PAID T TREBNDS IIN BIO/PHARMACEUTICALpursuing. Because such cells would be derived directly from the...

A Publication of Alliance of Chinese American Biotechnology & Pharmaceutical Associations

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Volume 5 / Issue 22009

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PAIDOrinda, CA

Permit No. 174

Intellectual Property Strategies for Biotechnology andPharmaceutical Industry

H a r d c o p y : I S S N 1 9 4 3 - 2 5 0 x

O n l i n e : I S S N 1 9 4 3 - 2 5 1 8

TBITRENDS INBIO/PHARMACEUTICALINDUSTRY

BioPharma News Digest

Tr e n d s i n B i o / P h a r m a c e u t i c a l I n d u s t r y 1

S U M M E R2 - 2 0 0 9

Trends InBio/Pharmaceutical

Industry

Table of ContentS

Letter from Editor Janet Xiao / 2


Xiaoxiao: the Little Mouse, Giant Footprint / 3 Ruby Yanru Chen-Tsai

Intellectual property

Fostering a Favorable Intellectual Property Environment in Chinese Biotechnology Industry / 6 Janet Xiao and Kun Wang

Biotech Licensing: Key Principles for Building Successful Licenses and Collaborations Between China and the West / 10Thomas E. Duley

Innovator vs. Generic: The Interplay of Patent Delisting and 180-day Market Exclusivity / 16 Cynthia H. Zhang

Patent Issues in Stem Cells and Regenerative Medicine / 20Terri M. Shieh-Newton and Catherine M. Polizzi

IP Strategies for Chinese biotechnology and Pharmaceutical Compa-nies / 25 Y. Philip Zhang

Society Event Wish you were there!-Report on The 1st Bio-Pearl River Forum & 14th CBA Annual Con-ference / 29 Yanni Wang Ride Through the Global Downturn - Report on the 11th CABS Annual Conference 2009 / 34Tu Hua Riding the Economic Wave-Challenges and Opportunities / 38 - Report on the 8th Annual San Diego Bio-Pharma Conference

China CRO Profile Genscript / 41

Advertisement MERCK & CO AzoPharma Taicang EDA Shanghai Medcilon BRI ACME BioScience GeneScript Zhangjiang Pharma Engine Beijing Pharmaron


It is my great pleasure to introduce this new issue of TBI, our first issue dedicated to the topic of intellectual property.

As TBI evolves from a local scientific publication towards a mainstream industrial journal in the Chinese-American biotech/pharmaceutical community, it is embraced with a significant expansion of readership with increased sophis-tication. To continue to meet the growing needs of our readers and provide in-depth analyses in particular areas of interests, we have published several issues dedicated to specific topics, such as personalized medicine, stem cell research, and avian flu. The present issue reflects our con-

tinued efforts in serving the interests of our readers.

Intellectual property (IP) is the driving force behind innovation, and provides incentive for long-term investment. It plays pivotal roles in the biotech/pharmaceutical industry, which relies heavily on innovation and long-term investment. Whether you are a scientific researcher or an emerging entrepreneur, a general understanding of IP issues will give you significant competitive advantage in building a successful career in the biotech/pharmaceuti-cal industry. Over the years, we have introduced various topics on the evolving IP law to our readers. To provide our readers with an opportunity to better understand the intricacies and practical considerations of intellectual property law, we have dedicated this issue of TBI to the topic of intellectual property.

The articles included in this issue focus on IP issues in different facets of the biotech/phar-maceutical industry. Some of the issues are of imminent importance. For example, use of stem cells in drug discovery and clinical treatment has emerged at the forefront of the biop-harmaceutical industry. Understanding IP issues related to stem cell research and application is critical for those planning to delve into this area. For this purpose, we have invited Drs. Terri Shieh-Newton and Catherine Polizzi to discussed IP considerations surrounding stem cells and regenerative medicine, including obtaining patent protection, ensuring freedom to operate, and other legal considerations unique to stem cell research. Equally important is the article by Dr. Cynthia Zhang discussing legal issues at the crossroad of IP law and the FDA drug regulation, with a particular emphasis on the interplay between patent delisting and the 180-day market exclusivity for innovative drug developers.

For those who are planning to launch a biopharmaceutical enterprise in China, we have further included three original articles with a special focus on IP considerations in China. This series of articles begin with a policy discussion by me and my colleague Kun Wang on China’s IP environment. This is followed by an article by Dr. Philip Zhang, who provides an overview of IP strategies for Chinese biotech and pharmaceutical companies from a practi-cal perspective. Finally, an article authored by Thomas Duley provides an in-depth analysis of key principles for building successful biotechnology licenses and collaborations between Chinese and Western companies.

I would like to thank our authors for their valuable time and candidness in dissecting some of the most complex IP issues for our readers. I would also like to thank members of the Chinese/American Intellectual Property Law Association (CIPLA), including Drs. Philip Zhang and Tao Huang, who are instrumental in putting this special issue together.

I hope you find this special issue resourceful and informative, and we welcome your valuable comments and feedback. Enjoy!

Janet Xiao, PhD and JDMorrison & Foerster LLP

2 Tr e n d s i n B i o / P h a r m a c e u t i c a l I n d u s t r y

Letter from EditorEditor in Chief

Wang, Jianxin Novartis, USA

Board of Scientlfic Editors

An, Songzhu Amgen, USA

Han, Jun Barr, USA

Li, Bin Abbot, China

Li, Hui Pfizer, USA

Liu, Chuan Medidata, USA

Mo, Chengjun Medimmune, USA

Shi, Li Genzyme, USA

Wang, Deqian Bayer, China

Wang,Yanni Int. Biomed Com-munication

Wei, Yingfei 3Sbio, China

Yang,Dajun Morningstar, USA

Yang, Pei Portola, USA

Yang, Naibo Biochain, USA

Zhang,Philip Cooley Godward Kronish, USA

Managing Editor

Xiang, Jun Bayer, USA

Art Director

Li, Xiaojun CA State, USA

Pages Design

Sun, Wei Today Design

Legal Counsel

Huang, Tao Morgan Lewis, USA

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Contact Us

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Editorial Board of Trend in Bio/Pharmaceutical

Industry

Letter From Editor

Dear friends and colleagues,


Chinese researchers recently reported a world class breakthrough in stem cell research in which they successfully created live mice from mouse fibroblast cells via induced pluripotent stem (iPS) cells, without using embryonic stem (ES) cells or cloning techniques that require eggs. This milestone opens the door to the development of exciting thera-pies, such as using a patient’s own cells to grow replacement organs. The research is reported in the July 23, 2009, advanced online issue of Nature [1] .

Since Shinya Yamanaka of Kyoto University in Japan created the first iPS cells [2] (Figure 1) in 2006, research-ers had not been able to generate an entire mammalian body from iPS cells, as in the case of true embryonic stem cells. Multiple groups had tried to produce mice from iPS cells but no live mice were ever born. For unknown rea-sons, iPS mouse embry-os stopped developing about two-thirds of the way through gestation. This led to concerns that iPS cells might be inferior to embryonic stem cells and hinted that reprogramming with four factors identi-fied by Yamanaka might not be the best method to produce pluripotent cell lines from patients. But the Chinese team led by Drs. Zhou and Zeng was up to the challenge. Their studies validated the potential application of iPS cells for cell replacement therapies.

In this report, animal cloners Qi Zhou of the Institute of Zoology in Beijing and Fanyi Zeng of Shanghai Jiao Tong University started by

Xiaoxiao: the Little Mouse, Giant Footprint

Ruby Yanru Chen-Tsai

About Author: Dr: Ruby Yanru

Chen-Tsai graduated from Fudan Uni-

versity with first class honor in 1986

and received her PhD in Biochemis-

try, Molecular and Cell Biology from

Cornell University in 1993. She is

currently the Director of Transgenic

Research Facility at Stanford Uni-

versity and a co-Founder of Applied

StemCell, Inc.,

Figure 1: Production of iPS cells and their applications. Taken from Stem-cell-based therapy and lessons from the heart, by Robert Passier, Linda W. van Laake & Christine L. Mum-mery. Nature 453, 322-329(15 May 2008) doi:10.1038/nature07040




creating iPS cells the same way as Yamanaka, by using vi-ral vectors to introduce four genes into mouse fibroblast cells. The first part of the team’s new study involved gathering cells that were already “differentiated,” i.e. developed into a particular cell type, such as skin, nerve, or muscle. In this case, the scientists worked with mouse embryonic fibroblast cells. Viruses were then used to insert genes coding for four proteins, called reprogram-ming factors, into these cells’ DNA. These reprogram-ming factors shifted the cells out of their normal differ-entiated state to a “pluripotent” state resembling that of embryonic stem cells, which allows the cells to produce a wide variety of cell types. This cellular rewiring caused the cells to change their size and shape so that after only 7 to 10 days they could not be visually distinguished from embryonic stem cells. To check whether the reprogramming had worked, Zhou and Zeng first carried out a standard set of tests, including analyzing whether their iPS cells had the same surface markers as embryonic stem cells. The ultimate test of the developmental puripotency was to generate live mice entirely from iPS cells. To test for that, they performed tetraploid complementation experiments in

which iPS cells are microinjected into tetraploid blasto-cyst embryos (created by fusing two wild type embryos) (Figure 2). A tetraploid embryo develops a placenta and other cells necessary for development, but not the em-bryonic cells that would become the body. Any mice that are born are therefore 100% derived from the iPS cells. Drs. Zhou and Zeng’s team was able to obtain live mice from iPS cells all the way to fertile adulthood, demon-strating that mouse iPS cells can, in fact, pass the most stringent test of pluripotency. Major Advantages Clearly one advantage of iPS cell lines, assuming no issues with their stability emerge, is that they can be cre-ated without the need to harm the donor, meaning they offer the potential to avoid most of the ethical issues associated with embryonic stem cells. Another advantage is that iPS cells are tied to the key hopes for future work.Researchers, and perhaps eventually physicians, can take cells from mice or humans at any age to generate an iPS cell line. This opens the enticing possibility that iPS cells might be manipulated to grow replacement organs such as hearts and livers, or to provide healthy replace-ments for damaged cells, such as neurons needed to cure paralysis, Parkinson’s, or Alzheimer’s disease, all possi-bilities research groups around the world are vigorously pursuing. Because such cells would be derived directly from the patient, the rejection problems that plague conventional transplant therapies would be eliminated. Another hope is that iPS cells will be used to create new disease models that will foster better understanding of disease causes and more rapid identification of potential treatments. Future directions In the paper, Drs. Zhou and Zeng’s team reports 27 live births. Twelve of the live born mice passed one of the most fundamental tests of health: they produced offspring, and the offspring showed no abnormalities. However, the efficiency of live born mice is low. With their best cell line and optimal recipe, the Chinese group was able to get 22 live births from 624 injected embryos, a success rate of 3.5%. These mice also appear to have a high death rate, with some dying after just two days, and others displaying physical abnormalities. More studies need to be carried out to understand what differences between iPS cells and embryonic stem cells might ex-plain the abnormalities, high death rates, low efficiency rates and the fact that most iPS cell lines don’t seem to work in making mice.

Figure 2: Schematic graph on tetraploid complementation. Taken from “Mice made from induced stem cells, technical feat shows that the different route to stem cells can indeed make a full mammal body”. By David Cyranoski doi:10.1038/460560a



Earlier this week, a group of Scripps Research scien-tists, led by Assistant Professor Kristin Baldwin, Ph.D., describes the creation of mice from mouse skin cells via iPS cell technology. The research is reported in the August 2, 2009, advance, online issue of Nature [3] . The Scripps Research team’s protocols showed a higher success rate of 13% of live born mice compared to 3.5 percent reported in the Zhou and Zeng group’s studies. The Scripps Research team also was able to generate live mice from four of 15 lines generated in one experiment (four of four tested) while the Zhou and Zeng’s groups reported success with three of 37 (three of six tested). Now that researchers have a number of cell lines that do and do not generate live mice, comparisons among them should make it possible to zero in on exactly which parameters mark the production of successful lines. This in turn should provide invaluable information to aid in advancing iPS studies. In addition, comparison on mice raised normally with those generated using cloning, embryonic stem cells, or iPS cells will aid in better un-derstanding on how tissues derived from iPS cells might behave in human cell transplant experiments.

It remains to be seen whether lessons obtained from these findings can be applied to human cells and thus whether human iPS cells will be a viable alternative to human ES cells in all circumstances. A few weeks ago, researchers at the University of California, Los Angeles, reported that human iPS cells that passed conventional

pluripotency tests differed in gene expression from human embryonic stem cell [4] suggesting that iPS cells might do things better or worse than embryonic stem cells. Because the tetraploid work cannot be done with human embryos, the Chinese and the Scripps’ studies can’t say much about clinical applications of human pluripotent cell lines at this time.

Never the less Drs. Zhou, Zeng and Baldwin’s studies do provide an important model for understanding repro-gramming and answer a lingering question about the development potential of mouse iPS cells.

References

1. iPS cells produce viable mice through tetraploid complementation (2009). Xiao-yang Zhao, Wei Li, Zhuo Lv, Lei Liu, Man Tong, Tang Hai, Jie Hao, Chang-long Guo, Qing-wen Ma, Liu Wang, Fanyi Zeng & Qi Zhou. doi:10.1038/nature08267.

2. Takahashi, K. & Yamanaka, S. Cell 126, 663-676 (2006).

3. Adult mice generated from induced pluripotent stem cells (2009). Michael J. Boland, Jennifer L. Hazen, Kristopher L. Nazor, Alberto R. Rodriguez, Wesley Gifford, Greg Martin, Sergey Kupriyanov & Kristin K. Baldwin. doi:10.1038/nature08310

4. Chin, M. H. et al. Stem Cell 5, 111-123 (2009).




About the Authors: Dr. Janet (Jian) Xiao is

an associate specializing in patent law in the

Palo Alto office of Morrison & Foerster LLP. She

primarily represents clients in the areas of bio-

technology and pharmaceutical industry in their

world-wide patent procurement, patent portfolio

management, and strategic planning. Dr. Xiao

received a B.S. from Nanjing University, a M.S.

from Institute of Biophysics, theChinese Acade-

my of Sciences, and a Ph.D. from the University

of California, Los Angeles. She received her J.D.

from the University of California, Berkeley.

