Strong Presumption Moderna Covid Vaccine Infringes on Arbutus IP

News last Thursday that the US Patent Trial and Appeal Board (PTAB) upheld a broad liposomal nanoparticle (LNP)-related patent added an interesting wrinkle to the race to develop a vaccine against covid19.  Given the way that LNP delivery of mRNA is practiced today (see also below), the patent owned by Arbutus Biopharma greatly impacts on the development of some of the most prominent covid19 vaccine candidates, most notably by Moderna, but also BioNTech, CureVac and others.

This blog entry will provide some background on the history of the science and business of LNPs and why there is a strong presumption that the mRNA-1273 formulation by Moderna which is about to enter phase 3 development infringes on the US patent 8,058,069 ('069) in question.

Disclosure: while anybody who has been following RNAi from the early days of IP battles should be able to call themselves an IP expert, I do not have a corresponding certificate hanging on my walls.  Moreover, since I am long Arbutus Biopharma (ticker: ABUS), I have a vested interest in Arbutus prevailing in the present case, but hear me out anyway...

A history of trade secret theft and IP misappropriation

In 2005-6, Protiva (a predecessor of Arbutus) emerged as the leader in the delivery of RNAi Therapeutics by reporting the first clinically relevant success in taking RNAi triggers into cells in the human body.  The delivery formulation, then called SNALP, involved a mixture of lipids that has essentially remained the same until today:

•         the nucleic acid payload;
• an ionizable cationic lipid for formulation and cell penetration;
• a (PEG-)conjugated lipid for stability;
• cholesterol;
• neutral phospholipids.

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What has mostly changed since is the nature of the cationic, typically ionizable lipid, but the 4 lipid-component-system has stayed the same despite at times frantic IP workaround attempts like using just 3 lipid components.

Due to the central importance of these LNPs to RNAi Therapeutics, large players (Sirna Therapeutics/Merck, Alnylam, Roche) soon came to collaborate, then misappropriate related IP from the small Canadian biotech company.  A bitter divorce of Protiva and scientists related to Pieter Cullis from the University of British Columbia certainly aided that goal by facilitating the transfer of know-how and trade secrets for peanuts. Divide and conquer.

Despite of what appeared to be a hopeless battle between David and Goliath, a settlement was reached in 2012 with Alnylam and 'Cullis' in which Alnylam got access to (now) Tekmira’s IP mainly for covering ONPATTRO for the treatment of TTR amyloidosis (now approved) in return for allowing Tekmira survive a system that greatly favors the guy with the most financial wherewithal (disclosure: I was an expert witness called on by Tekmira in that litigation).  The settlement also provided for the limited use of certain IP by 'Alnylam Canada' (AlCana, now Acuitas).

LNP going out of favor in RNAi as mRNA gains traction

The fact that Alnylam started to see success with a less invasive conjugate delivery strategy (GalNAc) for RNAi around that time, certainly helped with settling the dispute.  In ~2015 then conjugate technology in the form of second-generation GalNAc technology started to demonstrate superiority over LNPs in RNAi delivery and Tekmira faced the decision of where to take their company.

In my mind, the decision was obvious: leverage the LNP know-how and IP in order to cement their position in messenger RNA (mRNA) Therapeutics, a hot new field in biotech where Tekmira had been generating industry-leading data.

Instead, in what must be one of the most catastrophic business decisions that to this day I fail to grasp, Tekmira in 2015 gave up half of the company in a merger with a paper company called OnCore Biopharma in establishing an HBV therapeutics solutions company.  This shell contained nothing more but a list of untested chemical structures written on the back of an envelope by new biotech Wunderkind Vivek Ramaswamy and his scientific lieutenant Michael Sofia.

To wit, Vivek Ramaswamy is famous for dumpster diving and buying rights to a failed Alzheimer’s asset from GSK for $5M to then sell it to the public without much additional development for $1.5B soon thereafter.  It then only took one clinical trial to incinerate that value to essentially zero...

Arbutus Biopharma was born.

Unsurprisingly, in what must be one if not the longest string of failures in biotech history, small molecule after small molecule crashed and burned, mostly due to preclinical and early clinical tox issues.

Realizing that their legacy IP and know-how could be quite valuable for financing their string of failures, Vivek took advantage of Arbutus and its shareholders yet another time by spinning out Arbutus' mRNA assets into Genevant (January 2018).  

