”). Insight Economics is being compensated at a rate of $700 per hour
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`for my work and at lower rates for time spent by others on my team. The
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`compensation of Insight Economics is not dependent on the substance of my
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`testimony or the outcome of this matter.
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`7.
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`For this declaration, I was asked to evaluate aspects of commercial
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`success relating to U.S. Patent No. 9,339,507 (Ex. 1001) as it relates to Tyvaso
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`(treprostinil). This declaration is a statement of my opinions in this matter and the
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`basis and reasons for those opinions.1 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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`II. Background
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`Patent-at-issue
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`8.
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`I understand that the following patent is at issue in this IPR
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`proceeding: 9,339,507 (“the ’507 patent” or “the patent-at-issue”).
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`9.
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`The ’507 patent, entitled “Treprostinil Administration by Inhalation,”
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`was filed on May 11, 2012 and issued on May 17, 2016. I understand that the ’507
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`patent has the following abstract:
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`Treprostinil can be administered using a metered dose inhaler. Such
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`administration provides a greater degree of autonomy to patients. Also
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`disclosed are kits that include a metered dose inhaler containing a
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`pharmaceutical formulation containing treprostinil.
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`1
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`This declaration reflects only my current opinions, which are subject to
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`change based upon additional information, analysis, and/or opinions of other
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`experts.
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`Pulmonary hypertension
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`10.
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`Pulmonary hypertension (“PH”) is generally defined by high blood
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`pressure in the lungs and the right side of the heart. This can occur when blood is
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`not able to flow freely through arterioles in the lungs. Over time, the heart muscle
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`weakens from the increased effort required to pump blood and may fail.
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`Pulmonary arterial hypertension (“PAH”) is known as Group 1 PH, classified by
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`the World Health Organization (“WHO”), and includes PH that is inherited, has no
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`known cause, or is caused by certain drugs or conditions.2
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`11.
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`Patients diagnosed with PH have several treatment options, including
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`medications and surgery. Treatment for PH includes anticoagulants, digoxin,
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`diuretics, and calcium channel blockers (“CCB”), among others. Heart or lung
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`transplants or open heart surgery may be warranted if drug therapy is not
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`successful. For the treatment of PAH, in particular, approved pharmaceuticals
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`2
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`Ex. 1120: Mayo Clinic Website, Pulmonary hypertension, Overview,
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`http://www.mayoclinic.org/diseases-conditions/pulmonary-
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`hypertension/home/ovc-20197480 (accessed 3/22/2017).
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`Ex. 1122: NIH Website; National Heart, Lung, and Blood Institute; Types of
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`Pulmonary Hypertension, https://www.nhlbi.nih.gov/health/health-
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`topics/topics/pah/types (accessed 5/16/2017).
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`target one of three major biochemical pathways: (1) the endothelin pathway,
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`targeted by endothelin receptor antagonists (“ERAs”); (2) the nitric oxide (“NO”)
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`pathway, targeted by phosphodiesterase inhibitors (“PDE-5”) and soluble
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`guanylate cyclase stimulators (“GCS”); and (3) the prostacyclin pathway, targeted
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`by prostacyclin analogues and IP receptor antagonists.3
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`Tyvaso (treprostinil)
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`12.
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`Tyvaso (treprostinil) is a prescription pharmaceutical product sold by
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`UTC that is indicated for treatment of PAH in WHO Group 1 patients to improve
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`exercise ability. Tyvaso was approved by the FDA on July 30, 2009. Tyvaso is
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`available in a 0.6mg/mL solution for inhalation.4
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`3
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`Ex. 1120: Mayo Clinic Website, Pulmonary hypertension, Overview,
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`http://www.mayoclinic.org/diseases-conditions/pulmonary-
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`hypertension/home/ovc-20197480 (accessed 3/22/2017).
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`Ex. 1083: Cowen and Company, “Therapeutic Categories Outlook,” 2/2017,
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`at 2249-2250.
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`4
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`Ex. 1140: Tyvaso, FDA Label, 6/2016.