About the Authors: Dr. Kun Wang is an associ-

ate in the Patent Group of Morrison & Foerster’s

San Diego office. His practice focuses on patent

prosecution, patent portfolio development, and

preparation of opinions pertaining to biotechno-

logical, biomedical and pharmaceutical technolo-

gies. Dr. Wang received his J.D. from George-

town University in 2008. He was an exchange

student at the L.L.M. program at Tsinghua

University Law School. Dr. Wang received a

Ph.D. in molecular cell biology from Washing-

ton University, and a B.S. in biochemistry from

Nankai University.

Despite the global economic crisis, China holds the promise of being one of the leaders in the world and China strategy has increasingly become an intrinsic part of multinational companies’ business strategies. The Chinese biotechnology industry, including biopharmaceutical, agricultural biotech-nology, industrial biotechnology, and environmental biotech-nology, is one of the key areas of China’s competitiveness and is expected to account for about 7-8% of China’s GDP by 2020.1 China’s biotechnology industry also offers tremen-dous potential for multinational companies because of its vast market place, low cost pool of resources, relaxed regula-tory environment, and extensive research and development infrastructure.

Over the years, China has gradually transformed from a pure manufacture base, raw material provider, and outsourcing post to the core of innovative research and development. China’s biotech expertise already stands out at the interna-tional level with strength in areas such as gene mapping and profiling, transgenic technology, gene therapy, and stem cell research. Many multinational biotechnology companies have established R&D centers in China. Recognizing the impor-tance of biotechnology innovation, the Chinese government has been aggressively investing in biotechnology. Over the period of 2001-2005, the annual government investments increased significantly by 400% from USD 100 million in 2001 to USD 1.2 billion by 2005. This figure is expected to reach USD 8.8 billion in 2020 as the government intends to transform China into one of the leading biotechnology play-ers in the world.2

While China is expected to be a key player at the forefront of the global biotechnology arena in the future, there remain significant concerns about the lack of intellectual property protection in China.3 In order to provide strong incen-tives for domestic innovation and attract foreign innovative technologies, it is critical for China to improve its intellectual property environment. This article discusses the role of intellectual property in the biotechnology industry, China’s progress and efforts in strengthening intellectual property protections, and identifies (1) public awareness of intellectual property, (2) increased understanding of the strategic value of intellectual property and (3) an effective infrastructure for intellectual property commercialization as key factors for fostering a favorable intellectual property environment in the Chinese biotechnology industry.

Fostering a Favorable Intellectual Property Environment in Chinese Bio-technology Industry

Janet Xiao and Kun Wang



Role of intellectual property in the biotechnol-ogy industry

Modern biotechnology is a science-intensive field. Intel-lectual property, particularly in the form of patents, plays important roles in biotechnology development. Intellec-tual property rights granted to inventors provide the in-ventors with a temporary market exclusivity to commer-cialize their research and findings, and an opportunity to benefit from their inventions. In return, the invention becomes publicly known and free for use after the expi-ration of the intellectual property rights. The invention can then be utilized and built upon by the general public to create new innovations. Biotechnology requires long term investment and is highly risky. Without the guarantee of market exclusiv-ity, investors would be unwilling to invest in the risky business. Early-stage biotechnology companies typically focus on a small niche in the technology and rely on intellectual property as their main valuable asset. Intel-lectual property is thus critical for early-stage biotechnol-ogy companies to secure funding and/or collaborators; the value of the company largely depends on the value of its intellectual property. As a biotechnology com-pany grows, intellectual property provides guidance for investing on a particular endeavor and assurance that the investment will have a reasonable return due to competi-tive advantages offered by the intellectual property pro-tection. Intellectual property is also extremely important for mature biotechnology companies, which rely heav-ily on intellectual property protection to block generic competitors from entering the market. Upon expiration of the intellectual property rights, on the other hand, the innovation becomes freely available to the public, fueling the development of generic products.

China’s progress and effort in intellectual prop-erty protection

The China strategy has increasingly become an intrinsic part of multinational companies’ intellectual property strategies. In 2007, the Chinese Patent Office (the State Intellectual Property Office or the SIPO) received a total of 694,153 patent applications, which represents a growth rate of 21.2 percent over the previous year. In 2008, China received 828,328 patent applications, repre-senting another increase of 19.4 percent over the previ-ous year.4 This ranks China among the top in the world with respect to patent application filings.

Domestic companies in China have been increasingly ac-tive in seeking intellectual property protection. Among the 828,328 patent applications filed in China in 2008,

86.6 percent were filed by domestic applicants, a steady increase from 82.1 percent in 2006 and 84.5 percent in 2007.5 In 2008, China filed 6,089 patent applications under the Patent Cooperation Treaty (PCT), increased by 11.9 percent compared with the previous year.6 China moved from the seventh largest in 2007 to the sixth in 2008 in terms of the number of international patent applications. Moreover, Chinese telecommunication company Huawei Technologies was the largest filer of PCT applications in the world in 2008.

The Chinese government has placed tremendous empha-sis on strengthening intellectual property protection in China and is determined to transform the country from resource and labor-driven economy to innovation-driven economy. In the “Outline of National Intellectual Prop-erty Strategy” issued by the State Council of the People’s Republic of China on June 5, 2008 (“the Outline”), China sets the strategic goal that, by 2020, it will become a country with a comparatively high-level creation, utili-zation, protection and administration of the intellectual property rights. Implementing this strategy, the National People’s Congress approved a Third Amendment to the Chinese patent law on December 27, 2008. The Third Amendment includes significant changes to Chinese Pat-ent Law, and was intended to bring the law in line with China’s current drive to promote domestic innovation and its attempt to reduce reliance on foreign-controlled patents. On March 29, 2009, the People’s Supreme Court published guidelines on the implementation of the Outline.7 The guidelines, entitled “Comments of the Supreme People’s Court on Implementing the National Intellectual Property Rights Strategy,” set out a series of goals, including promoting the guiding roles of Chi-nese courts on intellectual property cases, increasing efficiency and consistency of the intellectual property adjudication system, and enhancing sanctions against intellectual property infringers. The Comment calls the courts to use all means, including damage compensation, injunctive relief, mitigation, and seizing goods, to ensure that infringers are effectively deterred and the damaged parties are sufficiently compensated.

Key factors for fostering a favorable intellectual property environment

Although China’s progress on the intellectual property front is phenomenal, the overall intellectual property en-vironment in China needs significant improvement. One of the key factors for fostering a favorable intellectual property environment in China is public awareness of intellectual property. Although the number of domestic patent applications has significantly increased over the years, the average number of filings per person in China




still lags far behind other Asian countries. There also remain significant regional differences in patent filings, with the majority of patent applicants coming from Beijing, Shanghai, and Shenzhen. Among the 6,098 PCT applications filed by the Chinese applicants last year, roughly one third were filed by Huawei Technologies. More than 90% of the Chinese enterprises have not filed any patent applications, and do not consider intellectual property as part of their business strategy.

Great effort should be invested on promoting public awareness of intellectual property rights. Innovative companies should be more aggressive in filing patent applications and be more vigilant in protecting their own intellectual property. On the other hand, companies should learn to respect other people’s intellectual prop-erty. When a company delves into a new product, a new improvement, or a new territory of technology, it should examine its technology closely to make sure it did not misappropriate other parties’ trade secrets or infringe other parties’ patents. By doing so, the company can avoid unnecessary investment of time and money and the cost of a lawsuit at a later stage.

Another factor that is important for fostering a favor-able intellectual property environment in Chinese biotech industry is an increased understanding of the strategic value of intellectual property. Intellectual property, par-ticularly in the field of biotechnology, is a forward-look-ing long term investment by nature. Frequently, the value of intellectual property does not become apparent until during the late stage of the product development, and the intellectual property rights become the most critical dur-ing the last few years of the patent term. A clear under-standing of a company’s intellectual property portfolio is critical to effective intellectual property protection, yet it is frequently overlooked by Chinese applicants.

Among all the patents granted to domestic applicants in 2008, only about 15% were invention patents, i.e., patents granted after extensive examination and having 20 years of patent protection.8 The majority of do-mestic patent filings were applications for utility model and design patents, both of which are granted without substantive examination and provide the patentee with 10 years of patent protection. While utility model and design patents can certainly be valuable intellectual property assets, the overwhelming tendency of domestic applicants to pursue utility model and design patents reflects the general focus of domestic applicants on the number of granted patents and the speed of getting a patent granted.

Importantly, in order for intellectual property to be

an effective tool to block competitors, the scope and strength of intellectual property is essential. A nar-rowly drafted and claimed patent may be easily designed around and thus ineffective against potential competi-tors. On the other hand, a patented claim that is so broad as to encompass prior art will easily be invalidated and frequently ignored by competitors. The risky and high stake nature of biotechnology investment makes it particularly important to emphasize the quality of the intellectual property protection. Focusing on the num-ber of granted patents and the speed of getting a patent granted can be misleading, because a patent application not being carefully drafted to carve out prior art and maximize protection can be valueless.

A third important factor that is important for a favorable intellectual property environment is an effective infra-structure for the conversion of the intellectual property into commercial products. In China, many research activities are carried out by individual applicants and research institutes. However, development of innovative technologies requires vast investment which is difficult for individuals and research institutes to achieve. An analysis in the biotechnology literature and patents in the years of 1991-2002 revealed that the ratio of scien-tific publications published and patent applications filed by biotechnology professionals in China is about 70:1, suggesting a relatively low level of transformation from scientific research into patentable knowledge.9 Although the ratio may have improved over the years, it evidences a need for fully realizing the value of innovative tech-nologies, for example by establishing a market-oriented infrastructure that facilitates conversation and collabora-tion between individual inventors or research institute and private enterprises.

Notably, the Outline of the National Intellectual Prop-erty Strategy has identified fostering a culture of intel-lectual property rights as one of the key focuses for the Chinese intellectual property strategy. The Outline also laid out several strategic measures for achieving this goal, including: 1) setting up a working mechanism for publicizing information about intellectual property in which the public widely participates and 2) formulating and implementing a general education plan on intellec-tual property in education institutions.10 Moreover, the Third Amendment of the Chinese patent law and the Comments recently published by the Supreme People’s Court provide much needed directions to the Chinese courts on improving procurement and enforcement of intellectual property rights. Effective enforcement sends a strong message about the importance of intellectual property protection and the consequence of ignoring intellectual property rights. Rigorous examination and



invalidation processes will ensure the quality of patents and reinforce the concept that the value of intellectual property depends on the quality of the patent rather than the number of patents or the speed of obtaining the patents. With these efforts, it is foreseeable that a favorable intellectual property environment will soon be developed in China.

Conclusion Intellectual property protection is vital to the continuing economic competitiveness and progress in the Chi-nese biotechnology industry. At a time of tremendous economic turmoil and uncertainty, it is more important than ever for China to nurture the precious growth cycle of intellectual property and biotechnology innovations. If China can increase public awareness of intellectual property, improve public understanding of the strategic value of intellectual property, and establish an effective infrastructure for commercializing intellectual property, China’s evolution into an innovation-driven economy will be swift and certain. . References

1. Teh, “China’s Biotech Long March,” available at

http://clearstate.com/admin/data/China_Biotech_Industry.pdf.

2. Id. 3. Minshell, “Does Offshoring Put Patents in

Jeopardy?” Genetic Engineering & Biotechnology News, Vol. 29, No. 4, 2009.

4. SIPO website, available at http://www.sipo.gov.cn/sipo_English/statistics.

5. Id.6. www.chinaview.cn, “China Moves up in

International Patent Application Rating”, available at http://news.xinhuanet.com/english/2009-02/04/content_10764477.htm.

7. Comments of the Supreme People’s Court on Implementing the National Intellectual Property Rights Strategy, Chinese version available at http://www.court.gov.cn/news/bulletin/activity/200903300001.htm.

8. SIPO website, available at http://www.sipo.gov.cn/sipo_English/statistics.

9. Quach et al., “Biotechnology Patenting Takes Off in Developing Countries,” Int. J. Biotechnology, vol. 8, Nos. ½, 2006.

10. Outline of the Intellectual Property Strategy, available at http://www.sipo.gov.cn/sipo_English/news/iprspecial/200806/t20080621_407693.htm.

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China’s biotechnology sector, fueled by government funding and talented scientists with a desire to innovate, is growing rapidly. These new entrepreneurs include Chinese nationals who have been trained in the West and who have returned home – the so-called “sea turtles”– to establish new China-based biotechnology companies, as well as Chinese scientists who establish US-based companies with substantial operations in China. In either case, many of these new China-based biotechnology companies will establish relationships with traditional Western biotechnology or pharmaceutical companies. Increasingly, these relationships go far beyond a Chinese contract research organi-zation (CRO) performing services for a large Western pharma-ceutical company. We have already seen the first crop of bio-technology innovations originate in whole or in part from work performed in China; and innovation will certainly increase. If you are one of these scientists and entrepreneurs performing innovative biotechnology work in China, you may wonder how to create the legal framework around your technology transac-tions that will protect your innovations and grow the value of your company. This article will briefly explain eight principles of biotechnology transactions that you want to understand and implement before you sign your next licensing, collaboration, manufacturing or services agreement.

1. New Intellectual Property: Carefully Identify And Allocate Rights. Next to scientific innovation itself, establishing solid intellectual property rights – typically patents – drives the creation of value in the biotechnology industry. A patent is a powerful tool: it gives the owner (or exclusive licensee) of the patent the right to prevent others from practicing the patented invention. For example, if you possess the exclusive rights to a United States patent covering a new chemical compound, no one else can lawfully make, use, sell, offer for sale or import that compound in the United States without your permission.1 Patent rights are deeply ingrained in Western business. In the United States, for example, the modern patent system was authorized by the Constitution, which in 1787 gave to Congress the right “To promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries.”2 In Europe as in the United States, biotechnology and pharmaceutical compa-nies create value by obtaining patents on their innovative com-

About the Author: Mr. Thomas E. Du-

ley is counsel in Morgan Lewis’s Business

and Finance Practice. Mr. Duley has more

than 10 years of experience in life sciences

transactions and intellectual property litiga-

tion matters. Prior to joining Morgan Lewis,

Mr. Duley was senior corporate counsel and

head of the transactional legal group at

PDL BioPharma, Inc. Mr. Duley received his

J.D. from the University of California, Davis

School of Law in 1995. He received his Mas-

ter of Architecture degree in 1987 and his

B.A. in English literature in 1983 from the

University of California, Los Angeles.

