Thanks Go Out To Marilyn Mann: Gilead Counters Merck's Demand For 10% Patent Royalty On New Hep C Drug

I'll have a chemical structure graphic, and more here -- late night, tonight. My 2013 backrounder, on the chances of Merck being leapfrogged by Gilead's sofosbuvir candidate. [On the road -- then grilling -- most of the rest of the day today.]

And so, Marilyn Mann, longtime friend of this blog, has alerted us that Gilead is now defending itself in federal court in San Francisco, against Merck's demand for a 10 per cent running alleged patent infringement royalty on sales of Gilead's next gen Hep C drug.

That drug is likely to drop the curtain on Merck's boceprevir -- a legacy Schering-Plough Hep C drug.

UPDATED @ 10:30 PM EDT: Of course, Merck's current Hep C franchise is at best holding even, or perhaps, slighly declining. Whitehouse Station's next gen candidates are clearly threatened by the success of sofobuvir in late stage clinical trials. So Merck is looking to collect some of Gilead's coming revenue, with very little additional downside risk. It is fairly inexpensive -- trivial, almost -- to write a demand letter, seeking to impose a license deal, by threatening patent litigation. That's what Merck did. Gilead answered, directly in the federal courts, though -- by seeking a declaration from the courts that its next gen drug candidate doesn't read on any of Merck's patents.

That approach costs Gilead a bit more, up front, in legal fees -- but will effectively prevent Merck from prematurely strong-arming a license deal, unless a judge starts hinting that Gilead does, in fact, infringe. And I think that outcome is unlikely -- at this point. So my guess is that Gilead likely is cleared of infringement, and Merck doesn't get a free 10 per cent of pure margin, on its already deployed capital. It is simply a continuing erosion of Merck's Hep C franchise. But you absolutely should do your own diligence here. [END UPDATE.]

Now, here's a bit, from Bloomberg:

. . . .Merck. . . asked Gilead to pay a 10 percent royalty on the net sales of the medicine until the patents expire, a request “meant to threaten Gilead” on the eve of U.S. regulatory approval of sofosbuvir, according to the complaint. Gilead seeks a judge’s declarations that the patents aren’t enforceable or infringed so it won’t have to license them to sell the medicine.

Gilead, based in Foster City California, said June 7 that sofosbuvir will receive a priority marketing review by U.S. regulators with a target review date of Dec. 8. . . .

Back tonight with more. Merck is fishing for a revenue enhancer here -- and while it won't be damaged terribly if it loses -- Merck is not likely to win on this one. Just my $0.02.