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`III. Analysis of Commercial Success
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`Overview
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`13. Commercial success may provide objective evidence that a patent
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`owner may use to indicate that a patent is not obvious based on the alleged
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`commercial success of a product embodying the invention of the patent. I
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`understand that commercial success can be relevant to the determination of a
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`patent’s obviousness based on the presumption that an idea could have been
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`brought to market sooner, in response to market forces, had it been obvious to
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`persons skilled in the art. I further understand that evidence of commercial success
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`may be relevant if there is a nexus between the alleged commercial success and the
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`patentable features of the asserted claims. In other words, I understand that the
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`patent owner must show that the commercial success is attributable to demand for
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`Ex. 1120: Mayo Clinic Website, Pulmonary hypertension, Overview,
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`http://www.mayoclinic.org/diseases-conditions/pulmonary-
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`hypertension/home/ovc-20197480 (accessed 3/22/2017).
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`Ex. 1096: FDA Website, FDA Approved Drug Products, Tyvaso,
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`http://www.accessdata.fda.gov/scripts/cder/daf/index.cfm?event=overview.p
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`rocess&ApplNo=022387 (accessed 5/17/2017).
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`the alleged benefits of the patented technology relative to demand resulting from
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`other factors.
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`14.
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`For this declaration, I have been informed that United Therapeutics
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`Corporation made a number of assertions related to the alleged commercial success
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`of Tyvaso as a secondary consideration during the prosecution of the patent-at-
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`issue, or related patents, with the USPTO.5 Upon review, I find that those
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`assertions of commercial success are based on a skewed market definition (Section
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`III.B) and flawed evaluation of nexus (Section III.C). In addition, my own
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`evaluation of the alleged commercial success indicates only modest commercial
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`performance of Tyvaso (Section III.D) and low or no economic relevance to
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`obviousness of the patent-at-issue (Section III.E). These opinions are discussed in
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`more detail below.
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`Alleged commercial success based on a skewed market definition
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`15.
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`I understand that, during patent prosecution, the patent owner made a
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`number of assertions of commercial success based on Tyvaso’s alleged market
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`shares among U.S. inhaled prostacyclin drugs compared to Ventavis (iloprost). I
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`understand that the patent owner claimed that Tyvaso earned “the majority of the
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`5
`
`See, for example, Ex. 1161.
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`US market for inhaled prostacyclins from Ventavis in a single year” and referenced
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`the following chart:6
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`16. However, this purported market share is among only the two inhaled
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`products on the market, and is overstated and unrepresentative of competition in
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`this market because it omits relevant competing products. Substantial evidence
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`indicates competition between Tyvaso and non-inhaled PAH therapies, for
`
`example:
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`a. UTC’s CEO stated on an earnings conference call (2010-Q2) that
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`“Roughly speaking about 10% of the patients come on to Tyvaso
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`actually from parenteral therapies. Either Remodulin or Flolan or
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`the other generic parenteral therapies. Maybe a tad less than
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`10%. About 20% of the patients, maybe a little bit more than
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`6
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`See, for example, Ex. 1161 at 9.
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`20%, come on to our therapy from Ventavis, and then the
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`majority, the large majority, around 70%, come on to our therapy
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`after not really achieving the results desired with either oral or
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`more commonly dual oral therapies. That is PDE5 plus an
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`ETRA. So, that's pretty much as you recall the situation as we
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`reported last year. The majority of patients are coming from the
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`oral therapies rather than at the expense of Ventavis.”7
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`b. UTC 10-Ks from 2009 to 2016 indicate that UTC products
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`“compete with many approved products in the United States and
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`the rest of the world,” including: Flolan, Veletri, generic
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`epoprostenol; Ventavis and Ilomedin; Tracleer; Letairis; Revatio
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`and generic sildenafil citrate; Opsumit; Adempas; Uptraiv; and
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`drugs in current development. UTC’s 10-Ks discuss how
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`various product attributes provide certain competitive advantages
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`and disadvantages within the competition to treat PAH patients:
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`i. 2009 to 2013 (Ex. 1151 at 21; Ex. 1152 at 22; Ex. 1153
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`at 23-24; Ex. 1154 at 23-24; Ex. 1155 at 22-23): “The use
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`7
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`Ex. 1142: UTC, “Q2 2010 United Therapeutics Earnings Conference Call,”
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`7/28/2010, at 4.