Biotech Licensing: Key Principles for Building Successful Licenses and Collaborations Between China and the West

Thomas E. Duley

Tr e n d s i n B i o / P h a r m a c e u t i c a l I n d u s t r y 1 1


pounds, formulations and manufacturing methodology. Given the power and history of patent rights in the West, vigorously negotiating and carefully documenting rights to new intellectual property is essential in every biotechnology transaction that involves the possibility of new inventive work. This is a complex topic with many traps for the unwary, but here are a few key points. In the United States, an invention is owned by the inventor unless a contract provides otherwise. 3 Thus, if your company signs a contract that permits the other party to perform inventive work in the United States, and if the contract does not assign (or license) those inventions to your company, your company will not own (or have rights to) the United States patent rights claim-ing those inventions. If the inventive work results in a block-buster new drug that was discovered using your company’s technology, your company could suffer an unnecessary and devastating loss of value. Even in an agreement that was intended to assign new inventions to your company, poorly drafted terms can lead to disputes and a loss of rights you thought your company had secured. Consider this example of unin-tended consequences. Many agreements provide that each company owns all inventions “related to” its own technology. But what happens if an invention “relates” to both company’s technologies? The result could be that the companies jointly own the new invention. In the U.S., each joint owner can use and exploit a joint invention – including granting licenses to one or more third parties – without permission from the other joint owner. If this occurs with an invention critical to your company’s business model – such as a patented new method of producing vaccines – your company will lose substantial value. Finally, be wary of definitions. Licensing and collabora-tion agreements often rely on terms that are defined, in many cases, by reference to a series of other defined terms. This “hall of mirrors” approach to drafting agreements can make many of their provisions difficult to understand. In connection with categories of intel-lectual property, however, it is essential to draft and understand each defined term. You may encounter an agreement, for example, that uses a term like “Collabora-tion IP,” which sounds like it refers only to inventions jointly created by your company (the “Licensor”) and the other party (the “Licensee”). If the definition of “Collaboration IP,” however, includes inventions related to improvements to “Licensor’s IP,” which in turn is

defined to include all inventions related to “Licensor’s Technology,” which is defined to include “all inventions related to Compound [X],” then in fact the term “Col-laboration IP” could include all inventions related to your company’s “Compound [X]” – even if your com-pany is the sole inventor. The brief outline above is only the tip of the iceberg. Provisions related to defining and allocating rights to new inventions and intellectual property demand close attention, creative negotiation, and careful drafting. Only in this way can you create trust with the other party while preserving and growing your own company’s value. 2. Exclusivity: When “Freedom-To-Operate” Is Not Enough. The right to practice a patented invention can be trans-ferred from one party to another by a license grant, which can be exclusive, co-exclusive or non-exclusive. Understanding which type of license you need can be critical to your company’s ability to create value. Exclusivity is a simple but important concept: it deter-mines whether one company, two companies, or many companies, have the right to practice a patented inven-tion. Your company first needs to determine, from a business perspective, whether a particular transaction should convey exclusive rights, or something less than exclusive rights. Under a non-exclusive patent license, for example, the licensee will obtain “freedom to operate” under that patent – i.e., the right to practice the invention – while the licensor retains the right to practice the invention itself and to grant licenses to a potentially limitless number of other parties. In many cases, a non-exclusive license is an appropriate choice, such as for a platform technology that is widely applicable to many different products. However, in the United States a non-exclusive licensee does not have the right, on its own, to bring a lawsuit against an alleged infringer.4 Thus, the non-exclusive licensor (and possibly all other licensees) may be required to join in a lawsuit. All other things being equal, an exclusive license will cost more for the licensee to obtain and yield greater revenue to the licensor. An exclusive license, however, usually carries with it other terms that a potential licensee should carefully consider, including: obligations to “diligently” develop the licensed technology, sometimes




with minimum annual royalties due; the right to control patent prosecution, usually including the obligation to pay prosecution costs; and the right to control lawsuits to enforce the patent rights against alleged infringers, and to recover most or all of the proceeds from such litigation. Thus, an exclusive license, with all of its costs and burdens, is not always appropriate. Finally, co-exclusive license grants are often seen be-tween collaboration partners for new inventions created under the collaboration but owned solely by one of the partners. A co-exclusive license enables both of the collaboration partners to practice the invention, usually for the sole purpose of furthering the collaboration. Regardless of whether you are granting or receiving a license, knowing when to structure it as an exclusive, non-exclusive or co-exclusive license is a critical part of developing your business strategy. 3. Territorial Divisions: Consider Options And Rights-Of-First-Refusal. A license can grant “worldwide” rights or rights to a single country – and anything in between. For example, in many cases a Chinese company will grant a Western biotechnology company worldwide rights, minus China (or minus a list of specific Asian countries). Retaining rights to China (or Asia) may make sense if the Chinese company would like to develop a commercial sales force in China (or Asia), or if it be-lieves a different company would have more success in China (or Asia) than either the licensor or licensee. When dividing up territory, however, there are other possible approaches and considerations. If at the time you do your deal, for example, it is unclear whether a particular country should be included, you may wish to structure an option or right-of-first refusal to the country. In the example noted above, the Chinese company can grant the Western biotechnology country an option to acquire the Chinese (or Asian) territory. An option, if exercised, usually requires the payment of an additional fee (similar to an upfront fee). An option, once exercised, may also require the other company to meet certain diligence requirements to commercialize the technology in the newly-acquired territory. Also, an option can expire after a certain number of years. Another alternative is similar: a right-of-first refusal. With this approach, the Chinese company in the exam-

ple above would agree not to license out the rights to China (or Asia) to any third party without first giving the Western biotech company an opportunity to do the deal on terms that, on the whole, are at least as favorable to the Chinese biotech company. This structure provides the Western biotech company the opportunity to control additional rights, which it may find attractive. It may also create a competitive bidding environment that will enable the Chinese biotech company to obtain better terms. The disadvantage, however, is that it can be difficult to negotiate a deal with a third party if the third party knows that its terms will be presented to the original licensee who may have a substantial period of time (typically at least thirty days) to exercise its rights, further delaying any potential deal. The option and the right-of-first-refusal approaches, however, provide flexibility when you consider whether to grant “worldwide” rights, or something less. 4. Joint Steering Committees: Create Rules That Build Trust And Efficiency. Most collaborations have a “joint steering committee” that governs major decisions regarding the collaboration, such as selecting a drug candidate to advance into further development or clinical testing. Sometimes subcommittees are also created for handling specific issues, such as patent prosecution, finance, regulatory and other matters. Each party identifies members for each committee, and the committees usually meet periodically, and make decisions – usually by vote – within their area of respon-sibility. But what if the committee members disagree? Although the parties usually hope to achieve consensus, that is not realistic over a long-term collaboration. An agreement that requires consensus before a committee can act – such as a decision to advance a candidate into a Phase 1 clinical trial – can create paralysis. And the alter-native of sending a disagreement to an arbitrator for resolution of the “dispute” can create tension, delay, extra cost and may put the decision in the hands of someone ill-equipped to understand the scientific, regulatory or business considerations that should drive a prudent decision. A better alternative, in many cases, will be to identify which party will have “final say” over decisions. In some cases, this may change as the collaboration progresses



through product development. It may make sense, for example, for the smaller biotech company whose tech-nology is being developed to control decisions about early R&D work, such as identifying potential drug candidates. When the same drug progresses into human clinical trials, however, the larger and more experienced party may control decisions. The time to resolve disputes over which party controls which decisions is during the negotiation of the collabo-ration agreement – not during the collaboration! 5. Due Diligence Obligations: Understand The Limits Of “Commercially Reasonable” Or “Best Efforts” Standards, And Consider Alternatives. Most exclusive licenses require the licensee to exert some form of “diligence” in developing and commercializing the licensed technology. Often, the licensee is required to use “commercially reasonable efforts” or “best efforts,” which can be defined at length in the agreement and in U.S. case law. Enforcing these obligations, however, can be difficult, expensive and time consuming – and the results are uncertain. In an attempt to create an objective diligence standard, “commercially reasonable” is sometimes further defined as the efforts of “similarly situated” biotechnology company. These provisions can list numerous factors to be used in determining whether the licensee’s efforts are “commercially reasonable,” including the quality and scope of patent protection available for the product or technology, regulatory hurdles, market size, projected profitability, and even the presence of competitive products within the licensee’s portfolio. But do these provisions, which are often heavily negoti-ated, provide clear and enforceable obligations? If you are the licensee, can you be certain you have met your obligations? If you are the licensor, can you establish with certainty that the licensee has “materially breached” its diligence obligations? In many cases, the answer to all of these questions is “no.” If a licensing relationship goes well and a product is successfully launched and sold, these questions never arise. If, however, a product is delayed or abandoned, a dispute about whether the delay or abandonment was “commercially reasonable” can lead the licensor to attempt to terminate the contract on the ground that the licensee failed to meet its diligence obligations. The result can be a costly dispute with the potential to keep a product in limbo for years.

Alternatives exist for these diligence standards. For example, if the licensee is required to pay minimum annual royalties starting several years after signing, the licensee will be motivated to commercialize the product before the minimum royalties become due. Payment of the minimum royalties can, in effect, force the licensee to either succeed or give back the asset to the licensor – without litigation. The minimum royalty approach can either be combined with “commercially reasonable efforts” diligence stan-dards or replace them. In either case, the advantage is that the payment obligation is clear and objective; either the minimum royalties are paid, or they are not. Another alternative to consider is objective diligence milestones. If the licensee is required to launch at least one licensed product in at least one country, for exam-ple, it will usually be clear whether or not the licensee has complied or is in breach. This approach, too, can be combined with traditional “commercially reasonable efforts” standards, as well as with minimum royalties. Regardless of whether your company is imposing diligence obligations or complying with them, consider carefully whether they are realistic and clear. 6. Representations And Warranties: Know When To Use A “Knowledge Qualified” Repre-sentation. Representations and warranties are usually grouped together and even intertwined into a single sentence, but they are distinct concepts.5 A factual representation (but not a warranty) can be absolute, or it can be “knowledge qualified” – meaning that the party representing a fact to be true does so only “to its knowledge” or “to the best of its knowledge.” Knowing when to insist on or accept a knowledge-quali-fied representation is important, because the breach of a representation can give the other party the right to rescind the entire agreement. However, if a representa-tion is knowledge-qualified, any dispute over its breach is likely to require invasive and potentially expensive discovery into what the allegedly breaching party knew at the time the transaction was signed. One representation that is often knowledge-qualified is a statement that the practice of a particular technology does not (as of the effective date of the agreement) breach any intellectual property right held by a third party. Often this fact cannot be known for certain,




especially if the representation is intended to encompass worldwide rights. As a result, parties who agree to this representation often insert the qualifier “to the best of [licensor’s] knowledge.” This may seem like a reasonable compromise, but it can have unforeseen consequences if a dispute later arises over the accuracy of this knowledge-qualified non-infringement representation. Determining whether the licensor breached this representation – i.e., whether the licensor did in fact know that its technology infringed a third party’s intellectual property – requires discovery into what facts the licensor knew on or before the date the agreement was signed. Pertinent facts may be contained in opinions obtained from patent counsel, which may be subject to the attorney-client privilege. Unless waived, that privilege can preclude disclosure of the legal opinions to the licensee. Thus, a seemingly reasonable knowledge-qualified representation presents risks for both parties. For the licensee, who is relying on the representation and will probably have the burden of proof in a dispute, it may be impossible to prove that the licensor knew its tech-nology infringed if the only proof of that knowledge is contained in privileged attorney-client communications. For the licensor, too, there is risk. The licensee may succeed in overcoming the attorney-client privilege and expose not only the licensor’s knowledge of infringe-ment, but also other aspects of the legal opinion that may be harmful to the licensor – such as statements that could undermine the licensor’s own intellectual property. While knowledge-qualified representations can be an appropriate and reasonable approach, they carry with them hidden risks if there is a dispute. 7. Indemnity Provisions: Beware Of Unforeseen Consequences. In most circumstances, if a party breaches an agreement it can be found liable to the non-breaching party for damages. In most instances, it is possible to estimate what those damages might be, or to contractually limit them. Contractual liability limits, however, often do not apply to a party’s indemnity obligations, which can be difficult to estimate and virtually unlimited. Conse-quently, an indemnity claim can destroy a company. An indemnity obligation requires a party to “hold harmless” the other party from a lawsuit initiated by a third party. One example of this could be a product's liability lawsuit against a licensee that arises from mate-

rial supplied by the licensor. The licensor may not even be a party to the lawsuit, which might be filed in a country where the licensor has no facilities or personnel, and under local laws with which the licensor has no familiarity. But, if the licensor has agreed to indemnify the licensee, then the licensor is exposed to the possibil-ity of a severe and adverse judgment for which it will be contractually liable. Because indemnity provisions can trigger damaging and unforeseen obligations (or, from the other point of view, provide critical protection), these provisions – often stuck at the end of a long agreement and potentially overlooked – should be given careful attention and nego-tiated thoughtfully. Usually a party will only have indemnity obligations for certain types of lawsuits. By limiting the types of suits that will trigger an indemnity obligation, risk can be reduced. For example, if a party indemnifies for suits arising only from a breach of its representations and warranties, that limitation may preclude indemnity for a products liability case if the product was supplied in compliance with the terms of the agreement. Though often considered to be boring “boilerplate” provisions, indemnity sections can have devastating consequences. 8. Term Sheets: Negotiate Financial TermBased On Risk Allocation. Most licensing transactions begin with a term sheet. A term sheet is usually two or three pages outlining the key elements of the transaction, commonly including the licensed intellectual property, exclusivity, territory, diligence obligations, and the financial terms. Consider, however, whether other provisions that materially effect risk allocation – such as representations, warranties and indemnity obligations – should also be outlined at the term sheet stage. For example, if a licensor is going to be required to represent that its technology does not infringe any other intellectual property and to indemnify the licensee if it is sued for infringement, those provisions could alter the economics of the deal. As noted above, indemnity obligations are often excluded from any liability cap, and can be potentially very costly. If a licensee insists on being indemnified, a licensor may want to demand higher financial terms that correspond to the likelihood of the licensee being sued. In the case



of licensing a pharmaceutical product that is in early-stage development, a lawsuit is probably more likely to occur only after the product is launched for sale (and probably shortly after product launch). In that circum-stance, it may be prudent for a licensor to demand a higher royalty payment, at least in the first year or two when a suit is most likely, while the upfront and mile-stone payments that occur pre-launch need not be raised. It is preferable to negotiate all of these key risk alloca-tion and financial terms at the term sheet stage, rather than have a deal fall apart only after considerable time and money has been spent drafting a full, definitive license agreement. Conclusion The principles discussed above are only a few of the most important provisions in a license or collaboration agree-ment. There is no “typical” deal, and each transaction

should be analyzed, negotiated and drafted with care.

