Case 1:20-cv-00393-LMB-WEF Document 1425-23 Filed 09/09/22 Page 1 of 8 PageID# 37056
`Case 1:20-cv-00393-LMB-WEF Document 1425-23 Filed 09/09/22 Page 1 of 8 PagelD# 37056
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`EXHIBIT 79
`EXHIBIT 79
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE CENTRAL DISTRICT OF CALIFORNIA
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`Case No. 2:17-cv-07639-SJO
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`DECLARATION OF
`RYAN SULLIVAN, PH.D.
`
`
`
`JUNO THERAPEUTICS, INC., MEMORIAL
`SLOAN KETTERING CANCER CENTER, and
`SLOAN KETTERING INSTITUTE FOR
`CANCER RESEARCH,
`
`
`Plaintiffs,
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`v.
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`KITE PHARMA, INC.,
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`Defendant.
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` DECLARATION OF RYAN SULLIVAN, Ph.D.
` ATTORNEYS’ EYES ONLY INFORMATION
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`I.
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`Introduction
`1.
`On December 13, 2019, the jury for the above-referenced matter entered a verdict
`finding Kite Pharma, Inc. (“Kite” or “Defendant”) liable for willfully infringing U.S. Patent No.
`7,446,190 (“the ’190 patent”) and awarded damages to Juno Therapeutics, Inc. (“Juno”) and Sloan
`Kettering Institute for Cancer Research (“Sloan Kettering” or “SKI”) (Juno and SKI collectively
`“Plaintiffs”) in the form of an upfront payment of $585 million and a running royalty of 27.6% of
`Yescarta revenues through trial.1
`2.
`I have been asked to provide calculations of potential prejudgment interest on
`damages awarded as well as provide an economic analysis pertaining to a potential ongoing
`royalty.
`Prejudgment Interest
`II.
`3.
`I understand that Plaintiffs may be entitled to prejudgment interest on damages
`awarded by the jury. Prejudgment interest is often calculated at the commercial lending rate used
`by banks for loans to creditworthy customers. The best measure of this interest rate is the U.S.
`bank loan Prime Rate, which is the reference or base rate that banks use to set the price or interest
`rate on many of their commercial loans.2
`4.
`I have calculated prejudgment interest through December 31, 2019 using the Prime
`Rate compounded quarterly based on the timing of Yescarta sales occurring through December 12,
`2019. I use the Bank Prime Loan Rate provided by the St. Louis Federal Reserve, which varies
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`Exhibit A: Jury Verdict Form, 12/13/2019, at 4.
`Exhibit B: Federal Reserve Website, FAQs, What is the Prime Rate, and does the Federal Reserve Set the Prime
`Rate, https://www.federalreserve.gov/faqs/credit_12846.htm (accessed 1/20/2020). (“The prime rate is an interest
`rate determined by individual banks. It is often used as a reference rate (also called the base rate) for many types of
`loans, including loans to small businesses and credit card loans.”)
`Exhibit C: Investopedia Website, Prime Rate, https://www.investopedia.com/terms/p/primerate.asp (accessed
`1/20/2020). (“The prime rate (prime) is the interest rate that commercial banks charge their most creditworthy
`customers, generally large corporations. The prime interest rate, or prime lending rate, is largely determined by the
`federal funds rate, which is the overnight rate that banks use to lend to one another. Prime forms the basis of or
`starting point for most other interest rates—including rates for mortgages, small business loans, or personal loans—
`even though prime might not be specifically cited as a component of the rate ultimately charged.”)
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`DECLARATION OF RYAN SULLIVAN, Ph.D.
`ATTORNEYS’ EYES ONLY INFORMATION
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`between 4.25% and 5.5% from October 2017 through December 2019. See Appendix A-6. I use
`a midpoint convention for calculating interest on damages in which interest begins to accrue
`beginning at the midpoint of the quarter. Use of a midpoint convention is a common approach
`that accounts for the realization of sales revenue throughout the quarter. With this approach, total
`prejudgment interest through December 31, 2019 using the Prime Rate is approximately
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`. See Appendix A-3.