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`of the available oral therapies and Tyvaso, either alone or
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`in combination, could delay the need for infusion therapy
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`for many patients. As a result, the success of other
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`therapies in preventing disease progression affects our
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`commercial products. Furthermore, the
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`commercialization of generic forms of other approved
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`PAH therapies and the development of new PAH
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`therapies may exert downward pressure on the pricing of
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`our products.”
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`ii. 2014 to 2015 (Ex. 1156 at 20-21; Ex. 1157 at 20-21):
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`“We anticipate that [Orenitram] will face competition
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`with existing oral PAH therapies, and will be regarded as
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`a less invasive and more convenient alternative therapy
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`to Tyvaso and Remodulin. The use of available oral
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`therapies could delay many patients’ need for inhaled or
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`infused prostacyclin therapy. As a result, the availability
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`of oral therapies affects demand for our inhaled and
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`infused products.”
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`iii. 2016 (Ex. 1158 at 19-20): “…[Orenitram] offers a less
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`invasive and more convenient alternative therapy to
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`Remodulin and Tyvaso. The use of available oral
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`therapies could delay many patients' need for inhaled or
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`infused prostacyclin therapy. As a result, the availability
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`of oral therapies affects demand for our inhaled and
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`infused products.”
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`c.
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`Third-party analysts:
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`i. RBC Capital Markets (2011) reports Tyvaso’s market
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`share as 7% in 2011 (compared to 13% for Remodulin,
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`12% for Letairis, 50% for Tracleer, 2% for Adcirca, and
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`16% for Revatio).8
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`ii. Cowen and Company (2017) reports Tyvaso sales of just
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`7.4% of major PAH drugs sales worldwide as of 2016.9
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`17.
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`In contrast to the majority share asserted by the patent owner,
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`Tyvaso’s sales share as a fraction of competing PAH therapies shows more modest
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`commercial performance. Based on sales data reported by competing companies,
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`8
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`Ex. 1135: RBC Capital Markets, “Untied Therapeutics Corp.,” 6/13/2011,
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`at 7.
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`9
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`Ex. 1083: Cowen and Company, “Therapeutic Categories Outlook,” 2/2017,
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`at 2248-2250. ($405 million for Tyvaso / $5,456 million total) = 7.4%.
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`Tyvaso’s share of sales among competing PAH therapies has ranged from 0.7% in
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`2009 up to a peak of 10.4% in 2013 and declining to 7.3% by 2016. See
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`Attachment B-9.
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`Alleged commercial success based on flawed evaluation of nexus
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`18.
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`I understand that, during patent prosecution, the patent owner made a
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`number of assertions relating to nexus based upon “clinical advantages of Tyvaso®
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`over Ventavis® [being] direct results of: a) dosing regimen of Tyvaso® compared
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`to Ventavis®; and b) the pulsed ultrasonic nebulizer used with Tyvaso® compared
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`to Ventavis®.”10 The patent owner also made assertions as to Tyvaso’s
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`“substantially lower share” of sales representatives, at 25.0% share for Tyvaso and
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`30.7% share for Ventavis.11
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`19. Other than its uncited claim regarding Tyvaso sales representatives
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`compared to Ventavis (which, contrary to patent owner’s assertions on market
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`shares, appear to be calculated as shares of a broader PAH market definition),
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`patent owner provides no analysis of other factors that may drive demand for
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`Tyvaso. To my knowledge, patent owner provided no evaluation of other factors
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`commonly evaluated in determining nexus, including actual marketing
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`10
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`11
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`See, for example, Ex. 1162 at 9–11; Ex. 1163 at 16–18.
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`See, for example, Ex. 1161 at 9.