References

1. Title 35, United States Code § 271(a)2. United States Constitution, Art. I, Sec. 8.3. Laws of jurisdictions other than the United States

are often different. This article will confine itself to rights under United States patents and U.S. laws.

4. Intellectual Prop. Dev., Inc. v TCI Cablevision of Cal., Inc., 248 F3d 1333, 1345 (Fed. Cir. 2001).

5. A “warranty” is a promise that some fact or circum-stance will exist in the future – for example, that a product will be manufactured in compliance with specifications and will not be adulterated or mis-branded. A properly drafted “representation,” how-ever, concerns a state of facts that exist at the time the agreement is entered into – that the licensor owns the licensed patents, for example. See 3-23 Milgrim on Licensing, §23.00.

Shanghai Pharma Engine Co.,Ltd. is located at Zhangjiang Hi-tech Park in Pudong District, Shanghai. It wasco-founded with the Shanghai Science and Technology Committee, the Pudong Science and TechnologyCommittee and Zhangjiang Bio-Pharmacentical Base Development Co.,Ltd. Shanghai Pharma EngineCo.,Ltd. is a national bio-pharmaceutical incubator, having a floor space of 10,000 square meters, providingthe services of incubation, public lab., CRO consultation and investment & financing etc. Incubation Space: 50 incubation units with ~200 m2 each, equipped with test-beds, fume hoods, laminar flowcabinets etc. Public Lab Service: CNAS-accredited drug analytical testing services; equipped with NMR, GC-MS, HPLC,etc.; supplying pure water, dry ice, liquid nitrogen, etc. CRO Service: Drug registration, clinical trial management, GCP authentication consultation, datamanagement and statistical analysis, pharmacology & toxicology research consultation, GMP and CGMPauthorizing consultation etc. Investment & Financing Service: Incubation and Innovation Fund; helping start-ups obtain governmentsubsidies and matching funds; collaborating with domestic and well-known foreign commercial ventures.

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About the Author: Dr. Cynthia

H. Zhang is Director of Intellectual

Property at Gilead Sciences, Inc.

She previously worked as a patent

attorney at Novartis Pharmaceutical

Corporations, handling all aspects

of IP issues. Prior to Novartis,

Cynthia worked as a patent attor-

ney at a D.C. firm 2001-2003 and

a Boston firm 2003-2005. Cyn-

thia received her B.S. in Chemical

Engineering in 1987 from Dept. of

Chemistry & Chemical Engineering,

Tsinghua University, and her Ph.D.

in Biochemistry & Molecular Biology

in 1995 from Indiana University.

After obtaining her Ph.D., Cynthia

was a postdoctoral associate first at

Dana Farber Cancer Institute/Har-

vard Medical School, then at Boston

University. Between 1998 and

2001, Cynthia attended University

of Houston Law Center.

Pharmaceutical companies face a unique challenge in developing their innovative drugs due to the research and development costs incurred in bringing the innovative drugs to the market. The current estimate of the average cost for a pharmaceutical company to bring an innovative drug to the market is nearly $800 million to $1 billion. Even with this enormous investment, there is no assurance that the innovative drugs will achieve market exclusivity and profitability. Consequently, it is crucial for the innovative drug maker to have in place effective patent protection for the innovative drug. Although a full term for a U.S. patent is twenty years, pharmaceutical companies often file for their patent applications during early stages of drug discovery and development. As a result, the effective patent term at the time of drug launch is significantly reduced. In order to re-coupe the R & D investments and achieve profitability from selling an innovative drug, pharmaceutical companies often set high drug prices, which results in a lack of affordable medicines for customers in need. Prior to the 1980s, generic drug manufacturers had to pass two hurdles before they can bring a generic version of innovative drugs to the market. First, the generic drug manufacturers were required to conduct the same clinical tests of safety and efficacy as the innovative drug makers. Second, the FDA would not approve a generic drug until the patents covering the innovative drug expired. In addition, conducting safety and efficacy tests by a generic drug manufacturer during the patent term was considered an infringing use of a patent drug. Therefore, the generic drug manufactur-ers had to wait until the patent term expired to begin the generic drug development and approval process. This often resulted in a lag between the end of a patent life and the introduction of a generic drug, thus ultimately adding to the effective patent life of the innovative drug. Congress passed the Drug Price Competition and Patent Term Restora-tion Act of 1984, commonly called “the Hatch-Waxman Act,” to balance the needs of innovative and generic drug manufacturers (Certain provi-sions of the Hatch-Waxman Act were amended in 2003 in the Medicare Modernization Act to address concerns arising from applying the Act to the generic drug approval.). On one hand, the innovative drug manufac-turers seeking regulatory approval of new drugs were given greater patent protection in the face of expensive and time-consuming regulatory hurdles. On the other hand, the generic drug manufacturers were given an abbreviated, less expensive regulatory approval process for generic versions of innovative drugs, as well as incentives to challenge the patent protection of the innovative drugs. Thus, the generic drug manufacturers got faster entry into the market for the generic version of innovative drugs. This abbreviated drug approval process, known as “Abbreviated New Drug Application (ANDA),” did not require the generic drug manufacturers to conduct independent safety and efficacy studies for the generic drug. Instead, the generic drug manufacturers can rely on the

Innovator vs. Generic: The Interplay of Patent Delisting and 180-day Mar-ket ExclusivityCynthia H. Zhang



previously submitted safety and efficacy data by the innovative drug makers. Generic companies are only required to demonstrate bioequivalency, i.e., the generic drug has the same active ingredient, the same basic pharmacokinetics. See 21 U.S.C. §355(j), 35 U.S.C. §§156 & 271(e). Under the Hatch-Waxman Act, an innovative drug maker is required to include in its new drug application (NDA), the patent number and the expiration date of any patents that “claims the drug for which the applicant submitted the application or which claims a method of using such drug and with respect to which a claim of patent infringement could reasonably be asserted if a person not licensed by the owner engaged in the manu-facture, use, or sale of the drug.” See 21 U.S.C. §355(b)(1). The FDA is required to publish the patent informa-tion together with the approved drug in what is known as “the Orange Book”. Such publication of patent information serves to give notice to public including ANDA applicants. Submission of a patent for Orange Book listing is the responsibility of the NDA applicant or holder. In most cases, the NDA holder is also the patent owner, or at least has the same interest as the patent owner. However, if the patent owner is not also the NDA holder, the patent owner has no right to submit the patent itself and cannot compel the NDA holder to submit the patent for listing. See aaiPharma, Inc. v. Thompson, 296 F.3d 227 (4th Cir. 2002). In a noteworthy case, Watson Pharm., Inc. v. Henney, 194 F. Supp. 2d 442 (D. Md. 2001), the court held that FDA has only a ministerial role in listing and delisting patents in the Orange Book. The FDA makes no assessment of whether a patent covers a drug or not. Instead, the FDA acted to reasonably rely on the paten-tee’s declaration of coverage. According to the court, the legislation has indicated and intended for the FDA to have a limited, ministerial role in listing patents in the Orange Book, and the matters of claim scope and validity should be resolved in patent litigation between the patent holder and the ANDA applicant. All ANDA applicants are required to include one of the four certifications regarding the patent status listed in the Orange Book. In particular, for each patent listed in the Orange Book for the innovative drug, the ANDA applicants must certify that (I) the patent information has not been submitted for listing in the Orange Book (known as a “paragraph I certification”); (II) that the patent has expired (known as a “paragraph II certifica-tion”); (III) they seek to market the generic drug after

the date when the patent expires (known as a “paragraph III certification”); (IV) that the patent is invalid or will not be infringed by the manufacture, use, or sale of the generic drug for which the application is submitted (known as a “paragraph IV certification”). The type of certification determines the effective date for ANDA approval and commercial marketing. The FDA can approve the generic drug immediately for both paragraph I and II certifications. The FDA can approve the ANDA with a paragraph III certification when the patent expires. If, however, an ANDA applicant files a paragraph IV certification, the ANDA approval date will depend on whether the patent holder sues the ANDA applicant for infringement or not. The Hatch-Waxman Act provides that submitting a paragraph IV certification is itself an act of patent infringement, and requires the paragraph IV ANDA applicant to give notice of the paragraph IV certification to the NDA/patent holder, including a detailed factual and legal analysis explaining why the patent is either invalid or not infringed. If the patent holder fails to bring a patent infringement action within 45 days, the ANDA approval may be made effective immediately. However, if the patent holder sues the ANDA applicant for patent infringement, the ANDA approval is deferred for 30 months unless the ANDA applicant prevails in the litigation before the 30 month period expires. The Hatch-Waxman Act from 1984 throughout its amendment in 2003 and the case law also provide 180-day market exclusivity for the first ANDA applicants that file a paragraph IV ANDA even if the patent holder never sues for infringement. The FDA will not approve the later-filed ANDAs for the same drug until the 180-day exclusivity expires. The introduction of generic competition via the Hatch-Waxman Act has brought substantial financial stress to the innovative drug makers while the generic drug manufacturers reap significant profits. The innovative drug makers have sought ways to strategically delay the competitions from the generic drug manufacturers. Technically an innovative drug maker can voluntarily delist their patents from the Orange Book. Once a patent is removed from the Orange Book, the generic challenger must amend its ANDA to a paragraph I certification. As the first ANDA applicants with para-graph IV certification are entitled to the 180-day market exclusivity, the first generic challenger would lose the market exclusivity as a result of patent delisting. In addition, even if the FDA approves the first ANDA




application, the patent holder can still sue for infringe-ment once the first ANDA applicant starts to sell its generic drug. Furthermore, the amendment to the Hatch-Waxman Act in 2003 provides that delisting a patent from the Orange Book is a forfeiture event, which would force a first ANDA applicant with an approved ANDA to market the generic drug within seventy-five days in order to avoid forfeiture of the 180-day exclusivity. The 180-day market exclusivity is forfeited seventy-five days after “[t]he patent informa-tion submitted under subsection (b) or (c) is withdrawn by the [NDA] holder. However, courts have set limitations on such patent delisting strategy. In Ranbaxy v. Leavitt, 469 F.3d. 120 (D.C. Cir, 2006), the D.C. Circuit court held that FDA may not delist a patent from the Orange Book following the submission of an ANDA with a paragraph IV certification to the patent. This case involves Merck’s drug Zocor. Merck submitted to the FDA information with respect to three patents covering the drug Zocor. Teva and Ranbaxy each filed an ANDA to market generic Zocor. The two ANDAs applicants were both eligible for a 180-day period of marketing exclusivity because they involved different dosages - each contained a paragraph IV certification with respect to two patents. Merck, however, did not file patent infringement suit against either Ranbaxy or Teva. Instead, before the two generic companies’ ANDAs were approved, Merck asked the FDA to delist the patents from the Orange Book and the patents were delisted in 2004. As a result, Ranbaxy and Teva were required to delete the paragraph IV certifications from their ANDAs and thereby lost their eligibility for market exclusivity. Ranbaxy and Teva each filed a Citizen Petition asking the FDA to relist the two patents. The FDA denied the petitions on the grounds that Merck had not sued Ran-baxy or Teva for patent infringement, thus, the patents could not be relisted. Ranbaxy and Teva then took the case to the D.C. district court. The district court entered a summary judgment for Ranbaxy and Teva, and the FDA appealed to the D.C. Circuit. The D.C. Circuit affirmed the district court, holding that the FDA’s re-quirement that a generic manufacturer’s patent challenge give rise to litigation as a condition of retaining the market exclusivity when a patent is delisted, is inconsis-tent with the Hatch-Waxman Act. See Ranbaxy, Id. Interestingly, two years later in another case involving patent delisting, the D.C. Circuit vacated Teva’s 180-day market exclusivity on generic Risperdal (risperidone).

On September 12, 2008, a three-judge panel at the U.S. Court of Appeals for the District of Columbia heard oral argument and filed a per curiam judgment in Teva Pharmaceuticals U.S.A., Inc. v. Leavitt. On the same day, the D.C. Circuit issued a mandate to vacate Teva’s 180-day exclusivity on the generic version of Janssen Pharmaceutica’s schizophrenia drug RISPERDAL (risperidone) tablets. ANDAs with paragraph IV certification have been filed for risperidone tablets by Teva, Dr. Reddy’s, Mylan and Apotex. Teva submitted its ANDA in August 2001 and obtained the first filer status. Teva’s ANDA included a paragraph IV certification with respect to one patent and a paragraph III certification for another patent. In October 2001, FDA informed Teva that the first patent had been delisted prior to Teva’s ANDA submission, and it would not accept Teva’s ANDA filing unless Teva removed the paragraph IV certification. Teva later filed a Citizen Petition seeking reinstatement of the first patent, which was rejected. Teva then filed suit in the U.S. District Court for the District of Columbia seeking the same reinstatement. At issue before the trial court was whether the FDA’s online version of the Orange Book, from which the patent was deleted, or the paper version of the Orange Book (including then-current Cumulative Supplement), in which the first patent was still listed, was the legally operative patent listing at the time Teva submitted its risperidone ANDA. On April 11, 2008, the district court ruled in Teva’s favor and ordered the reinstatement of the first patent. The FDA subsequently appealed the ruling to the D.C. Circuit. The D.C. Circuit did not issue an opinion with its September 12 ruling. However, the appeal briefs filed by both Teva and the FDA might shed some light on how the court may have come to its ruling. Teva argued in its brief that the statue requires an ANDA filer to look into the Orange Book patent listing for the purposes of certification and Teva had properly relied on the patent listing in the Orange Book in filing the paragraph IV certification. Citing another D.C. Circuit ruling in Ranbaxy v. Leavitt, 469 F.3d. 120 (D.C. Cir. 2006), Teva argued that FDA may not delist a patent from the Orange Book following the submission of an ANDA with a paragraph IV certification to the patent. In contrast, FDA asserted that Teva submitted its ANDA after the first patent was delisted from the Orange Book as evidenced in the Orange Book web site. Thereby, Teva’s certification occurred after the first



patent had already been delisted. By the time Teva submitted its ANDA, the patent holder had already informed the FDA that the first patent did not claim the product. Thus, Teva’s paragraph IV certification was improper—something FDA told Teva and with which Teva then agreed. FDA further asserted that the Orange Book is not the final word on whether a patent claims a drug product, and proper certification must include patents that claim drugs whether or not they are on the Orange Book patent list. This case is distinguishable from the Ranbaxy case discussed earlier. The D.C. Circuit in the Ranbaxy case held that an ANDA appli-cant’s rights to the 180-day market exclusivity could not

be denied once the ANDA applicant had properly filed the ANDA with paragraph IV certification. In the Teva case, the D.C. Circuit determined that the ANDA with paragraph IV certification was not a proper ANDA because the patent at issue was no longer listed at the time the ANDA was filed. Notwithstanding the court rulings on patent delisting, it appears an open issue whether NDA holders may delist the patents from the Orange Book. Future amendments to address this issue may help clarify confusions arising from the inconsistent interpretations of the Hatch-Wax-man Act by different interest parties.