Arbutus retains a 40% stake in Genevant, a number that Arbutus said needs to be adjusted for 'significant' dilution due to the convertibles that Genevant has issued since.   Possibly equally if not more importantly, Arbutus is eligible to 20% of the revenues (e.g. from damages and royalties payable to Genevant) from the sublicensing of LNP IP by Genevant, for example as the result of a settlement with Moderna, but also other prominent covid vaccine players like BioNTech and CureVac.

BioNTech and Moderna acknowledge fundamental importance of IP controlled by Arbutus

The Genevant creation apparently hinged on a settlement with the rival Vancouver group (now 'Acuitas') announced the following month (February 2018) where it was determined that Acuitas could not sublicense certain fundamental LNP IP under the grand 2012 Alnylam settlement.

Not long thereafter, covid vaccine player BioNTech which until then had worked with Acuitas on mRNA LNP delivery took a license to Genevant's LNP IP in an obvious acknowledgement of the new settlement (note: there has been no explicit disclosure of whether the original license agreement between Genevant and BioNTech has been extended to cover the lead covid vaccine candidates by BioNTech and partners Pfizer and Fosun Pharma; potentially another important puzzle piece of the intrigue).

Importantly, the settlement also provided that Moderna, which similarly had been working with Acuitas, would only retain legacy rights to such IP for 5 viral targets that had been selected by then, well before SARS-CoV-2 was on anybody’s radar.

Unhappy and feeling vulnerable- not surprising since the '069 and other IP may cover most if not all of Moderna's current pipeline- Moderna set out to challenge the validity of Arbutus patents in front of the patent courts.

In a great setback to those efforts, by upholding the ‘069 patent last week, the PTAB not only confirmed the validity of fundamental LNP claims, but strengthened them enormously to the point that Arbutus (the patent owner) would run little risk having its IP found unpatentable (not unusual in IPR proceedings like the one concluded last week) during an infringement lawsuit.

The ‘069 patent

In order for a biotechnology/product to infringe on a patent, it is sufficient that a single claim applies to the technology/product that is being monetized by the infringer.  Receiving government money specifically to develop and manufacture such product like Moderna did in April could be interpreted as such monetization.  More typically, however, it is the actual sale of pharmaceutical products that is viewed as an act of infringement.

The critical claim in the present controversy is as follows (color highlights are mine):

1. A nucleic acid-lipid particle comprising:

(a) a nucleic acid;

(b) a cationic lipid comprising from 50 mol % to 65 mol % of the total lipid present in the particle;

(c) a non-cationic lipid comprising a mixture of a phospholipid and cholesterol or a derivative thereof, wherein the phospholipid comprises from 4 mol % to 10 mol % of the total lipid present in the particle and the cholesterol or derivative thereof comprises from 30 mol % to 40 mol % of the total lipid present in the particle; and

(d) a conjugated lipid that inhibits aggregation of particles comprising from 0.5 mol % to 2 mol % of the total lipid present in the particle.

In order to infringe a ‘comprising’ claim, all individual elements need to be present in a covered product.  As detailed in Moderna’s recent publication in the New England Journal of Medicine on their phase I results with mRNA-1273 (Jackson et al), there is no controversy of whether mRNA-1273 contains all elements covered by the claim:

Messenger RNA -->  nucleic acid

Ionizable lipid --> cationic lipid

DSPC --> phospholipid

cholesterol

PEG2000-DMG --> conjugated anti-aggregation lipid

What then becomes critical is whether the percentages in the mRNA-1273 formulation fall within the ranges specified in the claim.  Curiously, this information is lacking in the publication, in sharp contrast to previous publications. Interesting!

But since Moderna is using a platform approach to developing mRNA therapeutics and vaccines and has stated that the development risk of mRNA-1273 is greatly reduced because it relies on already clinically tested LNP formulations, one could simply look up and compare the percentages used in other mRNA vaccine candidates currently being developed by Moderna.  This is just what I did by looking up the hitherto 3 most recent freely accessible mRNA vaccine publications by Moderna as listed on their website and where the ratios were explicitly detailed.

1)      HIV (Moyoet al, 2020)

Ionizable lipid: 50 mol % (i.e. within 50-65% stipulated in claim)

DSPC: 10 mol % (cf 4-10%)

Cholesterol: 30.5 mol % (cf 30-40%)

PEG-lipid: 1.5 mol % (cf 0.5-2%)

è The HIV formulation infringes on the ‘069 patent.

2)      RSV (Espeseth et al, 2020)

Ionizable lipid: 58 mol % (cf 50-65%)

DSPC: 10 mol % (cf 4-10%)

Cholesterol: 30 mol % (cf 30-40%)

PEG-lipid: 2 mol % (cf 0.5-2%)

è The RSV formulation infringes on the ‘069 patent.