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`expenditures, marketing messages, pricing, or other attributes contributing to
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`demand for Tyvaso, such as the treprostinil compound (e.g., Ex. 1019: U.S. Patent
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`4,306,075 (“the ’075 patent”)) or the application of treprostinil to treating PAH
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`(e.g., Ex. 1025: U.S. Patent No. 5,153,222 (“the ’222 patent”)). Without
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`evaluating these factors, patent owner does not provide adequate basis to conclude
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`that Tyvaso’s commercial performance is driven by the alleged innovative aspects
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`of the patent-at-issue.
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`20. With respect to specific comparisons between Tyvaso and Ventavis, I
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`understand from the declaration of Dr. Maureen Donovan, Ph.D. (Ex. 1002 at
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`¶ 247) that this difference derives primarily from differences between treprostinil
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`and iloprost rather than any alleged innovative aspects of the patent-at-issue, and
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`thus differences in commercial performance are largely attributable to the ’075
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`patent and ’222 patent rather than the patent-at-issue. I understand from Dr.
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`Donovan (Ex. 1002 at ¶ 247) that the less frequent treatment with Tyvaso relates to
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`treprostinil’s longer half-life relative to iloprost rather than any differences in the
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`way the Ventavis and Tyvaso are delivered via inhalation.
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`21.
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`Finally, patent owner’s own assertions appear to support the notion
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`that Tyvaso sales were impacted by marketing. Tyvaso’s purported 25.0% share of
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`sales representatives compared to a peak market share of just 10.4% indicates
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`above-average marketing relative to competition (i.e., the share of marketing
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`expenditures exceeding the share of revenues). It is difficult to assess further
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`without the underlying analysis provided by patent owner.
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`Tyvaso sales show only modest commercial performance
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`22. Contrary to patent owner’s assertions, Tyvaso sales show only modest
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`commercial performance, as evidenced by: (1) comparisons to pharmaceutical
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`products generally, and (2) comparisons to competitor PAH products.
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`23.
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`First, Tyvaso’s annual sales ranging from $152 million to $470
`
`million are not exceptional or even above-average in the context of pharmaceutical
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`product sales. For example, published research on pharmaceutical product sales
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`indicates that Tyvaso sales are below average for the pharmaceutical industry:
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`compared to Tyvaso’s peak annual sales to date of $470 million in 2015, peak
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`annual sales based on published research (normalized to 2015 USD) are $3.6
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`billion for top-decile drugs (top 10% of drugs), $1.3 billion for 2nd-decile drugs
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`(80-89% percentiles), and $633 million for average drug sales. See Attachment
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`B-2. Top-decile and 2nd-decile drugs tend to be the drivers of profitability in the
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`pharmaceutical industry, whereas average drugs tend to be close to break-even in
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`terms of economic profits that account for the economic costs of development.12 A
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`comparison of Tyvaso sales to these benchmarks can be seen as follows (see
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`Attachment B-3):
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`12
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`Ex. 1084: DiMasi, Joseph A. and Henry G. Grabowski (2012), “R&D Costs
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`and Returns to New Drug Development: A Review of the Evidence,” in
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`Patricia Danzen and Sean Nicholson, ed., The Oxford Handbook of the
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`Economics of the Biopharmaceuticals Industry, New York: Oxford
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`University Press, at 43 (“The search for these blockbuster drugs, typically
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`“first in class” or “best in class” compounds, has been a key driver of R&D
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`competition over the past several decades.”).
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`Ex. 1113: Grabowski, Henry, John Vernon, and Joseph A. DiMasi (2002),
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`“Returns on Research and Development for 1990s New Drug Introductions,”
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`Pharmacoeconomics 20(3): 11–29, at 11, 17, 22-23.
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`24.
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`Second, as another point of comparison, Tyvaso sales are middle-of-
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`the-pack relative to competing PAH treatments. In comparison to Tyvaso’s peak
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`annual sales of $470 million in 2015, peak annual sales of competing PAH
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`treatments include $1.7 billion for Tracleer (2011), $1.1 billion for
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`Letairis/Volibris (2016), $844 million for Opsumit (2016, 4th year on the market),
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`and $602 million for Remodulin (2016). See Attachments B-4 and B-5. A
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`comparison of Tyvaso sales to competing PAH drugs can be seen as follows
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`(normalized to 2015 USD, noting that Tyvaso sales have already peaked and
`
`started to decline as of 2015 but that other drugs may continue to have even higher
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`peak sales beyond 2016—see Attachment B-6):
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`25.