About the Authors: Dr. Shieh-Newton is an as-

sociate in the Biotech group of Morrison & Foer-

ster’s Palo Alto office. Her practice focuses on

preparation and prosecution of patent applica-

tions as well as portfolio management, strategic

patent counseling, performing both investor and

company side due diligence, and interferences.

Dr. Shieh-Newton received her J.D. from Santa

Clara Law School and her Ph.D. in Cellular and

Molecular Medicine from Johns Hopkins Uni-

versity. She received her bachelor’s degree in

Biochemistry from Rice University.

About the Authors: Dr. Catherine M. Polizzi

is Co-Chair of Intellectual Property group and

a partner in the Palo Alto office of Morrison &

Foerster LLP. Dr. Polizzi focuses her intellectual

property practice on patent law and biotechnol-

ogy, working with small, medium, and large

companies as well as universities. Dr. Polizzi

holds a Ph.D. in Molecular Biology and Biochem-

istry from the University of California, an M.A. in

Chemistry from the University of California, and

a B.A. in Chemistry from the University of Mis-

sissippi. Dr. Polizzi received a J.D. from Stanford

Law School. She also conducted biomedical

research on diabetes and alcoholism at Sansum

Medical Research Foundation, and was a post-

doctoral fellow at the University of California.

Stem cell research and its potential for advancing regenerative medicine dominate many of the daily headlines in advances in scientific research. The progress made in stem cell research holds promise in translating into various clinical products and uses for treatment as well as drug development. To this extent, protection of intellectual property, in particular patent protec-tion, on stem cells and their uses is an important consideration early in the discovery phase and beyond. This article provides a brief overview of the various types of stem cells and some ethical considerations for each type of stem cell and then dis-cusses various aspects of patent protection that are applicable to all types of stem cells and their use in regenerative medicine. In addition, other considerations, such as freedom to operate and use of stem cells as research tools, are also discussed.

Types of Stem Cells

Stem cells have three fundamental properties: they are capable of dividing and renewing themselves for a long period of time; they are unspecialized (i.e., not differentiated); and they can differentiate into specialized cell types. The various patent issues that surround stem cells depend on the stem cells that are being discussed. There are many types of stem cells; For the purposes of discussion of patent issues, stem cells can be categorized into three main types: (1) embryonic stem cells; (2) induced pluripotent stem cells (iPSCs); and (3) adult stem cells (i.e., non-embryonic).

Embryonic Stem Cells

Generally, embryonic stem cells are derived from embryos. The inner cell mass of blastocysts are harvested and cultured in a rigorous manner to obtain embryonic stem cells. One of the initial discoveries of embryonic stem cells was accom-plished by Martin1 and Evans2 when they isolated and char-acterized mouse embryonic stem cells. Subsequently, primate embryonic stem cells and human embryonic stem cells were isolated.3

Some jurisdictions, such as the United States, permit primate (which would encompass human) stem cells to be patented. For example, U.S. Patent 5,843,780 (issued on December 1, 1998, the “’780 patent”) owned by Wisconsin Alumni Re-search Foundation (“WARF”) covers a purified preparation of primate embryonic stem cells that (i) is capable of prolif-eration in an in vitro culture for over one year, (ii) maintains a karyotype in which all the chromosomes characteristic of the primate species are present and not noticeably altered through

Patent Issues in Stem Cells and Regenerative Medicine

Terri M. Shieh-Newton and Catherine M. Polizzi



prolonged culture, (iii) maintains the potential to dif-ferentiate into derivatives of endoderm, mesoderm, and ectoderm tissues throughout the culture, and (iv) will not differentiate when cultured on a fibroblast feeder layer. Arguably, this broad claim could cover nearly any type of primate embryonic stem cell. WARF also owns U.S. Patent 6,200,806 (the “‘806 patent”), which claims human embryonic stem cells with similar characteristics. The WARF patents were challenged several years ago by a third party consumer watch group, which initiated the reexamination of the ‘780 patent, ‘806 patent and also U.S. Patent 7,029,9134 before the U.S. Patent and Trade-mark Office (“USPTO”). All three patents were upheld by the USPTO with revisions to some of the claims.

However, other jurisdictions such as Europe have moral-ity clauses5 in the patent law that do not allow patenting of a product that can only be obtained from the destruc-tion of human embryos. The European counterpart6 of the U.S. ‘806 patent, which had similar claims as the ‘806 patent, was the subject of appeals before the European Enlarged Board of Appeals and was recently refused as being unpatentable subject matter which is contrary to morality and uses of human embryos for industrial or commercial purposes under prevailing European laws. The question of how expansively the European Patent Office would interpret these rules to exclude any human embryonic stem cells is still uncertain since the ruling of the WARF patent application was based on the assump-tion that, at the time of the filing date of that applica-tion, those human embryonic stem cells could only be obtained by destroying human embryos. Whether or not human embryonic stem cells (“hESCs”) made using somatic nuclear cell transfer or other similar technolo-gies, such as nuclear reprogramming, would fall within the scope of unpatentable subject matter remains to be determined by the European Patent Office. A dichot-omy of policy considerations arises as to why it is not permissible to patent human embryonic stem cells in the European Patent Office, yet various countries allow hu-man embryonic stem cell research (including somatic cell nuclear transfer) to be conducted. Each country in Eu-rope has a set of policy rules that govern research on hu-man embryonic stem cells and the reconciliation of these policy rules with the patenting rules at the European Patent Office remains to be seen. Policy rules governing research on human embryonic stem cells can be found at http://www.isscr.org/public/regions/index.cfm.

Recently, President Obama overturned an executive order signed by President Bush in 2001 that barred the National Institutes of Health (NIH) from funding research on embryonic stem cells beyond using the 60 cell lines that existed in 2001. To address the concerns

over cloning of human beings, the President pledged to develop “strict guidelines” to ensure that such research “never opens the door to the use of cloning for human reproduction.” President Obama’s order has given the NIH 120 days to develop revised guidelines on federal funding for embryonic stem cell research. Although the long-term effects of President Obama’s order remains to be seen, this order signals a change in the U.S. govern-ment’s commitment to stem cell research that employs embryonic stem cells and may spur faster progress in the search for cures to afflictions such as Parkinson’s disease, cancer, and spinal cord injuries.

Induced Pluripotent Stem Cells

Induced pluripotent stem cells (iPSCs) face less ethical challenges than embryonic stem cells because the start-ing material is differentiated cells (such as skin fibroblast) instead of embryos. Induced pluripotent stem cells are a type of pluripotent stem cell that has been artificially derived from a non-pluripotent cell, typically an adult so-matic cell, by inducing expression of nuclear reprogram-ming factors such as Oct 3/4, Sox 2, Klf4, and c-Myc. Shinya Yamanaka’s team at Kyoto University, Japan was the first group to create iPSCs in 2006 using a lentiviral vector for introducing the nuclear programming factors.7 However, the use of a lentiviral vector raised concerns about viral integration into the host genome. Since then, other groups have explored alternative approaches such as using protein transduction domains, and more recent-ly, transposons to introduce the nuclear reprogramming factors into the somatic cell to be reprogrammed. In terms of obtaining patent coverage of human iP-SCs, it is less likely that the attempted procurement of patent coverage for human iPSCs would face the same hurdles in Europe as with embryonic stem cells since no human embryos are destroyed in the process of pro-ducing such cells. Typically, adult somatic cells, such as skin fibroblast, would be used as a starting point for the reprogramming and thus, a compelling argument can be made that there is an alternative method to obtaining the stem cells other than by the destruction of human embryos. Patent coverage of iPSCs, including human iPSCs, are permitted in the United States. Recently, Shinya Yamanaka’s patent application was published as US 2009/0047263.8

Another interesting area for research and also for patent coverage is disease-specific iPSCs, which are useful for drug discovery. The legal implications for stem cells as a research tool are discussed in greater detail below. Disease-specific iPSCs may have different genotype and/




or phenotype9 than other types of iPSCs and, as such, could be separately patentable in their own right.

Adult Stem Cells

Adult stem cells, also referred to as “non-embryonic stem cells,” can be derived from a child or an adult. An adult stem cell is an undifferentiated cell found among differentiated cells in a tissue or organ, which can renew itself and can differentiate to yield the major specialized cell types of the tissue or organ. The ethical issue of destroying human embryos is greatly diminished when non-embryonic stem cells, such as adult stem cells, are used because the starting material is from an adult or child already born. Many types of adult stem cells have been described in the literature, from adipose-derived stem cells to pancreatic progenitor stem cells to hemato-poetic stem cells to mesenchymal stem cells. Generally, adult stem cells are considered to have less potency in terms of the types of differentiated cells they can become since they are further down the differentiation pathway.

Patent coverage of adult stem cells is possible. How-ever, as discussed in greater detail below, it is important to describe the adult stem cells in a manner that dis-tinguishes them from other stem cells described in the literature. In addition, it is also important to understand the chronology of other stem cells already described to determine whether the adult stem cells have already been described in an earlier stage of development.

Patentability

The patentability or the likelihood of procurement of patent protection in the face of existing publications or disclosures (“prior art”) should always be considered. In the case of embryonic stem cells, the WARF patents and publications by James Thomson disclose primate and human embryonic stem cells. Thus, any party cur-rently seeking to protect primate and human embryonic stem cells would have to distinguish themselves over the WARF/Thomson patents and publications as well as other publications on murine, rodent and non-primate embryonic stem cells.

For procurement of patent protection on any type of stem cells (embryonic, iPSCs, adult), one should also consider the various aspects of protection and to obtain as many aspects of protection as possible. Stem cells may be protected as a composition or a type of formula-tion. The methods of obtaining the stem cells, such as culturing methods, may also be protectable subject mat-ter. In addition, methods of using the stem cells, such

as inducing the differentiation of stem cells into organ-specific cells for use in regenerative medicine, may also be valuable subject matter to protect.

One difficulty that is to be expected and should be care-fully addressed is how one distinguishes one’s stem cells over what is already in the public domain. There is not a universal panel of markers that all scientists use for characterizing stem cells, although some markers (such as Oct4) are used more than others. It is conceivable that inventor A believes he or she has isolated a novel population of stem cells with markers A, B, C, and D and another inventor B believes the same but B’s stem cells have markers M, N, Q, and R. However, since A has not tested his or her stem cells for the expression of M, N, Q, and R, he or she cannot rule out the possibil-ity that his or her cells are not the same as B’s stem cells. The same dilemma would face B.

Chronology in terms of stem cell development poses another possible complication for assessing patentability and attempting to obtain coverage. It is possible that an inventor has described his or her stem cells in a way that is downstream or upstream of someone else’s descrip-tion but they may be the same type of stem cell depend-ing on when one looks at the cells or how they were cultured. Thus, where possible, the inventor should address the issue of whether or not his or her stem cells are different from the other stem cells described in the art.

Since there is extensive art on stem cells that often does not give enough information to allow an inventor to distinguish the newly discovered stem cells from those described in a given publication, it behooves the inventor to characterize his or her stem cells as completely as pos-sible so that he or she can put this type of information in the patent application at the time of filing. If this is done, then there is more leeway for finding the support needed for amending the claims during patent prosecu-tion to distinguish over other people’s work. Types of characterization that can be done are cell surface markers, gene expression (such as mRNA expression), protein expression, functionality in terms of what types of resultant cells the stem cells can differentiate, the level of pluripotency and/or multipotency, adherence or non-adherence, rate of proliferation, morphology, purity of the stem cell population, telomere activity, number of doublings as a stem cell before differentiation, epigenetic reprogramming, and any other physical or biological traits that can help define the stem cell population.

Strategic mapping of one’s patent application is critical for building a strong patent portfolio around stem cells.



The beginning, intermediate, and ending product should be mapped out and additional consideration should be given to other potential products (such as special culture media) that could give rise to additional value. Provid-ing a type of stem cell service (such as cryopreservation, purification, large scale manufacturing) to third parties is another area where patent coverage can also be obtained.

Freedom to Operate

In addition to patentability, freedom to operate (FTO) presents additional considerations. FTO means that a party’s products, practices and/or services would not be blocked by a third party’s patents. A thorough FTO analysis can help assess risks early on in the development phase and identify the risks that should be mitigated or at least addressed. An FTO analysis typically includes: (a) identification of the patents having claims that might encompass your product or practice to identify potential infringement threats and pending patent application with claims that, if issued, may pose infringement threats; (b) examination of which parties are likely to sue (for exam-ple, competitors) and reasons as to why they would want to sue; and (c) any countervailing arguments about the scope or validity of the patents that might be asserted. From the investors’ standpoint, investing in a company that may potentially be sued for patent infringement is a significant risk that affects valuation for the company, causes a headache that they do not want to deal with, and thus may make the company a less attractive candi-date for funding. In some cases, the valuation may be affected to such an extent that investors do not want to put money into the company at all. Since the stem cell space is a very active field with many players, a company seeking to work in such a crowded space should seek the advice of legal counsel as to whether it has freedom to operate with respect to not only its own stem cells as a composition per se but also the steps leading up to the procurement of the cells and the steps beyond the procurement of the cells to their use, whether it is in cell-based therapies for regenerative medicine or as a discovery tool.

Although the WARF patents are considered the domi-nating patents in the embryonic stem cell arena, there are many other patents that involve embryonic stem cells. For example, many patents are directed to methods of culturing or growing embryonic stem cells and meth-ods of using the embryonic stem cells. Therefore, one important issue for a company working in the embryonic stem cell field is whether it has freedom to operate in the crowded patent landscape. The same freedom to operate considerations would be equally applicable for induced pluripotent stem cells and adult stem cells.

Stem Cells as Research Tools

As mentioned above, all types of stem cells can be used as a research tool. For example, they can be used to screen for antibodies that bind to antigens expressed on stem cells that could be cancer antigens, oncofetal antigens, or tumor specific antigens. These types of antibodies could be useful for therapeutic purposes. Another example is using disease-specific iPSCs (such as insulin-resistant cells) to screen for possible drug candi-dates to treat a disease such as diabetes.

