Eli Lilly 2015 Annual Report Download - page 22

F10
FINANCIAL REPORT
some countries as long as the mark is used, and in other countries as long as it is registered. Registrations
are normally for fixed but renewable terms.
Patent Licenses
Most of our major products were discovered in our own laboratories and are not subject to significant license
agreements. Two of our largest products, Cialis and Alimta, are subject to patent assignments or licenses
granted to us by others.
• The compound patent for Cialis is the subject of a license agreement with GlaxoSmithKline (Glaxo),
which assigns to us exclusively all rights in the compound. The agreement calls for royalties of a
single-digit percentage of net sales. The agreement is not subject to termination by Glaxo for any
reason other than a material breach by Lilly of the royalty obligation, after a substantial cure period.
• The compound patent for Alimta is the subject of a license agreement with Princeton University,
granting us an irrevocable exclusive worldwide license to the compound patents for the lives of the
patents in the respective territories. The agreement calls for royalties of a single-digit percentage of
net sales. The agreement is not subject to termination by Princeton for any reason other than a
material breach by Lilly of the royalty obligation, after a substantial cure period. Alimta is also the
subject of a worldwide, nonexclusive license to certain patents owned by Takeda Pharmaceutical
Company Limited. The agreement calls for royalties of a single-digit percentage of net sales in
countries covered by a relevant patent. The agreement is subject to termination for material default
and failure to cure by Lilly and in the event that Lilly becomes bankrupt or insolvent.
Patent Challenges
In the U.S., the Drug Price Competition and Patent Term Restoration Act of 1984, commonly known as the
Hatch-Waxman Act, made a complex set of changes to both patent and new-drug-approval laws for human
pharmaceuticals. Before the Hatch-Waxman Act, no drug could be approved without providing the FDA
complete safety and efficacy studies, i.e., a complete New Drug Application (NDA). The Hatch-Waxman Act
authorizes the FDA to approve generic versions of innovative human pharmaceuticals (other than biologics)
without such information by filing an Abbreviated New Drug Application (ANDA). In an ANDA, the generic
manufacturer must demonstrate only “bioequivalence” between the generic version and the NDA-approved
drug—not safety and efficacy.
Absent a patent challenge, the FDA cannot approve an ANDA until after the innovator’s patents expire.
However, after the innovator has marketed its product for four years, a generic manufacturer may file an
ANDA alleging that one or more of the patents listed in the innovator’s NDA are invalid or not infringed. This
allegation is commonly known as a “Paragraph IV certification.” The innovator must then file suit against the
generic manufacturer to protect its patents. The FDA is then prohibited from approving the generic company’s
application for a 30- to 42-month period (which can be shortened or extended by the trial court judge hearing
the patent challenge). If one or more of the NDA-listed patents are challenged, the first filer(s) of a Paragraph
IV certification may be entitled to a 180-day period of market exclusivity over all other generic manufacturers.
Generic manufacturers use Paragraph IV certifications extensively to challenge patents on innovative human
pharmaceuticals. In addition, generic companies have shown an increasing willingness to launch “at risk,” i.e.,
after receiving ANDA approval but before final resolution of their patent challenge. We are currently in
litigation with numerous generic manufacturers in Hatch-Waxman litigation involving Alimta and Effient,
among other products. For more information on Hatch-Waxman litigation involving the company, see
“Financial Statements and Supplementary Data—Note 15, Contingencies.”
The passage of the America Invents Act in 2011 added a new procedure to U.S. patent law. This procedure,
inter partes review (IPR), allows any member of the public to file a petition with the USPTO seeking the
review of any issued U.S. patent. IPRs are conducted before Administrative Patent Judges in the USPTO
using a lower standard of proof than used in Federal District Court. In addition, the challenged patents are not
accorded the presumption of validity as they are in Federal District Court. We are now seeing instances
where generic drug companies and some investment funds are attempting to invalidate our patents by filing
IPR challenges in the USPTO. For more information, see “Financial Statements and Supplementary Data—
Note 15, Contingencies.”