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`In sum, patent owner provides limited information and no basis for
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`comparison to conclude that Tyvaso was a “tremendous commercial success.” By
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`contrast, an economic evaluation of Tyvaso sales in proper context are only modest
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`by comparison and are not demonstrative of commercial success.
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`Low or no economic relevance of alleged commercial success
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`26. Contrary to patent owner’s assertions, there is actually low or no
`
`economics relevance of any alleged commercial success, for several reasons,
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`including: (1) blocking patents and regulatory exclusivity, (2) UTC’s specialization
`
`in PAH, and (3) contributions of the patent-at-issue.
`
`Blocking patents and regulatory exclusivity
`27.
`First, early patents covering Tyvaso and marketing exclusivity granted
`
`by the FDA reduce the economic relevance of any alleged commercial success due
`
`to blocking disincentives. A blocking patent is one that effectively blocks others
`
`from making, selling, or using a product without use of the invention purportedly
`
`claimed in that patent. Courts have found that, in the presence of blocking patents
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`and market exclusivity, the existence of commercial success provides little
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`probative value on whether a claimed technology is obvious. For example, in
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`Merck v. Teva, the Federal Circuit found that Merck’s ability to prevent market
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`entry by others via blocking patents and statutory exclusivity weakened any
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`probative value of commercial success in evaluating non-obviousness of the
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`Declaration of DeForest McDuff, Ph.D.
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`18
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`WATSON LABORATORIES, INC. , IPR2017-01622, Ex. 1055, p. 18 of 45
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`HIGHLY CONFIDENTIAL
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`patent-at-issue.13 This makes sense, economically, since other entities would have
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`strong disincentives not to develop technology that they would be blocked from
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`utilizing or implementing in the marketplace.
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`28.
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`In the case of Tyvaso, there are several patents that have been alleged
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`to cover Tyvaso before the patent-at-issue in this case (e.g., in the FDA Orange
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`Book or described as relating to treprostinil more broadly14):
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`a. U.S. Patent No. 4,306,075 provides the composition and
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`production of stable prostacyclin analogs, including UT-15 (i.e.,
`
`treprostinil), with approximate priority in or around 1980 and
`
`issuing in December 1981.15
`
`13
`
`14
`
`15
`
`Ex. 1121: Merck& Co., Inc. v. Teva Pharmaceuticals USA, Inc., 395 F.3d
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`1364, 1376–77 (Fed. Cir. 2005).
`
`Ex. 1085: FDA Orange Book, 2010, at ADA 189 of 197.
`
`Ex. 1086: FDA Orange Book, 2017, at ADA 229 of 237.
`
`Ex. 1019: Composition and Process, U.S. Patent No. 4,306,075 (filed
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`12/22/1980, issued 12/15/1981).
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`Declaration of DeForest McDuff, Ph.D.
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`19
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`WATSON LABORATORIES, INC. , IPR2017-01622, Ex. 1055, p. 19 of 45
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`HIGHLY CONFIDENTIAL
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`b. U.S. Patent No. 5,143,222 provides the use of treprostinil for
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`pulmonary hypertension and congestive failure, with approximate
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`priority in or around 1988 and issuing in October 1992.16
`
`c. U.S. Patent No. 6,521,212 provides methods for treating PAH via
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`inhalation, with approximate priority in or around 1999 and
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`issuing in February 2003.17
`
`d. U.S. Patent No. 6,756,033 provides methods for treating PAH via
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`inhalation, with approximate priority in or around 1999 and
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`issuing in June 2004.18
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`16
`
`Ex. 1025: Method of Treating Pulmonary Hypertension with Benzidine
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`Prostaglandins, U.S. Patent No. 5,153,222 (filed 6/14/1991, issued
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`10/6/1992).
`
`17
`
`Ex. 1018: Method for Treating Peripheral Vascular Disease by
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`Administering Benzindene Prostaglandins by Inhalation, U.S. Patent No.
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`6,521,212 (filed 3/15/2000, issued 2/18/2003).