However, one of the legal issues arising from using stem cells as research tools is whether the activities conducted for research would infringe a third party’s patent or whether they would be exempt under the Hatch-Waxman Act. The current state of the case law surrounding the Hatch-Waxman Act generally exempts a party from infringement of a patent when that party’s activities are “reasonably related” to the procurement of information for FDA approval. In addition, research for “purely philosophical pursuits” would also be exempted. However, the wide chasm between procuring data for FDA approval and research for research’s sake is an unsettled area in terms of whether these activities would be protected by any type of exemption from being an infringing activity.

Conclusion

The future of stem cells holds great promise for regen-erative medicine. Patent protection of various types of stem cells and their use in regenerative medicine is not only possible but highly encouraged for increasing the value of a company. It is important to consider the features, characteristics, and aspects that make stem cells patentable in view of the myriad of stem cell publica-tions in the public domain. In addition, strategic map-ping of the type of claims for stem cells and their uses provides for increased protection and value. In addition to patent protection, other aspects of patent law, such as freedom to operate, play a significant role in creating and assessing value of stem cell technology. Careful atten-tion to these issues, using qualified experts to provide legal advice, will improve the attractiveness of your ventures involving stem cells. References

1. Martin G, “Isolation of a pluripotent cell line from early mouse embryos cultured in medium condi-tioned by teratocarcinoma stem cells” Proc Natl Acad Sci U S A 78 (12): 7634-7638 (1981).




2. Evans M and Kaufman M, “Establishment in cul-ture of pluripotential cells from mouse embryos” Nature 292 (5819): 154–6 (1981).

3. Thomson J, Itskovitz-Eldor J, Shapiro S, Waknitz M, Swiergiel J, Marshall V, Jones J, “Embryonic stem cell lines derived from human blastocysts” Science 282 (5391): 1145–7 (1998).

4. The ‘913 patent claims: “A replicating in vitro cell culture of human embryonic stem cells comprising cells which (i) are capable of proliferation in in vitro culture for over one year without the application of exogenous leukemia inhibitory factor, (ii) maintain a karyotype in which the chromosomes are euploid through prolonged culture, (iii) maintain the po-tential to differentiate to derivatives of endoderm, mesoderm, and ectoderm tissues throughout the culture, and (iv) are inhibited from differentiation when cultured on a fibroblast feeder layer.”

5. Article 53(a) EPC and Article 28(c) EPC.

6. European Application No. 96903521.1.

7. Takahashi K and Yamanaka S, “Induction of pluri-potent stem cells from mouse embryonic and adult fibroblast cultures by defined factors” Cell 126: 663–676 (2006).

8. Claim 1 of US Patent Application 2009/0047263 recites: “A pluripotent stem cell induced by repro-gramming a somatic cell, wherein the reprogram-ming is performed in the absence of eggs, embryos, or embryonic stem (ES) cells.” Claim 2 recites: “The pluripotent stem cell of claim 1, wherein the somatic cell is a human cell.”

9. “Genotype” refers to the genetic constitution (the genome) of the cells. In contrast, “phenotype” refers to the observable characteristics or traits of the cells. Examples of observable characteristics include the cell’s morphology, development pattern, biochemical or physiological properties, or behavior when exposed to external factors such as media and factors contained in media. Phenotypes generally re-sult from the expression of the cell’s genes as well as the influence of environmental factors and possible interactions between the two.

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About the Authors: Dr. Philip Zhang

is a Special Counsel at Cooley Godward

Kronish LLP. Prior to joining Cooley, Dr.

Zhang was Chief IP Counsel at Ensem-

ble Discovery Corporation, where he

handles all matters related to patents

and other intellectual property rights for

the company. Prior to joining Ensemble,

he was Patent Counsel at Genzyme

Corporation and handled patent mat-

ters for Genzyme’s drug discovery and

development efforts, both for small

molecule and polymer drugs. Before

joining Genzyme, he was in private

practice with Testa, Hurwitz & Thibeault

LLP. He holds a Ph.D. in organic chem-

istry from Dartmouth College and a J.D.

from Vanderbilt University Law School.

He graduated from the University of

Science & Technology of China.

Importance of Intellectual Property

Intellectual property (“IP”) rights are critical in today’s knowledge-driven economy. This is especially so in industries where innova-tion and creativity define and drive commercial success, such as the pharmaceutical and biotechnology industries. For many Chinese pharmaceutical and biotech companies that are in the initial phase of transformation from generic-focused to innovation-driven, effective patent strategies are critical to global competitiveness and long term commercial success. Why Need Good IP Strategies Innovators distinguish themselves from imitators through innovative products. Patent protection of unique products allows the innova-tors to enjoy exclusivity in the market place. Such patent-derived exclusivity enables the innovators to protect their competitive advan-tage and enjoy business leverage against competitors. Companies that develop a new technology can use patent positioning to protect its investment in developing the new technology and the correspond-ing products. Competitors and customers alike must deal with the innovators in order to gain access to the new technology and related products. As such, patents also help companies build their credibility and standing in the industry. Having a portfolio of well-crafted patents and patent applications covering marketed drugs and drug candidates under development are hallmarks of innovative biotech and pharmaceutical companies. Biotech and pharmaceutical products typically take a long time to develop, usually ten years or longer, and a large amount of capital investment, averaging over $800 millions. The drug candidates also have a high failure rate as they move through preclinical and clinical development and regulatory review process. Therefore, effective and reliable long-term protection through patents is a key component of the commercialization plans for biopharmaceutical products. Biotech companies and investors alike need the assurance of strong patents to justify the large amount of investment of capital and human capital. Biotech companies, therefore, are well advised to develop and execute an effective patent strategy designed to help the company in various aspects of its business, including fund-raising, R&D collaboration, market and commercial planning, and product life cycle management.

Intellectual Property Strategies for Chinese Biotechnology and Pharma-ceutical Companies

Y. Philip Zhang




An effective patent strategy and its successful execution may also allow alternative commercial strategies, such as out-licensing, where a strong IP position is necessary. This is especially true when a company owns a platform technology desired by others. Some companies have been able to build themselves through licensing and col-laboration on core technologies, such as on PCR, phase-display, and RNAi.

In parallel to patent protection is freedom-to-operate, i.e., a product is clear of third party patents. Lacking freedom-to-operate could potentially paralyze a product. Cost and uncertainty of litigation, risk of product delays and treble damages if the product is found to infringe a third party patent after product launch are potentially de-bilitating to businesses and must be addressed effectively and timely. Freedom-to-operate, therefore, is critical to the viability of products and should be assessed objec-tively with advice of competent patent counsel. Imagine a product that is finally approved for marketing after many years of development only to be found to infringe a third part patent. Biotech executives should be wary of such IP traps that could derail development and commercialization effort and address them as early and as effectively as possible. Thorough and continued IP landscape monitoring and review is advisable, especially in connection with each milestone decision on the future of a program or product candidate.

What Are Effective IP Strategies A common hallmark of effective IP strategies is that they advance business objectives. For biotech and pharmaceu-tical firms, IP should be viewed as a business tool. The issue to address is how to use IP to advance the busi-ness goals, and as such, IP strategies and patent portfolio development should be driven by the short, medium and long-term business needs. A company should integrate IP as part of its product development plan. For example, timing of venture financing and business development could in certain ways impact one’s strategy on patent portfolio development. Timing and subject matters of patent filings and licensing should address partnership and corporate development needs. Scope of patent claims are preferably both offensive and defen-sive. Thus, IP should be developed to protect one’s

current and future business interests, opportunities and products and, to the extent possible, products of key competitors. This should be carried out with a good understanding of the commercial landscape, the com-petitors, and the competing technologies. Good IP strategies, therefore, identify and address pat-ent protection as well as freedom-to-operate issues and develop leverage against identified present and potential threats. To the extent in-license needs and/or opportu-nities are identified, management should work with legal counsel to evaluate them, along with any design around options. Many times companies ignore IP risks and potential fixes (through licensing or design-around, for example), only to pay a dear price later. Good IP strategies also identify any potential need for IP enforcement and prepare accordingly. Patent enforce-ment decisions should be guided by business objectives. Options other than litigation should be evaluated before litigation is initiated, for example, licensing and collabo-ration. In the context of patent infringement litigation, one should know the strengths and weaknesses of a competitor’s IP as well as that of its own.

How to Achieve Effective IP Strategies The first and most important step in achieving a good IP strategy is for the chief executive of a business to recognize the importance of IP and obtain compe-tent legal advice from an experienced counsel. Senior management should view IP as a powerful business tool that they can use to their advantage, rather than think-ing about IP as simply a cost center or even a business nuisance. The question for the IP counsel is how IP can help the business objective, which often means how to use IP to build and protect the immediate and long-term value of the business. Effective communication between senior business, technical and legal functions is important. As many small and mid-size companies do not have in-house legal or patent capabilities, retain-ing experienced outside counsel can help with crafting and executing winning IP strategies. In this regard, the outside counsel should be familiar with the competitive landscape of the industry in which the company oper-ates as well as the relevant technologies, products and the commercialization plan. Be wary of patent lawyers



who focus on the technology alone without consider-ations of how the technology impacts the business. A solid understanding of the products and the competitive market landscape is important to provide effective legal advice.

IP and Biopharmaceutical Innovation IP often is a critical factor of the commercial viability of many therapeutic or diagnostic products. Product devel-opment in the biopharmaceutical industry usually entails large capital requirement, long R&D and clinical trial processes, uncertain regulatory outcome, and un-forgiv-en investors and capital markets. IP, therefore, should be an essential part of milestone reviews along the develop-ment path. The goal should be to identify and evaluate a product’s IP-related strength and weakness. Any issues identified should be timely addressed. Sometimes a drug developer learns, during the discovery or development process, that certain third party-owned patents could potentially cover a drug candidate. In such circumstances, a thorough review of the IP land-scape is critical and strategic in-license opportunities, design-around options, and validity of the third-party patent should be evaluated. If any third-party patent is key to the future IP position of the drug candidate, efforts should be made to investigate and evaluate the impact and availability of the IP and potentially secure such position before substantial capital is invested in the compound. Ignoring a serious IP issue of a drug program could be detrimental and potentially fatal to the business future of a biotech company. Because of regulatory and financial reasons, biotech companies often must part-ner with pharmaceutical companies in order to move a compound through clinical trials and FDA regulatory approval. Any patent weaknesses (e.g., lack of appropri-ate protection or freedom-to-operate risks) are likely to be identified by potential collaborators during their IP due diligence prior to the closing of a deal. Thus, it is important for a biotech company to review proactively what its IP needs are, what it already has and does not have, and what the strengths and weaknesses are. When entering into a partnership or collaboration with

regard to a drug candidate, it is important to structure the deal such that the parties know exactly what their rights, responsibilities and benefits are from the deal. Among the critical aspects of such deals are the ownership of the IP generated from the collaboration, the nature and scope of the license or the option to license, commercial-ization rights, geographical and field of use restrictions, as well as milestones and downstream royalties.

Patent Protection for Therapeutics and Diag-nostics For new therapeutic agents, the best patent protection is often composition-of-matter claims on the active agent itself which, supplemented by use and/or formulation patents, can provide strong protection against potential generic challengers or me-too drug developers. Sometimes, composition-of-matter claims are not avail-able because the active compound is a natural product or a known compound. In such situations, patent protec-tions often must be based primarily on use or formula-tion patents. If the intended use of a natural product is also known in the prior art, one could be left with lim-ited protections from so-called “secondary patents,” for example, patents with formulation and dosage claims. Thus, before embarking on costly clinical development, one may wish to explore medicinal chemistry of the candidate, for example, to see if it is possible to develop a modified candidate with fresh, attainable and defend-able IP position. Another important consideration for a biotech company is the global nature of drug development and commer-cialization. The complete value of a good drug is tied to the geographic reach of the underlining patents. Given the fact that the United States, Europe, and Japan remain the largest pharmaceutical markets, lack of solid patent positions in these markets will severely impact a drug’s commercial value and desirability to global pharmaceuti-cal companies, which are often the desired partners to biotechnology firms. The drug markets of China, India, Brazil, and Korea are fast growing, joining the ranks of Australia and Canada as the second tier markets. Patent protections in these countries are becoming more and more important, and depending on the target diseases, could be the primary markets as well. Global patent portfolio development strategies, therefore, should be

consistent with the overall commercialization objectives and the specific characteristics of the drug program at hand. With regard to diagnostic products, patent protection can sometimes be different from therapeutics. Having composition-of-matter patent protection on an under-lining biomarker would still be the preferred protec-tion. Often times, however, the innovation is not on the underling protein or nucleic acid biomarker but rather on either the detection probes or the analytical or data processing components of the diagnosis process. One needs to determine how best to approach IP protection in light of the specific target analyte, the biological pro-

cess underling the diagnosis, the data analysis software, as well as the detecting agents. Strategic in-licensing of critical patents, for example on the underling genes and gene products, often is critical to a solid patent position.

Conclusion Patent protection and freedom-to-operate are important aspects in developing and commercializing biotech and pharmaceutical products. For the Chinese pharmaceuti-cal and biotech companies striving to become leading innovators in this global industry, developing and imple-menting effective IP strategies are critical to sustained competitiveness and long term commercial success.



Society Events

In collaboration with the Department of Science and Technology of Guangdong Province and Guangdong Overseas Chinese Affairs Office, the Chinese Biopharmaceutical Association, USA (CBA) successfully held its 14th Annual Conference and Guangdong’s 1st Bio-Pearl River Forum at Guangzhou Baiyun International Convention Center on June 18-20, 2009. Supported by the Ministry of Science and Technology of the People’s Republic of China, China Overseas Exchange Association, Guangdong Food and Drug Administration, Chinese-American Biopharmaceutical Society, Sino-American Biomedical and Pharmaceutical Professionals Association, and Chinese-American Biomedical Association, the conference was designed to create a platform for communication and collaboration among biopharmaceutical companies, contract research organizations (CROs), research institutions, government agencies, as well as individual research scientists, entrepreneurs, and venture capitalists. Despite the global economic crisis and the threat of swine flu, the conference drew over 800 attendees with nearly 200 attendees coming from the U.S., France, Australia, Sweden, and Korea. Preconference: Symposium of Biopharmaceutical Innovation

The preconference entitled Symposium of Biopharmaceutical Innovation was a huge success. The conference room, which can comfortably accommodate 500 people, was packed; many people were standing in the back and the sides of the room. After the opening address and greeting remarks delivered by preconference organizer and co-chair Dr. Yingxian Xiao, and leaders from the central government and Guangdong provincial government, respectively, high-rank leaders from the 4 high-tech parks located in Guangzhou, Zhuhai, Zhongshan, and Shenzhen introduced their incentives and policies on recruiting talents, especially overseas talents. The lucrative benefits and generous supports made everyone in the room excited. Right after the introductions, 20 project leaders from the U.S. introduced their own projects, their interest of conducting their research and development in Guangdong, and their hope of getting support from the Guangdong provincial government and the high-tech parks. The 20 projects presented ranged from developing and marketing anticancer drugs to diagnostic

Wish you were there! Report on the 1st Bio-Pearl River Forum & 14th Annual

Conference of CBA (Part I)

Yanni Wang, Ph.D.

