1. Patent Term Matters Term and Scope AIPLA 14 May 2009

2. Patent Term Matters James J. Kelley Ass’t General Patent Counsel Eli Lilly and Company Indianapolis, Indiana 46285 jim.kelley@lilly.com Jeffrey P. Kushan Partner Sidley Austin Brown & Wood Washington, D.C. 20005 jkushan@sidley.com Vicki G. Norton Partner Duane Morris LLP San Diego, CA 92101-8285 vgnorton@duanemorris.com Pamela Politis Patent Attorney Endo Pharmaceuticals Chadds Ford, PA 19317 politis.pamela@endo.com 14 May 20092AIPLA Chemical and Biotechnology Sections

3. Motivation for This Session Conference Speakers – “PTE = ½ day/day during testing phase + 1 day/day during review phase (≤5, ≤14)” Due diligence observations – premature filings – protracted, non-strategic prosecution RCEs, CIPs, TDs, extensions, late submissions final rejections, not ready for appeal pursuit of “scope” no apparent concern about term How does pursuit of “scope” potentially jeopardize >14-year effective patent term for drugs? 14 May 20093AIPLA Chemical and Biotechnology Sections

4. How Much Does Term Matter? One extra day of exclusivity for a $1B/year drug is $2.75 million. Decisions that may affect patent term must be made carefully. – Example: direct non-provisional US filing vs. PCT followed 18 months later by US national filing – NPV for $1B/year drug – up to ~$150 million. 1 2 assuming 8% discount rate, 9-month difference in patent term (18 months ÷ 2), and complete loss of market at end of term 14 May 20094AIPLA Chemical and Biotechnology Sections

5. Agenda Discussion Starters Jeff Kushan – PTA Jim Kelley – PTE and PTA Vicki Norton - Scope: Enemy of Term? The Impact of Recent Decisions Pam Politis – Strategy Questions Panel and Audience Discussion Questions May be Asked at Any Time 14 May 2009AIPLA Chemical and Biotechnology Sections5

6. 35 U.S.C. PTE Provisions PTE is applied after PTA - § 156 (a) PTE accrues only after patent issues - § 156 (c) Lack of diligence deduction; ½ day per day; 14-year limit - § 156 (c) Regulatory review period = testing phase plus review phase - § 156 (g)(1)(B)(i) and (ii), resp. 5-year limit - § 156 (g)(6)(A) 14 May 20096AIPLA Chemical and Biotechnology Sections

7. PTE = PTR Drug Price Competition and Patent Term Restoration Act Must “lose” patent term before it can be “restored.” PTE “credits”  Regulatory review period minus any time during which there was lack of diligence;  ½ day per day from when the patent has issued and an IND has become effective until a complete NDA is submitted, plus  1 day per day from when the patent has issued and the NDA is complete until the NDA is approved, Total patent term restored ≤ 5 yrs Total period of Effective Patent Term (EPT) ≤ 14 yrs 14 May 20097AIPLA Chemical and Biotechnology Sections

8. Effective Patent Term (EPT) Patent Term Starts IND Effective NDA Complete DT P Patent Issues R NDA Approved EPT (≤14 years) Patent Expires Inputs:P = time from beginning of patent term to patent issue (“pending phase”) D = time from beginning of patent term until IND effective date (“delay”) T = time from IND effective date until NDA complete (“testing phase”) R = time from NDA acceptance until NDA approval (“review phase”) Output:EPT = time from NDA approval until patent expires PTE “Credits” ½ day per day 1 day per day Expiry of 17- or 20- year term PTE (≤5 years) 14 May 20098AIPLA Chemical and Biotechnology Sections

9. Effective Patent Term (EPT) Patent Term Starts IND Effective NDA Complete DT P Patent Issues R NDA Approved EPT (≤14 years) Inputs:P = time from beginning of patent term to patent issue (“pending phase”) D = time from beginning of patent term until IND effective date (“delay”) T = time from IND effective date until NDA complete (“testing phase”) R = time from NDA acceptance until NDA approval (“review phase”) Output:EPT = time from NDA approval until patent expires PTE “Credits” ½ day per day 1 day per day 14 May 20099AIPLA Chemical and Biotechnology Sections Patent Expires Expiry of 17- or 20- year term PTE (≤5 years)