`
`18
`
`Ex. 1057: Method for Delivering Benzindene Prostaglandins by Inhalation,
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`U.S. Patent No. 6,756,033 (filed 8/6/2002, issued 6/29/2004).
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`Declaration of DeForest McDuff, Ph.D.
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`20
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`WATSON LABORATORIES, INC. , IPR2017-01622, Ex. 1055, p. 20 of 45
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`HIGHLY CONFIDENTIAL
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`29.
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`In addition, UTC was granted orphan drug exclusivity of 7 years
`
`through July 2016, providing it with market exclusivity following launch in 2009.19
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`30. Accordingly, UTC’s exclusive license to the ’075 and ’222 patents
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`and its market exclusivity for Tyvaso provides strong disincentives for other
`
`companies to develop and commercialize the technology of the patent-at-issue,
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`even if those alleged innovations had been obvious. Moreover, I am not aware of
`
`any evidence that a license to those patents was offered to or pursued by other
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`companies, and thus they represent a disincentive for development. In other
`
`words, even if there were a compelling commercial opportunity to be inferred by
`
`the alleged commercial success of Tyvaso, that alleged success would not be
`
`economically relevant to obviousness of the patent-at-issue since other companies
`
`would have been blocked from commercializing those technologies.
`
`Limited Market Interest
`31.
`Second, as discussed, commercial success may be relevant to
`
`obviousness based on the idea that a product or technology may have been
`
`developed sooner, in response to market forces, had it been obvious. In the case of
`
`Tyvaso, UTC had unique specialization in developing PAH treatments (and
`
`particularly drugs utilizing treprostinil as an active ingredient) that would not have
`
`19
`
`Ex. 1152: UTC, Form 10-K, 2010, at 19, 24.
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`Declaration of DeForest McDuff, Ph.D.
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`21
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`WATSON LABORATORIES, INC. , IPR2017-01622, Ex. 1055, p. 21 of 45
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`HIGHLY CONFIDENTIAL
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`been shared by the broader market. This further weakens any nexus and economic
`
`inference between the alleged commercial success and the patent-at-issue.
`
`32. UTC has a history of pursuing and focusing on PAH treatments,
`
`including Remodulin, Tyvaso, Adcirca, and Orenitram,20 and has a specialization
`
`in PAH that is not shared by the broader market. Additionally, I understand that
`
`UTC was founded and originally existed in response to the CEO seeking to find a
`
`cure for PAH for her daughter and her dissatisfaction with options available on the
`
`market.21 As of present day and dating back to approximate patent priority dates,
`
`there have been only a few other companies with PAH drugs on the market. See
`
`Attachment B-8.
`
`33. Additionally, the evidence suggests a limited commercial opportunity
`
`and lack of market-wide interest in developing an inhaled treprostinil product. For
`
`example, Tyvaso’s designation as an orphan drug (reserved for products with low
`
`commercial opportunity and/or fewer than 200,000 U.S. patients) indicates a
`
`20
`
`21
`
`Ex. 1158: UTC, Form 10-K, 2016, at 4.
`
`Ex. 1079: CNBC, “Highest Paid Female CEO: Race to Save My Daughter,”
`
`5/19/2015, http://www.cnbc.com/2015/05/19/highest-paid-female-ceo-race-
`
`to-save-my-daughter.html.
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`Declaration of DeForest McDuff, Ph.D.
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`22
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`WATSON LABORATORIES, INC. , IPR2017-01622, Ex. 1055, p. 22 of 45
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`HIGHLY CONFIDENTIAL
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`limited economic opportunity.22 The limited opportunity is further confirmed by
`
`Pharmacia & Upjohn Company and Glaxo Wellcome Inc. licensing early
`
`treprostinil patents to UTC rather than seeking to develop their own products.23
`
`34.
`
`In other words, market-wide development of PAH drugs appears to
`
`have been limited, and other developers would not have UTC’s motivation,
`
`experience, and resources in developing PAH treatments. This provides yet
`
`another hurdle for market-wide incentives for development that, all else being
`
`equal, further limits any inference of non-obviousness from the alleged commercial
`
`success of Tyvaso.