Figure 1. The Conference Attracted Over 800 Attendees

Figure 2. Some of the CBA Member Attendees



Society Events

products. All of the projects had passed the prescreening conducted by CBA’s expert committee before the conference. Due to time constraint, each project leader, however, was only given 5 minutes to tell his or her story. Leaders from the Department of Science and Technology of Guangdong Provincial Government, including Mr. Xinghua Li, director of the department, and Mr. Xiaoping Zhong, deputy director of the department, later met with the project leaders again and further discussed the plans of moving the collaborations forward. Opening Ceremony and CBA Brilliant Achievement Awards Presentation

The main conference started on the sunny morning of June 19, 2009. Mr. Qingliang Wan, vice governor of Guangdong provincial government, welcomed all conference attendees and briefly introduced Guangdong’s plan on supporting high-techs, as well as policies on attracting talents. Dr. Yifan Zhai, president of the CBA (2009-2010) and the conference chairwoman, briefly reported the nearly one year of preparation for the conference, and she sincerely thanked every single one of the hundreds of people, especially those volunteers, for working together to put together the conference. Following the opening remarks, Mr. Qingliang Wan presented CBA’s 2009 Brilliant Achievement Awards to Dr. Robert Gallo, member of the U.S. National Academy of Sciences, Dr. Nanshan Zhong, president of the Chinese Medical Association, and Dr. Luc Montagnier, 2008 Nobel Laureate in Physiology and Medicine, in recognition of their significant contributions to fighting viral infection and protecting worldwide human health. Keynote Speeches In his presentation titled “Using Click Chemistry to Find New Drugs and Diagnostics,” Dr. K. Barry Sharpless introduced “click chemistry,” Sharpless’ new synthetic stratagem, to the over 800 conference attendees. According to Sharpless, click chemistry has been widely used in the chemical world. By using click chemistry, new molecule entities with

complicated structures and/or unprecedented properties can be easily achieved. In 2009, as of the presentation, about 60 new patents, the majority of which are therapeutics, diagnostics and materials for life sciences, involve molecules having core structures with the copper-catalyzed 1,3-dipolar cycloaddition, the signature triazole linkage of the best click reaction to date.

Figure 3. The Preconference Was Well-Attended

Figure 4. Dr. Yifan Zhai Delivers Opening Remarks


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Despite the advances in HIV research and AIDS treatment, there is currently still no cure for AIDS or vaccine against HIV. In his presentation, “The Need for New Conceptual and Technological Approaches for Solving the HIV/AIDS Problem,” Dr. Luc Montagnier pointed out that although the tritherapy can extensively reduce the viral multiplication and allow a partial restoration of the immune system, part of the viral reservoir remains. New techniques are, therefore, needed to completely eradicate the virus infection. Dr. Montagnier also stressed the role of oxidative stress in AIDS pathogenesis and how antioxidant treatment may reduce the variability potential of HIV. At the end of his keynote speech, Dr. Montagnier expressed his interest in working with China in HIV/AIDS research. He stressed that the findings in this area could also be used to fight other diseases. Dr. Nanshan Zhong, who became famous during the 2003 SARS outbreak in China, demonstrated his passion for patients in his talk. He started his presentation, “Requisite and Expectation about Biopharmaceuticals from a Clinician’s Point of View,” with pointing out the differences between the approach that biopharmaceutical researchers generally follow (bench-to-bedside) and the one that clinicians tend to follow (bedside-to-bench). As a clinician, Zhong personally prefers gathering initial evidence from the bedside first, then conducting clinical studies, and finally using the information obtained from the clinical studies to better help patients. Zhong shared a successful bedside-to-bench story with the audience.1 Zhong urged the biopharmaceutical professionals keep patients’ needs and clinicians’ expectations for simple and affordable drugs and clinical techniques in mind while conducting research. Since he attended CBA’s 13th Annual Conference held in Shanghai in May, 2008, Mr. Sean Darragh’s enthusiasm in collaboration with the Chinese government and the Chinese biopharmaceutical industry has drastically increased. In his keynote speech, “Keys to Fostering a Biotechnology Hub: An Exploration of What Works and What Doesn’t,” Mr. Darragh, vice president of international affairs, biotechnology Industry Organization (BIO), shared his “secret recipe” for innovation, which includes essential ingredients such as free flow of information, solid public and private partnership, transparent and predictable government policies, strong financing support, perseverance, and strict IP protection. Despite the various challenges, Darragh believes that if “we all work together” we can solve global problems. He said that BIO is dedicated to working with the

Figure 5. The 2009 CBA Brilliant Achievement Awards Were Presented to Dr. Robert Gallo, Dr. Nanshan Zhong, and Dr. Luc Montagnier by Mr. Qingliang Wan



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CBA and other organizations to create a successful China story. In his keynote speech, “HIV/AIDS Research: A Few Lessons from the Early Years and Some Perspectives on Targeting CCR5 (therapy) and Preventing env Interaction with CCR5 (vaccine),” Dr. Robert C. Gallo first overviewed the history of discovering HIV and AIDS. He then discussed the current tests and therapies in this field. Despite the extraordinary advances made in the past decades, challenges and practical needs remain in the following areas: 1) drug deliveries to underdeveloped countries; 2) a “cure” for AIDS; 3) in the absence of cure, making current therapies more efficient; and 4) finding an effective vaccine. He shared further insights on the last two points. Gallo emphasized that the dependency of HIV on host cellular factor offers many opportunities of identifying new drug targets. Regardless of the challenges, Gallo

believed that we can develop a safe and efficient vaccine to prevent AIDS. But he stressed that the following are needed to achieve the goal: 1) higher availability of primates and easier accessibility of the primates to a broader number of scientists; 2) a sustainable immune response; 3) a broad immune response that can result in sterilizing immunity. “Genetically engineered mouse models have impacted on all areas of cancer science on the basic and translational level,” Dr. Ronald A. Depinho, M.D., director at Belfer Institute for Applied Cancer Science, Dana-Farber Cancer Institute, addressed in the last keynote address titled “Mining and Modeling Cancer Genomes.” Using the brain cancer model and the prostate cancer model, Depinho illustrated how scientists can use genetically engineered mouse models to understand the roles of genetic mutations in altering the developmental pathways, how to define the mechanisms of cancer progression, and finally how to use all the information gathered to guide the treatment for cancer patients. Post-conference Tours In addition to the 2-day (June 19-20, 2009) main conference on Biopharmaceutical Innovation and Commercialization and the half-day preconference meeting on New Drug Discovery and Development (June 18, 2009), CBA also organized post-conference tours (June 21-23, 2009) to the high-tech parks in Guangdong. The primary goal of the post-conference tours, which were free of charge to all conference attendees, was to foster collaborations among high-end overseas talents and local companies, research institutions, and high-tech parks.

Figure 6. Keynote Speaker, Dr. K. Barry Sharpless, Speaks with Mr. Richard Stone, Asian Editor of Science Magazine


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Attendees of the post-conference tours were divided into 2 groups based on their interests. The first group, led by Dr. Yingxian Xiao, general secretary of the CBA’s board of directors, visited Guangzhou, Dongguan, and Shenzhen, and the second group, led by Dr. Zhennan Lai, visited Guangzhou, Zhongshan, and Zhuhai. Besides meeting with the local government officials and visiting the facilities of the high-tech parks and companies, both groups conducted face-to-face meetings with the top management teams and scientists from the high-tech parks and companies. At those meetings, CBA members were invited to introduce their research projects and were given opportunities to ask questions regarding doing business in Guangdong. Early overseas returnees who are now working in those high-tech parks shared their experiences and wisdoms. They acknowledged the vast opportunities in Guangdong, as well as other parts of China, but also pointed out the challenges. Many of them considered persistence as one of the key elements of success. The 2-day post-conference tours helped the CBA members not only better understand Guangdong’s policies on recruiting overseas Chinese talents, but also reevaluate their chances of success should they decide to conduct their R&D, either on their own or in collaboration with local companies and research institutions, in Guangdong. At the end of the tours, both sides (Guangdong and CBA) agreed to continue working together after the tours to move the collaborations forward. References:

1. Wang Zh-Y, Chen Zh. Acute promyelocytic leukemia: from highly fatal to highly curable. Blood. 2008;111:2505-2515.

Yanni Wang is a scientific writer and biomedical communications consultant residing in Maryland. She has been serving as CBA’s vice president of communications since 2008. She can be reached at [email protected].

Figure 7. Post-conference Tours



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The 11th Chinese-American Bio-Pharmaceutical Society (CABS) Annual Conference was success-fully held in the Crowne Plaza Hotel in Foster City, California, on May 23, 2009. This conference was well attended by 400+ participants including 25+ conference speakers, 20+ vendors and sponsors, and hundreds of scientists across the San Francisco Bay Area, with many coming from the U.S. East Coast and China. This large gathering was particularly impressive given the economic recession and financial crisis that the world had experienced in the past 12 months. Equally fitting, the theme of this year’s CABS meeting was “Challenges and Opportunities in the U.S. and China: Through the Global Downturn and Beyond”.

The CABS annual meeting was rich in content with diverse programs from 8 am to 9 pm. After CABS President-Elect, Shichang Miao, Ph.D., announced the opening of the conference with an introduction of overall program, the current President, Leping Li, Ph.D., gave a state of the Society address. Dr. Li highlighted many activities that CABS organized 2008-2009 including conferences on stem cell, and therapeutic antibodies, workshops on career development, and the celebration of the CABS 10th anniversary. Li also emphasized CABS community service, volunteerism and alliances with other local and national organizations.

The plenary speakers included Dr. Norbert Bischofberger, Ph.D., Executive Vice President, R&D, and Chief Scientific Officer at Gilead Sciences, Dr Nancy Chang, Ph.D., Chairman and Managing Director of OrbiMed’s Caduceus Asia Partner Fund; and Dr. Karl Sanford, Ph.D., Vice President of Technology Development at Genencor. Dr. Bischofberger discussed the evolution of HIV treatment and Gilead's contributions, including a superb formulation strategy that combined three HIV drugs into one pill. From the first HIV drug approval in 1987 to 1998, the death rate of AIDS patients in the U.S. dropped dramatically to below 20,000 per year, thanks to a variety of drugs approved and combination drug therapy was widely used. Seemingly the AIDS epidemic was under control. How-ever ordinary AIDS patients needed to take 26 pills daily in 1996, which caused challenges in both patients’ lives and their compliance with the treatment. Gilead realized this opportunity and man-aged over the past 10 years to combine various HIV drugs in one pill. With the approval of Atripla

in 2006, now an average AIDS patient needs to take only one such pill for their disease con-trol. Gilead has revolu-tionized the AIDS drug treatment and in return

Ride Through the Global Downturn Report on the 11th CABS Annual Conference 2009

Reported by Hua Tu, Wentao Zhang, Photos taken by Xiaolin Hao.

From left to right: Drs. Leping Li, Norbert Bischofberger, Nancy Chang, and Karl Sanford.


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has become one of the best success stories in the biotech history. Dr. Chang described the chang-ing nature of pharma R&D and outsourcing environment in Asia. She stressed that quality was the ultimate winning strategy for Chinese CRO’s. Dr. Sanford discussed recent developments in industrial biotechnology: from industrial enzymes to biochemicals to biofuels. He pointed out four major industrial applications of biotechnology: bio-feedstock (replacement of fossil feedstock by sugar and biomass), bioprocesses (use of enzymes, bacteria, etc for industrial process), bioproducts (bio-based fuel, materials etc.) and bioremediation (use of biological process for environmental cleanup).

The Scientific session this year focused on oncology and neuroscience R&D with four influential speakers from Stanford University and three of the largest biotech companies in the Bay Area. Ira Mellman, Ph.D., Vice President of Research Oncology, at Genentech, discussed the approaches and strategies that Genentech scientists utilized in translating basic research into therapeutics. As Genentech just became a fully-owned subsidiary of Roche, Dr. Mellman described the formation of Genentech Research and Early Development (gRED) as an independent organization focusing on basic research and early clinical trials up to phase II. Peter Lamb, Ph.D., Senior Vice President, Discovery Research, and Chief Scientific Officer at Exelixis, discussed small molecule drug discov-ery and development targeting important oncogenic signaling pathways. Using examples of two inhibitors of the PI3K-mTOR pathway, Dr. Lamb described the use of pharmacodynamic read-outs in predicting tumor response. Dean W. Felsher, M.D., Ph.D. Associate Professor at Stanford University School of Medicine, presented his research on tumor oncogenes, such as myc. Under the central thesis that if a tumor is caused by an oncogene, then at some point of time, one can switch off the oncogene to shut off the tumor growth, Dr. Felsher showed that the specific consequences of the inactivation of an oncogene depended upon both cellular and genetic context. Dr. Alexander “Sasha” Kamb, Ph.D., Head of Neuroscience Therapeutic Area at Amgen, discussed some of the challenges and oppor-tunities in neuroscience drug discovery. Dr. Kamb singled out the need to improve more predica-tive animal models for human CNS diseases to reduce the high attrition in CNS drug candidates.

Following the Scientific session, Joseph McCracken, Ph.D., Vice President of Business Develop-ment at Genentech, started the session on China Biotech and Drug Development. Dr. McCracken echoed Dr. Mellman on the belief that recent acquisition by Roche will not change the scientific culture of Genentech. He discussed the long Genentech tradition of collaboration starting with the seminal partnership between its two founders: Dr. Herbert Boyer and Mr. Robert Swanson. Dr. McCracken highly recognized the importance of China as an emerging power nation, and more im-portantly as a key partner of the United States. He borrowed the word “Chinamerica” to empha-size the prominence of the two countries in the world economy and politics.