3)      Chikungunya (Kose et al, 2019)

Ionizable lipid: 50 mol % (cf 50-65%)

DSPC: 10 mol % (cf 4-10%)

Cholesterol: 38.5 mol % (cf 30-40%)

PEG-lipid: 1.5 mol % (cf 0.5-2%)

è The Chikungunya formulation infringes on the ‘069 patent.

Similarly, since Moderna has referred to the clinical experience with their 1273 formulation, I finally checked on their latest clinical research paper.

4)      Flu (Feldman et al, 2019)

Paper references Richner et al 2017 paper for formulation details.

Ionizable lipid: 50 mol % (cf 50-65%)

DSPC: 10 mol % (cf 4-10%)

Cholesterol: 38.5 mol % (cf 30-40%)

PEG-lipid: 1.5 mol % (cf 0.5-2%)

è The flu formulation infringes on the ‘069

As you can see, the preponderance of evidence points to the fact that the covid vaccine candidate by Moderna infringes on ‘069.  Issuing a PR, as Moderna did on Friday, that it is not aware of an IP problem, of course is par for the biotech IP game, not only for public posture, but in particular to downplay the view that Moderna is willfully using somebody else’s IP.  If found to have done so after starting to commercialize the vaccine, this could lead to up to triple the amount the damages awarded to Genevant and Arbutus.  But then again, the motivation behind attempting to invalidate the patent right after it loses access to it following the Genevant-Acuitas settlement and hiding the lipid ratios in the NEJM paper will be obvious to any judge and should lead to the presumption of willful infringement.

What’s next?

In the typical biotech game, what would follow now is a last-ditch attempt by Moderna to still invalidate the patent by appealing the ruling.  Odds, however, are now strongly against Moderna that they will be able to reverse last week’s ruling.  In fact, the ‘069 is now stronger than ever and the above evidence will give them sufficient ammunition to sue Moderna on the presumption of infringement.  Appealing the decision would, however, buy Moderna some time trying to make their smaller adversary willing to settle for more favorable terms (following the Alnylam playbook).

This, however, is happening during a pandemic and IP-related tactical games may not be viewed kindly.  This also means that Arbutus would be well advised not to make a big public fuss out of what could be very valuable to them financially and continue with their low-key, matter-of-fact approach to the issue.

So in short, I don’t know when the issue will be resolved, but it certainly won’t be next week or month, but more likely at least after a first read-out of the phase 3 results before we hear about any resolution to the matter- most likely a settlement.

How much all of this is worth to Arbutus stock is anybody’s guess, too, depending, of course, mostly on the performance of mRNA-1273 in the clinic, the price Moderna could charge for its vaccine (note: Moderna is a proponent of whatever-the-market-will-bear) and whether covid19 vaccines will become an annual re-administration market.  Personally, the current share price of $5 is already justified by the promising HBV-RNAi phase I results disclosed in May (update pending soon) and the optionality from the fact that Michael Sofia from Arbutus, the inventor of the most impactful HCV medicine, polymerase inhibitor sofosbuvir, has now set his sights on inhibiting the SARS-CoV-2 and other coronavirus polymerases.

A New Order: Tekmira Senior, Alnylam Junior

There have been a few developments supporting that Tekmira’s campaign to re-gain control over its technology from Alnylam and be recognized for its scientific accomplishments is as strong as ever (see 'Tekmira Tells Alnylam 'Enough is Enough''). 

Notably, based on LinkedIn entries, it appears as if key personnel in Alnylam’s RNAi delivery group got the axe during the latest round of lay-offs at the company.  Among those is Mark Tracy, former President of the Controlled Release Society and who according to LinkedIn 

'Built and led a multi-national RNAi delivery research and development alliance of industry and academic partners that enabled human clinical proof of concept for RNAi and a growing pipeline of clinical products. Matrixed-managed an international multi-department, mutli-organizational team of over 50 FTE. Directed technology assessment and due diligence activities. Headed delivery project and alliance management and business and financial planning.'

which would arguably make him one of the central players in Alnylam's relationship with Tekmira (note the emphasis on 'multi-national/international'). This should further fuel takeover speculations as in a merger there certainly wouldn’t be room left for liposomal delivery research organizations at both Tekmira and Alnylam.  It would further be consistent with the recent $85M dollar fund-raising by Alnylam that followed the take-over script.