`
`Contributions of the patent-at-issue
`35.
`Third, I am not aware of the patent owner providing an evaluation of
`
`the contributions of the patent-at-issue relative to earlier Tyvaso patents described
`
`above. Based on the opinions of Dr. Donovan (Ex. 1002 at ¶¶ 243–44, 246–47), I
`
`understand that the clinical contributions of alleged novel device and dosing
`
`regimen are limited and that, by contrast, the vast majority of the clinical benefit of
`
`Tyvaso comes from the treprostinil compound itself and the application of that
`
`compound to treating PAH. Accordingly, for the purpose of a nexus to the
`
`22
`
`23
`
`Ex. 1152: UTC, Form 10-K, 2010, at 8, 24.
`
`Ex. 1143: UTC, Form 10-K, 2000, at 6.
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`Declaration of DeForest McDuff, Ph.D.
`
`23
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`WATSON LABORATORIES, INC. , IPR2017-01622, Ex. 1055, p. 23 of 45
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`HIGHLY CONFIDENTIAL
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`commercial performance of Tyvaso, there is very weak nexus (if any at all) to the
`
`’507 patent.
`
`36. With respect to the claimed novelty of the patents, I understand from
`
`Dr. Donovan (Ex. 1002 at ¶¶ 242–46) that all of the alleged benefits over the prior
`
`art are were known from publicly available nebulizers, were in the prior art, and
`
`allowed for the claimed dosing regimen. Thus, the alleged benefits of the claimed
`
`invention are unrelated to any advantages over prior art. Further, I have seen no
`
`evidence (and have no reason to believe) that Tyvaso’s commercial performance
`
`would be any different if it used a different (nonclaimed) type of nebulizer or a
`
`different (nonclaimed) dosing regimen.
`
`37.
`
`Finally, as discussed, with respect to specific comparisons between
`
`Tyvaso and Ventavis, I understand from Dr. Donovan (Ex. 1002 at ¶ 247) that this
`
`difference derives primarily from differences between treprostinil and iloprost
`
`rather than any alleged innovative aspects of the patent-at-issue, and thus
`
`differences in commercial performance are largely attributable to the ’075 patent
`
`and ’222 patent rather than the patent-at-issue. I understand from Dr. Donovan
`
`(Ex. 1002 at ¶ 247) that the less frequent treatment with Tyvaso relates to
`
`treprostinil’s longer half-life relative to iloprost rather than any differences in the
`
`way the Ventavis and Tyvaso are delivered via inhalation.
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`Declaration of DeForest McDuff, Ph.D.
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`24
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`WATSON LABORATORIES, INC. , IPR2017-01622, Ex. 1055, p. 24 of 45
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`HIGHLY CONFIDENTIAL
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`IV.
`
`Signature
`
`38.
`
`I declare that my statements based on my knowledge are true and
`
`those based on information and belief I believe to be true. I made all my statements
`
`in this declaration with the knowledge that willful false statements and the like are
`
`punishable by fine, imprisonment or both pursuant to 18 U.S.C. 1001.
`
`39.
`
`I understand that this declaration is to be filed as evidence in a
`
`contested case before the Patent Trial and Appeal Board of the United States Patent
`
`and Trademark Office. I acknowledge that I may be subject to cross examination
`
`in the case and that cross examination will take place within the United States. If
`
`cross examination is required of me, I will appear for cross examination within the
`
`United States during the time allotted for cross examination.
`
`______________________________
`DeForest McDuff, Ph.D.
`June 21, 2017
`
`Declaration of DeForest McDuff, Ph.D.
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`25
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`WATSON LABORATORIES, INC. , IPR2017-01622, Ex. 1055, p. 25 of 45
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`
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`(cid:44)(cid:47)(cid:39)(cid:44)(cid:62)(cid:122)(cid:3)(cid:18)(cid:75)(cid:69)(cid:38)(cid:47)(cid:24)(cid:28)(cid:69)(cid:100)(cid:47)(cid:4)(cid:62)(cid:3)
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`(cid:286)(cid:38)(cid
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