From left to right: Drs. Ira Mellman, Peter Lamb, Dean Felser, and Sasha Kamp



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Track 1 of the session on China Biotech and Drug Develop-ment: Dr. Wayne Li of Morningside Venture in Shanghai stressed that the balance of great science with the right amount of capital is critical for a successful start-up. He also provided insights on how to obtain capitals in China. Dr. Jing-Shan (Jennifer) Hu, Director of Licensing & External Research of Merck in Mainland China, Hong Kong, & Taiwan, discussed how to maintain a competitive edge in a changing landscape through external partnership. Dr. Jintao Zhang, CEO of Shanghai Medicilon, discussed the integrated business model for preclinical CRO business and their joint venture with MPI. The Track 1 of China Biotech and Drug Development ended with two sponsors’ presentation. Drs. Ningni Yu and Zhenlin Li of Shanghai Pharma Engine discussed their support as a biotech incubator with public laboratory services. Dr. Larry Wang, co-founder and President of GenScript headquartered in New Jersey, described contract research services that Gen-

Script provides: biological reagents, assay development, lead optimization and antibody services. This session was well-attended with many questions from the audience.

Track 2 of the session on China Biotech and Drug Development: Tony Zhang, Managing Director of Eli Lilly China R&D, gave a talk entitled “Pharmaceutical R&D Networks and NME Develop-ment Efficiency”. Dr. Zhang highlighted the cost of failure and inefficiency issues related to drug de-velopment in the U.S. and outlined Lilly’s strategies for improving efficiency by outsourcing to China. He emphasized the concept of transition from fully integrated pharmaceutical company to fully integrated pharmaceutical network. Yingfei Wei, CSO of China-based 3SBio, gave a presentation on “Biosimilars in China: Current State and Future”. Dr. Wei overviewed the market and drug develop-ment process of biosimilars in China. Dr. Wei also announced a planned CABS workshop on bio-similars to be held on September 26th, 2009. Allan Riting Liu from Shanghai Fosun Pharmaceutical Group, gave a presentation on “Fosun Pharma and its Licensing and R&D Alliance Strategy”, where he discussed differences in deal valuation and evaluation in the China market, as well as processes involved in making deals. Two Gold Sponsor presentations were given by AzoPharma, a Florida-based contract pharmaceutical development CRO, and Pharmaron, a chemistry CRO with operations in Louisville, Kentucky; Irvine, California; and Beijing, China.

In the evening, the expert forum and panel discussion covered topics on entrepreneurship, managing through mergers and acquisition, and challenges and opportunities. Panelists included Brian Cunning-ham of Morrison & Foerster, Jin-Long Chen of NGM Biopharmaceuticals, Cheni Kwok of Poniard Pharmaceuticals, Larry Wang of Genscript, Alex Wu of Crown Bioscience, Wayne Li of Moringside, and Charles Hsu of Bay City Capital. Connie Sun and Hua Tu of CABS served as discussion mod-erators. The panelists provided their insights on the current state of the U.S. pharmaceutical market and underlined the enormous opportunities available in China. Two heads of leading service CROs, Larry Wang and Alex Wu, were asked about their value creation strategy and they commented on the Wuxi Pharma model, emphasizing their own focus on innovation and market-driven product devel-opment. Charles Hsu made a compelling argument on the perfect match between Chinese companies looking for talent and scientists in the U.S. who possess the experience and know-how. The ideas of “Don’t wait for brand new ideas, you can show up now with your existing knowledge and skills.” and “It is not if, but when. China is a dominant force in the world pharmaceutical development.” both resonated around the conference hall and made a strong impression upon the audience.


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The 11th annual conference marked the most important event for CABS in 2009. Its suc-cessful organization and completion required a tireless three-month preparation, meticulous coordination and hard work from numerous CABS volunteers. CABS also received gener-ous support from its many long-time corporate sponsors and members. This annual meeting attracted 400+ participants and provided them with a great opportunity to network, interact and exchange ideas. The reaction from the participants had been overwhelmingly positive as they enjoyed high-quality scientific presenta-tions as well as obtained an update on biotech business development and the industry trend. For them, the annual meeting was a great service by CABS to the Chinese-American Biopharmaceu-tical community.



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The 8th Annual San Diego Bio-Pharma Conference entitled “Riding the Economic Wave-Challenges and Opportunities” attracted unprecedented 600 Biopharma professionals on a rare sunny Saturday after consecutive June Gloom days and a few “gloomy” months for San Diego biotech companies. Dr. Xiangming Fang, president of SABPA-San Diego, kicked off the meeting by giving a brief overview of the agenda and the backgrounds of the speakers, which include a number of all-stars in their fields. Dr. Hui Cai, chairwoman of the SABPA Board, then led the first session and introduced the keynote speaker, last year’s Nobel Price winner, Roger Tsien. Dr. Tsien presented the latest breakthrough imaging technology, which is not related to his Nobel Price winning work on green fluorescence protein. The so-called activated cell penetrating peptides (ACPP) technology can result in tumor or tissue specific labeling, therefore offering promising potentials in many clinical settings such as guiding tumor removal with much improved accuracy during surgeries. Dr. Sheng Ding, a young rising star in applying chemical biology into stem cell research, presented his innovative approach in discovering novel chemicals, which could control the fate of stem cells in various systems. Moreover, he was able to identify the biological targets and related pathways hit by some of these novel chemicals. These impressive works clearly help to accelerate the emerging stem cell field towards future therapeutic applications. Following the two top-notch scientific presentations, Mr. Steve Danon, who represented Congressman Brian Bilbray, gave a speech on the ever increasing role of science in the nation’s economy. The following session was the panel discussion on evolving business models for Bio-Pharma R&D. The session moderator Mr. Jack Florio, SVP of Brinson Patrick Securities Corporation was introduced by Dr. Ming Guo. The panel had generated some very interesting debates on funding opportunities for different business models at different stages of the drug development cycle in different therapeutic and target areas. Dr. David Kabakoff shared his experience first as an executive on Salmedix’s success story, then as

Riding the Economic Wave-Challenges and Opportunities Report on the 8th Annual San Diego Bio-Pharma Conference

The audi-ence

Dr. Xiang-ming Fang

Dr. Roger Tsien

Dr. Sheng Ding


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a venture capitalist on identifying investment opportunities. Mr. Christopher LeMasters and Mr. Randy Woods discussed their strategies of obtaining capitals in the current environment for small biotech companies like Tragara Pharmaceuticals and Sequel Pharmaceuticals, and the current trends of negotiating partnerships with big pharmaceuticals. Dr. Stephen Chang offered his insights from the reagent side of the business and his start-up experience with Stemgent. Exit strategies including mergers and acquisitions were also discussed. The panel also addressed questions from the audience regarding how to strike a balance between earlier stage research, later stage product development and in-licensing opportunities. The afternoon session began with the presentation of the San Diego Bio-Pharma Achievement Award to the renowned chemist K.C. Ni-colaou by Dr. Hui Li, Vice Chair of the SABPA Board. Dr. Nicolaou then gave a brilliant talk on synthetic strategies of natural products and the related chemical biology studies. To avoid confusion, reorganize the sentence. The first speaker, Dr. David Ke from Amgen, presented their pioneer works on the identification of sclerostin as a new drug target in regulating bone formation and the development of scleros-tin neutralizing antibody which has exhibited promising pre-clinical and clinical data in treating osteoporosis. Dr. Lloyd Tilman from ISIS pharmaceuticals, a pioneer in developing antisense RNA based therapy, described ISIS’ novel formulation strategies to achieve oral delivery of antisense molecules, one of the biggest hurdles in RNA-based thera-pies. The “Swine Flu” outbreak has generated many headlines this year, and it became the topic of the last session of the symposium. Dr. Suixiong Cai, introduced a distinguished panel that includes the session modera-tor Dr. Eldora Ellison from Sterne, Kessler, Goldstein & Fox PLLC, Dr. Graham Lidgard from Nanogen, Dr. David Looney from UCSD Medical Center, Dr. Ronald B. Moss from NexBio, Dr. Sean M. Sul-livan from Vical and Dr. Christina Yang from Gen-Probe. The panel-ists offered their insights on the epidemic, pathogenesis, diagnosis, and treatment of swine flu. The panelists also discussed how CDC and the FDA responded to the outbreak of swine flu, and the opportunities and chal-lenges for the industry to work with government agencies to combat swiftly against such a contagious disease. Given the current job market, this symposium also set up a job bulletin and had attracted

The business panel. From left:Jack Florio, David Kabakoff, Christopher LeMasters, Randy Woods, and Stephen Chang

The Job Fair

Dr. K.C. Nicolaou and Dr. Hui Li

The Exhibition Drs. Graham Lidgard (left) and Chris-tina Yang (right)



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executive search firm like Med Exec International to the conference. Flyers with job posts from Bio-Phase, WuXi Apptech, Ardeas, GeneScript and CACO were distributed at the event and had generated a lot of inquiries. Job seekers also benefited from the networking opportunities provided by the event.

Record number of attendees, speakers, and sponsors provided overwhelmingly positive feedback to this well-organized symposium, especially given the current battled economy and downturn of the biotech industry. This huge success is the result of months of hard work by the Conference Organiza-tion Committee, many SABPA team members and volunteers. SABPA and SDCA had their 2nd year collaboration to make this event a success. For more information and photo report please visit http://www.sdbiopharma.org/2009/bio-index.htm

Organizers and VIP. From left:Xiangming Fang, Hui Li, Hui Cai, Consul Xiangdong Ye, Consul Cheng Wu, and Ming Guo

Networking: attendees and organizer, Peter Zhu (middle)

Company Name: GenScript USA Inc.

Year of Founding: 2002

Service Category: Biological CRO

Total Employees: over 700

Tel: 1-732-885-9188 Fax: 1-732-210-0262

Email: [email protected] Web: www.genscript.com

Address: 120 Centennial Ave., Piscataway, NJ 08854, USA

GenScript is a contract research organization (CRO) specialized in biological research and drug discovery services. Its service portfolio includes bio-reagent services, assay development & screening, lead optimization, and antibody drug development. Headquartered in Piscataway, New Jersey, GenScript has become a leading Biology CRO and leading gene synthesis supplier in the world, with subsidiaries in France, Japan, and China.

As The Leading Biology CRO: The largest biology contract research organization (CRO) with major

operations in US and China The leading gene synthesis provider in the world. One-stop biology CRO services focusing on drug discovery in small

molecules and biologics Seasoned scientific and management team

As a Reliable Partner: Full client IP protection ISO certified, cGMP compliance, and AAALAC accredited Flexible business models: Project-based, FTE-based, and Strategic Alliance

GenScript Service Modules:

Bio-Reagent Center- Custom Gene Services- Custom Protein Services- Custom Peptide Services- Custom Antibody Services- Custom Cell Line Development

Bio-Assay Center- Assay Development- HTS Assay Conversion- Primary Assay- Specificity Assay- Secondary Assay- Compound Screening

Lead Optimization Center- Lead Optimization- Discovery Biology

Antibody Drug Development Center- Antigen Production- Hybridoma Generation- mAb Seqencing- Antibody Humanization- Affinity Maturation- Bioprocess and Antibody Production

CEO’s Statement

GenScript USA Inc. was founded in 2002. Ever since its inception, GenScript has experienced rapid, constant, and organic growth. Now GenScript has become a leading biology contract research organization (CRO) in the world, with a global operating team of over 700 dedicated scientists, staffs. Looking forward, we will continue to deliver high -quality services in a cost effective and timely manner, and to help accelerate the discovery and development of innovative medicines by integrating our services into clients’ operation and pipelines seamlessly. With the high -profile $15 million investment sfrom KPCB and TBIG Healthcare, our drug discovery and development service lines will be further expanded. I believe that GenScript is poisedtoward rapid growth and exciting future.

About Investors

KPCB began investing in and helping build life science companies in 1977 when it was the founding investor of Genentech. Since then, KPCB has backed entrepreneurs in over 475 ventures, including AOL, Amazon.com, Compaq Computers, Google, IDEC Pharmaceuticals, Sun Microsystems, Symantec, and Verisign. More than 150 of the firm’s portfolio companies have gone public. Many other ventures have achieved success through mergers and acquisitions.

TBIG Healthcare is a division of The Balloch Group ("TBG") and is co-owned by Shipston Group Limited (SGL). TBG is an advisory and merchant banking firm serving both domestic Chinese and international firms, ranked the leading boutique investment bank in China by ChinaVenture in 2008.

Frank Zhang, Ph.D., CEO

China CRO Profile


Areas of Interest

Regional Contact in Mainland China, Hong Kong, and Taiwan

Jing-Shan (Jennifer) Hu, PhD

Merck & Co., Inc., Whitehouse Station, NJ, USA

Merck Sharp & Dohme (China) Ltd.

Email: [email protected]

C O M B I N I N G O U R S T R E N G T H SS H A R I N G O U R S U C C E S S E S

Whitehouse Station, N.J., U.S.A.Copyright © 2006–2009 Merck & Co., Inc. All rights reserved.

Director, Licensing & External Research

Tel: +86 21 2211-8535

EMBRACING PARTNERSHIPS

EMBRACING PARTNERSHIPSEMBRACING

• We have aligned our areas of interest with our six franchises…plus new technologies.

• Additionally, Merck will continue to pursue external licensing opportunities in other disease areas where clinical proof of concept exists.

• Merck will also pursue niche acquisitions and partnerships in diagnostics and devices where it complements our pipeline, and not as a stand-alone business.

• Two new initiatives – the formation of External Basic Research and Merck BioVentures – o�er even more opportunities to partner with Merck!

Neurosciences and OphthalmologyAlzheimer’s Disease Circadian DisordersOphthalmology Migraine Pain Parkinson’s Disease Schizophrenia

OncologyCompounds with clinical proof of concept only

Research TechnologiesDrug DeliveryDrug Discovery Platforms – In Vivo Models Peptide Therapeutics Molecular Imaging – Translation Sciences RNA Therapeutics Targets and Biomarkers / Identi�cation and Validation

Therapeutic Areas and Research TechnologiesAtherosclerosis and Cardiovascular DiseasesLipids/Metabolic SyndromeVascular Wall Hypertension/Cardiovascular

BiologicsFollow-on-Biologics with high quality and high probability of success including biosimilars and biobettersNovel Biologics that �t Franchise Strategies

Bone, Respiratory, Immunology, and EndocrineAnemia Arthritis and Immune-Based Diseases Asthma/COPD Bone Sarcopenia Urology

Diabetes and Obesity

Infectious Diseases and VaccinesAntibacterials Antifungals Antivirals – HIV Antivirals – HCV Antivirals – Other Interests Antiviral and Anti-infective Technologies Vaccines

Details can be found at http://www.merck.com/licensing/interest.html

Areas of Interest

Shanghai Rep.O�ce

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