10. Effective Patent Term (EPT) Patent Term Starts IND Effective NDA Complete D < 0 T P Patent Issues R NDA Approved EPT (≤14 years) Inputs:P = time from beginning of patent term to patent issue (“pending phase”) D = time from beginning of patent term until IND effective date (“delay”) T = time from IND effective date until NDA complete (“testing phase”) R = time from NDA acceptance until NDA approval (“review phase”) Output:EPT = time from NDA approval until patent expires PTE “Credits” ½ day per day 1 day per day 14 May 200910AIPLA Chemical and Biotechnology Sections Patent Expires Expiry of 17- or 20- year term PTE (≤5 years)

11. Attorney Influence Over EPT Variables No control: T, R Some influence: D – time between start of patent term and start testing phase Most influence: P – time to issue patent Patent Term Starts IND Effective NDA Complete DT P Patent Issues R NDA Approved EPT Patent Expires 14 May 200911AIPLA Chemical and Biotechnology Sections

12. Survey 48 human drugs that qualified for PTE (no devices or animal products) Sources – USPTO site – US patents – Federal Register Approval YearNumber in Survey 19961 20001 20013 20023 20036 20046 20055 200614 20079 14 May 200912AIPLA Chemical and Biotechnology Sections

13. Survey Results – Averages PDTREPT 17-year (18)5.9 5.50.912.8 20-year (30)4.82.45.91.112.9 Biotech (18)6.13.75.31.313.2 Small Mol. (30)4.73.66.00.912.6 Total (48)5.23.65.71.112.8 14 May 200913AIPLA Chemical and Biotechnology Sections P = time from beginning of patent term to patent issue (“pending phase”) D = time from beginning of patent term until IND effective date (“delay”) T = time from IND effective date until NDA complete (“testing phase”) R = time from NDA acceptance until NDA approval (“review phase”) EPT = effective patent term, i.e., time from NDA approval until patent expires

14. Survey Results – Ranges PDTREPT Minimum1.5-13.32.60.37.7 1 st quartile3.11.84.00.512.2 2 nd quartile4.63.05.50.814.0 3 rd quartile7.46.26.61.214.0 Maximum12.410.4203.014.0 14 May 200914AIPLA Chemical and Biotechnology Sections P = time from beginning of patent term to patent issue (“pending phase”) D = time from beginning of patent term until IND effective date (“delay”) T = time from IND effective date until NDA complete (“testing phase”) R = time from NDA acceptance until NDA approval (“review phase”) EPT = effective patent term, i.e., time from NDA approval until patent expires

15. An EPT “Mountain” – PTE Only 14 May 2009AIPLA Chemical and Biotechnology Sections15

16. Topographical View 14 May 2009AIPLA Chemical and Biotechnology Sections16

17. 14 May 2009AIPLA Chemical and Biotechnology Sections17

18. EPT Observations The longer the testing (T), the smaller the “plateau.” Longer prosecution (P) and greater delay (D) lower likelihood for 14 years. Length of prosecution (P) has least effect when D=0, that is, when patent term starts at the same time that clinical testing starts. Length of review (R) has little to no effect when T = 4-6 years, but longer review (R) lowers likelihood for 14 years when T = 8-10 years. 14 May 200918AIPLA Chemical and Biotechnology Sections

19. PTE Summary Must have a patent before PTE “credits” accrue – therefore want to issue sooner than later. Realizing this will affect drafting, filing, and prosecuting strategies: – Longer prosecution => less EPT – Earlier patent filing => less EPT Longer development time => less EPT If short development times (<~4-5 years), then less concern about prosecution time. 14 May 2009AIPLA Chemical and Biotechnology Sections19

20. PTE and PTA § 156 (c) The term … shall be extended by the time equal to the regulatory review period for the approved product which period occurs after the date the patent is issued, except that- … (3) if the period remaining in the term of a patent after the date of the approval of the approved product … when added to the regulatory review period as revised under paragraphs (1) and (2) exceeds fourteen years, the period of extension shall be reduced so that the total of both such periods does not exceed fourteen years; 14 May 2009AIPLA Chemical and Biotechnology Sections20

