A
patent
dispute
over
technology
key
to
messenger
RNA
Covid-19
vaccines
is
settling
with
Moderna
agreeing
to
pay
$950
million
up
front
and
potentially
more
than
$1
billion
later,
a
resolution
that
comes
days
before
the
expected
trial
start
in
litigation
that
has
been
brewing
for
years.
The
cash
will
go
to
Arbutus
Biopharma
and
Genevant
Sciences,
companies
in
which
Roivant
Sciences
holds
ownership
stakes.
Moderna
retains
the
right
to
appeal
a
narrow
legal
matter.
But
to
Roivant
CEO
Matt
Gline,
the
settlement
announced
after
Tuesday’s
market
close
is
a
victory
for
the
companies
as
well
as
its
scientists.
“Today
represents
the
first
real
acknowledgement
that
team
and
those
scientists
have
gotten
that
their
technology
was
instrumental
in
Covid-19
vaccines,
or
at
least
the
Moderna
vaccine
as
we’re
announcing
today
with
this
settlement,”
Gline
said
in
a
Tuesday
evening
conference
call.
The
patent
dispute
focused
on
lipid
nanoparticles
(LNPs),
tiny
fat
particles
that
encapsulate
mRNA
and
protect
it
during
its
journey
through
the
body
to
its
cellular
destination.
Moderna’s
mRNA
vaccine
for
Covid-19
uses
LNPs
for
delivery.
In
a
joint
complaint
filed
in
2022,
Arbutus
and
Genevant
contended
this
vaccine
infringed
their
LNP
delivery
patents.
Other
parties
have
licensed
this
technology,
and
Arbutus
and
Genevant
said
Moderna
needed
to
do
so
too.
Moderna
contended
its
Covid-19
vaccine
did
not
infringe
any
valid
patents.
But
its
defense
focused
on
another
argument:
Arbutus
and
Genevant
sued
the
wrong
party.
Moderna
had
said
the
companies
should
instead
sue
the
U.S.
government
because
the
Covid-19
vaccine
that
became
Spikevax
was
developed
and
brought
to
the
market
under
a
federal
contract.
Citing
Section
1498
of
the
U.S.
Code,
Moderna
said
claims
against
a
government-contracted
supplier
must
proceed
against
the
government
and
in
the
U.S.
Court
of
Federal
Claims.
In
2022,
the
court
denied
Moderna’s
partial
motion
to
dismiss
under
this
federal
law,
which
would
have
shifted
liability
to
the
government.
In
pretrial
rulings
earlier
this
year,
the
court
denied
this
Moderna
defense.
The
settlement
announced
Tuesday
grants
Moderna
a
non-exclusive
global
license
to
the
Genevant/Arbutus
LNP
technology
for
mRNA
vaccines
for
infectious
diseases.
Genevant
and
Arbutus
agree
not
to
not
to
sue
Moderna
for
certain
patents.
The
settlement
requires
Moderna
to
make
a
$950
million
lump
sum
payment
by
July
8.
Moderna
owes
no
royalty
payments.
The
mRNA
vaccine
maker
retains
the
right
to
appeal,
but
only
on
the
question
of
whether
the
company
or
the
government
is
liable
for
infringement
regarding
Moderna’s
vaccine
sales
made
under
a
federal
contract.
The
company
continues
to
argue
that
as
a
government
contractor,
its
liability
is
limited.
The
additional
payout
of
up
to
$1.3
billion
hinges
on
a
court
decision
affirming
that
Moderna
is
indeed
liable
in
this
matter.
In
Moderna’s
announcement
of
the
settlement,
the
company
said
a
court
loss
related
to
the
pending
Section
1498
appeal
“is
not
probable,”
so
it
expects
no
financial
charge
will
be
recorded.
Moderna
could
appeal
the
case
all
the
way
up
to
the
U.S.
Supreme
Court.
If
Moderna
ultimately
wins,
Arbutus
and
Genevant
must
refund
any
payments
plus
interest.