Perhaps symbolizing the shifting legal fortunes of the companies, a Court Order has just gone out declaring Tekmira (Protiva) the Senior Party, and Alnylam the Junior Party in the ALN-VSP02 Interference.  As you will remember, the Interference, an intriguing side-show to the Alnylam-Tekmira conflict, was declared by the USPTO when it found that Alnylam’s issued ALN-VSP patent (US 7718629) and a patent application by Tekmira were too close in nature for them to co-exist. The goal of the Interference now is to determine who first invented the subject matter that both patent (applications) are claiming.  

Based on important decisions on Motions by the companies in March, decisions which will set the tone for the rest of the proceedings, it already looked like Alnylam’s case stood on very weak grounds. Still, with Alnylam, as the patent holder, being considered the 'Senior Party', and Tekmira as the competing patent applicant being considered the ‘Junior Party’, Tekmira faced certain procedural disadvantages, including burden of proof with regard to claiming temporal priority in the upcoming phase of the Interference. 

However, in what must be a very satisfying turn of events for Tekmira, the judge now has agreed with the small Vancouver-based company's request that it actually should be the Senior Party, and widely recognized RNAi behemoth Alnylam only the Junior Party:

This not only makes it more likely that Alnylam will lose control over the liver cancer drug candidate at stake, but it is highly symbolic for what could unfold over the next 6 months or so leading up to their $1B day in court.  If it comes to that, the very existence of Alnylam will be in question.   Another question is whether the music will still be playing then.

On the Importance of Semple-Wheeler

The Semple-Wheeler (S-W) patents can be considered essential intellectual property (IP) for those liposomal siRNA formulations currently in development that have shown clinical promise. Because Alnylam obtained significant control over Semple-Wheeler (S-W) through a license from Tekmira, this patent estate has been important to Alnylam in controlling access to Tekmira’s SNALP delivery technology and, equally important, keeping Tekmira close to its chest.

Today, I will provide a brief re-cap of S-W and explain why its strategic importance is rapidly waning as patent expiration dates draw close.

What Semple-Wheeler Covers

Most critically, S-W cover LNPs comprising

a) ionizable lipids (e.g. DLinDMA, MC3), a modified lipid that prevents particle aggregation (e.g. PEG-lipid) in addition to the nucleic acid cargo (e.g. siRNA; Semple US6858225); and/or

b) a cationic lipid, a non-cationic lipid, a PEG-lipid conjugate in addition to the nucleic acid (i.e. the chemistry of a SNALP liposome; Wheeler US6815432).

While, until S-W has been tested in court, there will always been some uncertainty as to the real scope of the claims, e.g. in light of such newfangled terms like ‘lipidoids’ or other classes of lipids that may not have been covered by the examples in the specification, such strategies would seem to stand on weak scientific grounds.

Ownership and Control over Semple-Wheeler

Originally, Old Tekmira had an exclusive license to S-W from the University of British Columbia (UBC). Realizing the importance of liposomal delivery for the first wave of value creation in systemic RNAi Therapeutics, Alnylam obtained exclusive rights to Tekmira’s exclusive rights to S-W in January 2007. By this, Old Tekmira’s ability to further monetize this patent estate became greatly limited, and, in the absence of other significant RNAi assets at that time (i.e. lack of Protiva IP, know-how, and trade secrets), was widely regarded as a de facto satellite company of Alnylam.

Fair enough- not only did Alnylam pay $8M in upfront for these rights and is on the hook for milestones and royalties, Old Tekmira was in turn granted RNAi trigger IP and the use of S-W for the selected targets. Interestingly, the latter has been brought into question by Alnylam by stating in their recent Response to Tekmira’s Amended Complaint that Tekmira actually does not have rights to S-W and that Alnylam had given Tekmira such notice:

‘23. Consistent with this pattern, Tekmira has failed to adequately disclose the limitations of its licenses to investors. Despite the clear terms of the license agreements and notice from Alnylam that it lacked licenses to the Semple & Wheeler patent series and Isis patents, Tekmira made representation to the contrary in its public filings with the SEC and in other documents provided to investors.’

It is unclear on what grounds Alnylam makes these claims. Does it claim that Tekmira apparently was never granted such rights, or does it simply mean that Alnylam considers the lawsuit brought by Tekmira as grounds for terminating these rights? In any case, the irony is not lost as it is Tekmira through which Alnylam gained access to S-W and it is for Tekmira to terminate Alnylam's rights if at all.