`5.
`I have also been asked to provide ongoing daily interest that would accrue
`beginning January 1, 2020 using the Prime Rate as of December 2019, which I have calculated to
`be
`. See Appendix A-4.
`These results are summarized in Table 1.
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`6.
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`Table 1: Prejudgment Interest on Damages
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`Rate
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`Prime Rate
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`Prejudgment Interest through
`December 31, 2019
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`Daily Interest as of January 1,
`2020
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`III. Ongoing Royalty
`7.
`I have been asked to consider a potential ongoing royalty calculated as a 20%
`increase over the running royalty rate awarded by the jury from the perspective of a post-verdict
`hypothetical negotiation. The resulting ongoing royalty rate after a 20% increase is 33.1%, which
`would be applied to net sales of Yescarta from December 13, 2019 onwards. See Appendix B-1.
`8.
`In my opinion, a post-verdict ongoing royalty rate of 33.1% applied to revenues for
`Yescarta and other Kite-Gilead therapies using the same CAR as used in Yescarta (even if given a
`different brand name) would be agreeable to both sides in a post-verdict hypothetical negotiation
`for at least three reasons. First, there have been changes in the economic circumstances since the
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`DECLARATION OF RYAN SULLIVAN, Ph.D.
`ATTORNEYS’ EYES ONLY INFORMATION
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`time of Yescarta’s launch and the hypothetical negotiation.3 For instance, competition between
`Kite and Juno has increased and become more certain since the hypothetical negotiation.4 For
`example, Bristol-Myers Squibb (BMS) announced on December 18, 2019 that it had submitted to
`the FDA the BLA for liso-cel (JCAR017) for relapsed/refractory (r/r) large B-cell non-Hodgkin
`lymphoma (NHL), including DLBCL,5 solidifying Juno’s intention and expectation to directly
`compete with Kite and Yescarta, which is also approved for r/r B-cell NHL indications, including
`DLBCL.
`9.
`As another example of the increased competition between the parties since the
`October 2017 hypothetical negotiation, Gilead announced on December 11, 2019 that Kite had
`submitted the BLA for its second CAR-T therapy, KTE-X19, for the treatment of adult patients
`with r/r mantle cell lymphoma (MCL), further increasing Kite’s competitive presence in the
`CAR-T marketplace.6 Juno is testing JCAR017 for MCL patients as a separate cohort as part of
`its TRANSCEND trial, and as such would expect to compete with Kite in the MCL CAR-T
`marketplace.7 Moreover, like Yescarta, KTE-X19 also utilizes the infringing ’190 patent CAR-T
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`Exhibit D: Sidak, J. Gregory (2016), “Ongoing Royalties for Patent Infringement,” Texas Intellectual Property Law
`Journal 24:161–213, at 192–193.
`Exhibit D: Sidak, J. Gregory (2016), “Ongoing Royalties for Patent Infringement,” Texas Intellectual Property Law
`Journal 24:161–213, at 197–198. (“Changes in the commercial relationship between the patent holder and the
`infringer after the time of first infringement can also affect the patent holder’s minimum willingness to accept. . . .
`[I]f competition between the patent holder and the infringer increased between the time of first infringement and the
`time of final judgment, then the patent holder’s minimum willingness to accept in a hypothetical negotiation for an
`ongoing royalty will exceed its minimum willingness to accept in a hypothetical negotiation for the reasonable
`royalty for past infringement.”)
`Exhibit E: Bristol-Myers Squibb Press Release, “Bristol-Myers Squibb Announces Submission of Biologics License
`Application for CAR T-Cell Therapy Lisocabtagene Maraleucel (liso-cel) to FDA,” 12/18/2019,
`https://news.bms.com/press-release/corporatefinancial-news/bristol-myers-squibb-announces-submission-biologics-
`license-ap.