Gline
said
that
all
three
times
this
issue
has
come
up
in
court
so
far,
judges
have
ruled
in
favor
of
Genevant
and
Arbutus.
“We
expect
to
win
on
this
issue
and
we
believe
we
have
the
right
side
of
the
law
here,”
he
said.
“Whether
the
Supreme
Court
decides
to
hear
a
case
like
this
is
obviously
up
to
them
and
difficult
to
predict.”
Leerink
Partners
analyst
Mani
Foroohar,
who
covers
Moderna,
said
in
a
research
note
that
the
investment
bank
viewed
Moderna’s
defense
case
as
materially
weaker.
Leerink
is
surprised
by
the
outcome,
and
the
rise
in
Moderna
shares
reflects
“relief
for
a
successful
dodged
bullet,”
Foroohar
said.
The
manageable
settlement
terms
do
not
push
Moderna’s
finances
into
distress
or
burden
profit
margins
in
the
future
with
royalty
payments
—
avoiding
the
two
worst-case
scenarios
for
the
company.
Moderna
investors
expected
the
company
to
face
as
much
as
$5
billion
in
projected
liability,
making
the
settlement
terms
better
than
previously
feared,
William
Blair
analysts
said
in
a
research
note.
Acknowledging
that
Moderna
believes
it
will
win
its
appeal,
the
William
Blair
analysts
noted
that
the
U.S.
District
Court’s
ruling
for
the
government
means
Moderna’s
government
contractor
argument
under
Section
1498
is
not
applicable
for
the
vast
majority
of
the
company’s
sold
Covid
vaccine
doses.
Still,
the
analysts
see
the
settlement
as
removal
of
an
overhang
on
Moderna,
leaving
the
company
with
enough
capital
to
deploy
toward
its
other
programs,
including
late-stage
oncology
vaccines
with
expected
data
readouts
this
year.
These
vaccines
could
become
new
long-term
drivers
of
revenue
growth
for
Moderna.
Roivant’s
research
into
patent
litigation
found
that
the
largest
verdict
from
a
biopharma
case
that
went
to
trial
is
the
$2.54
billion
awarded
to
Idenix
in
2016
for
its
suit
against
Gilead
Sciences
and
its
hepatitis
C
drugs.
That
verdict
was
later
overturned
and
nothing
was
paid.
The
next
largest
biotech
case
was
the
$2.1
billion
that
Teva
Pharmaceutical
and
Sun
Pharma
agreed
to
pay
in
2013
to
settle
patent
litigation
regarding
Pfizer’s
stomach
acid-reducing
drug
Protonix.
Gline
noted
that
the
potential
payout
from
Moderna
falls
between
those
cases,
placing
it
among
the
largest
disclosed
patent
settlements
in
industry
history.
Roivant
plans
to
apply
the
settlement
proceeds
toward
development
of
its
pipeline
and
potential
product
launches.
But
the
company
will
also
return
some
of
that
capital
to
stockholder,
boosting
a
planned
share
buyback
program
from
$500
million
to
$1
billion.
Roivant
also
has
ongoing
patent
infringement
litigation
against
partners
Pfizer
and
BioNTech,
which
have
a
much
larger
share
of
the
Covid-19
vaccine
market
with
their
mRNA
shot,
Comirnaty.
Gline
said
this
case
is
about
a
year
behind
the
Moderna
litigation
and
no
trial
date
has
been
set.
Other
patent
suits
over
Covid-19
vaccine
technologies
have
settled.
Last
year,
BioNTech
acquired
mRNA
company
CureVac
in
a
move
analysts
viewed
as
a
way
to
resolve
the
patent
dispute
between
the
companies.
BioNTech
later
reached
a
formal
settlement
that
paid
$740
million
to
CureVac
and
its
mRNA
R&D
partner,
GSK.
This
deal
also
requires
BioNTech
to
pay
those
companies
royalties
on
sales
of
its
Covid-19
vaccine.
Photo:
Michael
Sohn
—
Pool,
Getty
Images