Strategic Importance of Semple-Wheeler in Light of Upcoming Patent Expirations

In biotechnology, patent infringement typically only becomes ground for lawsuits either when drugs/devices allegedly covered by such claims are about to be commercialized or as generics want to muscle their way onto the markets before the expiration of patents covering an innovator drug. Because of the so called Research Exemption, it is very difficult to enforce patent rights before any commercialization of related drugs, i.e. during the period that patented technologies are being used for drug development pre-commercialization.

Certain licensing and collaboration agreements may be considered to fall between the Research Exemption and the commercialization of drugs, as they may involve technologies covered by 3^rd party patents, even if these patents can be assumed to have expired by the time drugs are ready to be commercialized. In other words, the LCAs may be interpreted as a way of commercializing patents. Although such actions are less common, emotions are running high, so Alnylam may use S-W as pre-text for throwing a wrench into any significant LCA that Tekmira may strike. Old Tekmira e.g. once sued Protiva for allegedly licensing S-W to Merck, and one can only speculate to what extent Alnylam instructed Old Tekmira to do so.

The reason though why such actions are unusual is that chances of enforcing such patent rights are slim if the parties involved in an LCA word their agreement appropriately (e.g. by simply excluding the appearance, implicitly or explicitly, that the partner gains rights to S-W; performing work in countries where S-W is not in force etc etc). As such, Tekmira has substantial freedom to strike deals as long as SNALP-based drugs are not being commercialized before the expiration of the fundamental S-W patents…which should be around 2015-7:

Semple US6858225 (ionizable LNPs):

Date of patent: Feb 22, 20005

Filing date: June 29, 2001

Priority date: May 14, 1997 (claims priority to No. 08/856474)

Approximate term of patent: Feb 22, 2005- May 14, 2017

Wheeler US6815432 (SNALP chemistry):

Date of patent: Nov 9, 2004

Filing date: Feb 24, 2003

Priority date: June 7, 1995 (claims priority to No. 08/5981501; note that although this is just before the famous June 1995 cut-off date, because the patent application of ‘432 was filed after that date, patent terms are according to the new regime)

Approximate term of patent: Nov 9, 2004- June 7, 2015

Tekmira business development prospects

Two factors largely controlled by Alnylam have long held back Tekmira’s full business development potential. In addition to granting Alnylam exclusive rights to S-W, it was particularly Alnylam’s RNAi trigger gate-keeper claim that tied SNALP technology to Alnylam.

Until the expiration of S-W, only those companies with access to S-W (Tekmira, Alnylam, Roche, Takeda, and supposedly Novartis) could commercialize SNALP-based drugs until 2017. Because Tekmira has 8 target picks for which it can use S-W, Tekmira is able to offer an acquirer or product-specific co-development partner more than enough access to S-W until then. 6 years is not a long time in drug development, about the time it would take from initiation of phase I to approval if all goes smoothly. The ~2017 expiration of S-W therefore means that its strategic importance for the development of SNALP-based RNAi Therapeutics is waning rapidly. 2007-8 was a different story.

In this light, a gate-keeping position of Alnylam in RNAi triggers, based on the Tuschl and Kreutzer-Limmer patents would be the real rate-limiting factor, as the terms for these patents may last into 2021-2. However, the RNAi trigger landscape has changed significantly over the last 2-3 years as the importance of Kreutzer-Limmer is rapidly diminishing in Europe and is nowhere to be seen in the US, Tuschl I turns out to be of no relevance for therapeutic applications, and even the validity of Tuschl II is now being questioned. Even if T-II can survive the Utah challenge, as it covers only certain RNAi triggers with certain 3’ overhangs, it is not the type of gate-keeping IP that KL or T-I may have become with a bit of luck.

Consequently, with the strategic importance of S-W waning and access to RNAi triggers ceasing to be a limiting factor, Tekmira’s business development is almost entirely out of Alnylam’s control. If, as a result of the litigation, Alnylam lost all rights to Tekmira’s technology (certainly a plausible outcome if it comes to a trial*), the attraction of partnering with or acquiring Tekmira would increase even more.

* As I am writing this, Alnylam has just filed a $150M shelf registration with the SEC. This typically happens in anticipation of selling stock to the public. The timing of this shelf registration is unusual though, because Alnylam has over $300M in cash/cash equivalents, meaning that with the current and anticipated burn, it should not have a need for raising funds any time soon- under normal circumstances. Given my assessment of the strength of Tekmira’s case and the existential risk to Alnylam’s business, it would not surprise me if Alnylam’s lawyers are advising the company to settle the case. A $150M capital raise may be in the right range to allow for Alnylam to survive and remain an independent company.

A hostile takeover attempt as an alternative explanation? On paper, this would probably make most sense for Alnylam, but I don’t think so.