`Exhibit F: Gilead Press Release, “Kite Submits Biologics License Application to U.S. Food and Drug Administration
`for Company’s Second CAR T Cell Therapy,” 12/11/2019, https://www.gilead.com/news-and-press/press-
`room/press-releases/2019/12/kite-submits-biologics-license-application-to-us-food-and-drug-administration-for-
`companys-second-car-t-cell-therapy.
`Exhibit G: ClinicalTrials.gov, “Study Evaluating the Safety and Pharmacokinetics of JCAR017 in B-cell Non-
`Hodgkin Lymphoma (TRANSCEND-NHL-001),” https://clinicaltrials.gov/ct2/show/NCT02631044 (accessed
`1/17/2020).
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`construct, and therefore increases Kite’s competitive position through its use of the patented
`technology.8 The competitive adjustments that I performed to determine damages based on the
`October 2017 hypothetical negotiation do not include any competitive impact associated with Juno
`and Kite competing in the MCL marketplace.9
`10.
`In addition, from a marketplace share perspective, there has been increased success
`for Yescarta through its use of the patented technology compared to expectations at the time of the
`October 2017 hypothetical negotiation, which can support an increase in the jury-determined
`royalty.10 At the time of the October 2017 hypothetical negotiation, Juno expected that, in a
`two-player market with Kite and Novartis for 3L DLBCL, Yescarta (Kite) and Kymriah (Novartis)
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`would split the market equally, each with a 50% market share.11
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` However, since the October 2017 hypothetical negotiation,
`Yescarta’s market share has been more successful than was expected, with a market share of
`around 80% to 85% in the two-player market with Kite and Novartis.13
`11.
`Second, Kite and Gilead would view the proposed ongoing royalty of 33.1% as
`reasonable in lieu of Kite facing additional lawsuits related to its use of the ’190 patent with
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`Exhibit H: Jeffrey Wiezorek, Dep. Tr., 2/6/2019, at 26:21–27:6. (“Q. So what was the next Kite clinical trial you
`were involved in? A. So after ZUMA-1, we went forward with ZUMA-2, which was a study in mantle cell
`lymphoma. . .. Q. So for ZUMA-2, did you use the same CAR construct that you used in ZUMA-1? A. Yes.”)
`Exhibit I: Expert Report of Ryan Sullivan, Ph.D., 4/26/2019, at Attachment D-4.
`Exhibit D: Sidak, J. Gregory (2016), “Ongoing Royalties for Patent Infringement,” Texas Intellectual Property Law
`Journal 24:161–213, at 202–204.
`Exhibit J: Juno Workbook, Maple Company Model v12.29.17 (JUNO016712305, at tab “JCAR017 Assumptions”
`cells L369 and L370; Kite and Novartis referred to in workbook as “CD28 Competitors” and “4-1BB Competitors”,
`respectively).
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`Exhibit L: Michael Amoroso, Dep. Tr., 4/5/2019, at 38:17–40:3, 65:15–66:7.
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`respect to Yescarta and other follow-on therapies that use the same CAR as Yescarta. I
`understand that, in such a lawsuit, Kite would have no defenses and would potentially face an
`additional willful infringement verdict and a potential trebling of the corresponding damages given
`that Yescarta has already been adjudicated as infringing the ’190 patent
`12.
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`Exhibit M: Gilead, Form 10-K, 2017, at 55. (“We are amortizing [Yescarta] over an estimated useful life of 18 years
`using the straight-line method.”)
`2017 (Yescarta year of approval) + 18 years = 2035.
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`20.
`I declare under penalty of perjury of the laws of the United States that the foregoing
`is true and correct. Executed in San Diego, California, on January 21, 2020.
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` _______________________________
` Ryan Sullivan, Ph.D.
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`DECLARATION OF RYAN SULLIVAN, Ph.D.
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