A federal jury on Tuesday upheld the validity of two Merck patents in a high-stakes battle with Gilead Sciences (GILD), which may now have to pay royalties on some of the billions of dollars in sales generated by its wildly successful hepatitis C treatments.
The jury for the US District Court for the Northern District of California sided with Merck’s claims that its scientists were responsible for the discoveries that led to the development of Gilead’s Sovaldi and Harvoni medications, which have transformed the hepatitis C market, thanks to their high prices and exceedingly high cure rates. Together, the drugs generated more than $19.1 billion in sales last year and accounted for roughly 60 percent of Gilead’s revenue.
The battle between the two pharmaceutical behemoths began in earnest three years ago, when Merck proposed to license its patents to Gilead in exchange for a 10 percent royalty on US sales of any product containing Sovaldi, according to court documents. Gilead responded by filing a lawsuit accusing Merck of infringing its patents.
Gilead maintained the original Merck patent applications weren’t specific enough to cover the Gilead drugs and that Merck added information years later from information developed by yet another company called Pharmasset. Pharmasset had actually developed Sovaldi and was later bought by Gilead for $11 billion in 2011.
For its part, Merck has demanded more than $2 billion in damages in addition to the royalty. The jury will now decide how much Gilead must pay its rival. A Merck spokeswoman said the company “believes the jury’s verdict accurately reflects the evidence in this case.”
A Gilead spokesperson wrote that, “although we are disappointed by the jury’s verdict today, there are a number of remaining issues to be decided by the jury and the judge.” She declined to comment further.
In an investor note, RBC Capital Markets analyst Michael Yee wrote that he expects Gilead to appeal, and, as a result, “this would take some time to drag out.” He added that the jury was instructed to set a royalty rate for damages on Sovaldi and Harvoni sales through December 2015, but the federal judge overseeing the case will decide the rate beyond that time.