2014 – a threat for Bioporto, the NGAL-patent or the NGAL-test ??

Uncertainty about consequences of the recent decision by  the European Patent Organisation’s  (EPO)  Opposition Division (OD) on the NGAL patent

Is the ruling really vital for BioPorto … and in case it is not  - why is it not so ?

While we are still (after 8 weeks) sitting waiting for the EPO – OD’s written statement on how they justify the unjustifiable – it is perhaps appropriate to reflect on the impact of the proposed reassesment  …

First of all – it is of course important to remember – BioPorto still holds the European patent issued by the EPO.  And secondly also to keep in mind that BioPorto will – at the very least  hold the patent within the EPO-area untill 2014 (and probably longer than that) – even if we face the worst case scenario. Additionally, the decision by EPO  does not directly affect either the patents issued in the BRIC countries – or for that matter the patent application in the U.S..

In short – No need to despair….

In order to fully understand the recent bewilderment amongst investors – we have to make a distinction between the NGAL-Test and the NGAL Cutoff-Patent.

The Cutoff-Patent can – (although BioPorto considers it unlikely) – be completely revoked by the EPO (or by USPTO – regarding  the U.S. patent).Nonetheless – more and more studies operates with cutoff values ​​of 230/250 ng / ml – so there seems to be some consensus that it is the right level for the identification of AKI (acute kidney injury) – but that is something the examinators at EPO must decide.

If BioPorto loses the patent (in both the EPO-area and the other adopted areas) – it means,  that BioPorto can not restrict access to the market for test of NGAL-levels with reference to a violation of the cutoff value of 250 ng / ml.

If we make the assumption that it happens – then the NGAL-test is not patent-protected – and other diagnostic companies can make a similar (or identical) test. Some companies will surely then develop a heterogeneous-test (as Abbott) – others will eventually bring a homogenous test to the market.

There is nothing unique in a test – but obviously it takes time (years) to develop and validate it.  You have to take the “time-to-market” into consideration, just think of the time it has taken to implement both Abbott’s current heterogeneous tests and BioPorto’s homogenous.

But – and this is the most important fact … BioPorto CAN lose the patent  - BUT WHATEVER THE OUTCOME IS – BioPorto cannot lose the right to market the homogeneous test, and that’s REALLY interesting  - because the NGAL-Test is the only test – at present – that can be adapted to virtually all types of equipment.

If we look at the patent case – then there are different outcomes scenarios …. Here are three of the most obvious ones:

A: BioPorto succeeds in 1st instance (again). - Happy days are here again immediately

B: BioPorto will not succeed in 1st instance – but alter after appealing – Happy days are slightly delayed

C: BioPorto lose all the way – and after 2014, BioPorto holds no patent – Working days are here again

A: If BioPorto succeeds in the June/July 2012 – (again) – it will place Abbott /Alere (A&A) in an extremely difficult situation. It will take extraordinary persuading abilities  from A&A’s side to obtain license access – after the trial (though of course it would be sensible to separate emotions and business). On the contrary, one might say –  A&A is likely to place themselves between a rock and a hard place if they uphold the case (without being in constant dialogue with BioPorto)

B: Even if BioPorto do not succeed at first instance – then there is – (as we now know from the painful experience in February)  - always the possibility of making an appeal – and there is in this period – still a patent held by BioPorto. It is not overwhelmingly likely that any independent company  (other than Abbott / Instrumentation Lab / Alere / Gaetica) will develop a test in that period.

C: In this sceario, in 2014 it is decided that BioPorto no longer has a patent regarding measurement of cut-off values. Regardless –  BioPorto de facto still have a leading edge over emerging competitors – because the NGAL-test will at that time already in distribution. It is then up to the distribution partners to maintain that position – which will certainly lead to some price pressure (rising over time) – but it will hardly be noticeable the first few years (and we’re probably over in 2017 before emerging competitors shows up with a validated test)

So what can Abbott/Alere lose? Well – by maintaining the case we can basically operate with two outcome scenarios.

If BioPorto succeeds . A&A risk having to pay a hefty compensation for marketing their own test – and can – in addition (ultimately) be forced to revoke the test that have been sold, many years of promotion and marketing will be wasted – and a possible sale of Abbott RA-machines (based on NGAL-test) goes into the sink. (The same applies to the sale of Alere’s Triage).

Eventhough  Abbott/Alere opposition proceedings turns out to be justified – then A&A will never be able effectively to block BioPorto’s NGAL-test in the market. The heterogeneous test is expensive (both in production and procurement) in comparison with a homogeneous test (which of course also can be used on Abbott machinery) – so there will be some pressure on Abbott from below – even if they succeed in having the patent  revoked

In the period until 2014  Abbott/Alere therefore have to make a choice,  either they must continue marketing their own test (full throttle  with the risks it involves) – or should try a more intensive dialogue with BioPorto (presumably while the patentcase is running).

If BioPorto enters into agreement in the first half of 2012  (as they unequivocally promised) – BioPorto will probably prove to be a very stubborn negotiating partner for A&A.   So if I were in Management in either the two companies – I’d be more than just slightly interested in making a deal (in respect for a cancellation of the patent case) – before BioPorto enters into  an agreement with the other major players such as  - Roche / Siemens?

A&A are probably left alone in pursuing the case when the Pfadia patent will be declared permanently unapplicable – and then there’s only one other company  interested in upholding the case against BioPorto (Gaetica). If Abbott /Alere /Gaetica withdraws case there is no other who can protest against Patent (the last date for filing objections has expired long ago).

In clear text: BioPorto is in the driving seat until 2014 regarding the patent – and in relation to marketing the only homogenous NGAL test at least till  2017 (in the unlikely event of the patent being lost) …