21. 156(c)(3), 154(b), 156(a) Patent Term Starts IND Effective NDA Complete Patent Issues NDA Approved Patent Expires Expiry of 17- or 20- year term PTE (≤5 years) 14 May 200921AIPLA Chemical and Biotechnology Sections PTA EPT (≤14 years) 156(c)(3) if the period remaining in the term of a patent after the date of the approval of the approved product … when added to the regulatory review period as revised under paragraphs (1) and (2) exceeds fourteen years, the period of extension shall be reduced so that the total of both such periods does not exceed fourteen years

22. Incorrect Interpretation of 156(c)(3) Patent Term Starts IND Effective NDA Complete Patent Issues NDA Approved EPT (≤14 years) Patent Expires Expiry of 17- or 20- year term PTE (≤5 years) 14 May 200922AIPLA Chemical and Biotechnology Sections PTA 156(c)(3) if the period remaining in the term of a patent after the date of the approval of the approved product … when added to the regulatory review period as revised under paragraphs (1) and (2) exceeds fourteen years, the period of extension shall be reduced so that the total of both such periods does not exceed fourteen years

23. PTE and PTA Does the 14-year limit apply to both PTE and PTA? – Statutory language seems clear – No. – But, will the USPTO take a different interpretation, as in Wyeth? – No cases yet. – Some could be in process now. 14 May 2009AIPLA Chemical and Biotechnology Sections23

24. PTE and PTA PTA vs.PTE PTE – want to issue sooner, to start accruing “credit” sooner – only ½ day per day during testing phase PTE – want to issue later, but without incurring deductions – 1 day per day 14 May 200924AIPLA Chemical and Biotechnology Sections

25. PTE and PTA Poor correlation between pendency and PTA – see Patently-O blog, March 14, 2008 Average PTA = ~1.1 years over-all – Longer for pharma & biotech patents covering products? Longer for such patents that receive PTE? No data yet (Wyeth and other cases) No patents that obtained PTE also obtained PTA, yet – PTE data are very delayed (2-3 years from approval) – Only 2 patents in survey were filed after May 29, 2000 and neither qualified for any PTA. 14 May 200925AIPLA Chemical and Biotechnology Sections

26. PTE and PTA Summary PTA will extend PTE-extended patent term beyond 14 years. – But, will USPTO take a different view? Must be very careful not to lose PTA after lengthy prosecution – e.g., lost appeal, RCE, TD – could jeopardize both PTE and PTA 14 May 2009AIPLA Chemical and Biotechnology Sections26

27. Back up Slides 14 May 2009AIPLA Chemical and Biotechnology Sections27

28. PTE and PTA 35 U.S.C. § 156 (a) The term of a patent … shall be extended … from the original expiration date of the patent, which shall include any patent term adjustment granted under section 154(b) if …. 14 May 200928AIPLA Chemical and Biotechnology Sections

29. Requirement for Patent Issue 35 U.S.C. § 156 (c) The term of a patent eligible for extension under subsection (a) shall be extended by the time equal to the regulatory review period for the approved product which period occurs after the date the patent is issued, except that- 14 May 2009AIPLA Chemical and Biotechnology Sections29

30. Deductions, Partial Credit, 14-year Limit 35 U.S.C. § 156 (c) … (1) each period of the regulatory review period shall be reduced by any period [in which diligence was not exercised]; (2) after any reduction required by paragraph (1), the period of extension shall include only one-half of the time [described in 35 U.S.C. § 156 (g)(1)(B)(i) – i.e., from IND to NDA]; (3) if the period remaining in the term of a patent after the date of the approval … exceeds fourteen years, the period of extension shall be reduced so that the total of both such periods does not exceed fourteen years 14 May 2009AIPLA Chemical and Biotechnology Sections30

31. “Regulatory Review Period” 35 U.S.C § 156 (g) For purposes of this section, the term "regulatory review period" has the following meanings: … (1)(B) The regulatory review period for a new drug, antibiotic drug, or human biological product is the sum of – – (i) the period beginning on the date [an IND] became effective … and ending on the date an [NDA] was initially submitted, and – (ii) the period beginning on the date the [NDA]was initially submitted and ending on the date such [NDA] was approved. 14 May 2009AIPLA Chemical and Biotechnology Sections31

32. 5-year limit 35 U.S.C. § 156 (g)(6) A period determined under any of the preceding paragraphs is subject to the following limitations: (A) …, the period of extension determined on the basis of the regulatory review period … may not exceed five years. 14 May 2009AIPLA Chemical and Biotechnology Sections32