Alexis LukianovDuring NuVasive’s quarterly conference call with analysts on April 20, company Chairman and CEO Alexis Lukianov dropped, if not a bombshell, at least a stink bomb.
He told analysts towards the end of the call that NuVasive has begun legal action against Orthofix for allegedly infringing the ‘239 patent behind NuVasive’s Osteocel Plus biologic product. NuVasive purchased the licensing rights to that patent from Osiris for $85 million in 2008.
Orthofix: Suit Wholly Without Merit
Orthofix’s CEO, Alan Milinazzo was unaware of the action, not yet having been served with papers and issued this statement the following day.
Alan Milinazzo“At best, we find both the NuVasive announcement and the forum for the announcement questionable. We prefer to compete in the marketplace so that we can continue to bring next generation technologies to the market for the benefit of patients and surgeons who treat them. It is Orthofix’s policy to respect the intellectual property rights of others, and we are prepared to vigorously defend ourselves against any allegations to the contrary.”
During his own conference call with Wall Street analysts on April 28, Milinazzo told analysts that the suit was “wholly without merit.”
He told analysts that prior to developing its own product, Trinity Evolution, the company did its due diligence and found a, “novel next-generation” product and did not infringe on the intellectual property licensed by NuVasive.
Biologic IP in orthopedics is a big deal and this lawsuit encapsulates business, scientific and legal issues that have yet to be decided in courts and markets. With a stroke of the pen, Alexis Lukianov and NuVasive have sent these issues to a federal court. The world of orthopedics may be about to learn a lot about the legal nature of stem cell patents for use in promoting bone growth.
NuVasive/Osiris v Orthofix/MTF
In a nutshell NuVasive is saying that Osiris spent lots of time and money to learn that allogeneic mesenchymal stem cells (MSCs) can be harvested from a donor, dead or alive, and given to a patient without fear of rejection to promote bone growth.
Until this important breakthrough of the ‘239 patent, it was widely believed that allogeneic cells posed a risk of being a foreign cell surface protein that would trigger an adverse immune response in the patient receiving the cells. NuVasive says the inventors of the patent, “put those fears to rest.”
Osiris began exploring ways to develop therapies and products related to MSCs in the mid 90s and filed for a patent.
Allogeneic Mesenchymal Stem Cells
The patent (No. 6, 355, 239), “Uses for Non-Autologous Mesenchymal Stem Cells, ” was issued on March 12, 2002, to the inventors, Scott Bruder, Kevin McIntosh, M.D., Daniel Marshak, M.D. and Joseph Mosca, M.D. and assigned to Osiris.
According to NuVasive, the ’239 Patent, “claims, inter alia, methods for treating a human subject with allogeneic MSCs to promote connective tissue (e.g., cartilage or bone) growth.”
The suit claims the patent inventors, “surprisingly discovered that allogeneic MSCs do not provoke an adverse immunological response by the patient. The inventors’ teaching that allogeneic MSCs can be used in this fashion marked a significant advancement in the art.”
Launching Commercial Product
Osiris launched Osteocel in 2005 as the first commercial product in the U.S. that contained adult allogeneic MSCs for use as a transplant.
In 2006, Osiris went public with a valuation of $300 million, the second-largest public stem cell company in the U.S.
In March 2006, Blackstone Medical made a deal with Osiris to distribute, non-exclusively, Osteocel for use in promoting bone growth. Blackstone was acquired by Orthofix in September 2006.
In 2008, Osiris decided to divest itself of Osteocel and took bids from potential buyers. NuVasive won the bidding and Orthofix’s license to sell Osteocel, which they had been selling under the brand name Trinity, expired on July 1, 2009.
NuVasive Wins Licensing Rights
After Osiris accepted NuVasive’s offer in May 2008, Orthofix filed suit to stop the sale, but withdrew its complaint before the sale was completed. Orthofix never bid on Osteocell but filed the suit to ensure the contractual rights they had to the sale of the product would be honored by NuVasive.
NuVasive then began selling the product under their brand name, Osteocel Plus.
Orthofix Partners With MTF
To stay in the game and continue to offer a biologic product to surgeons, Orthofix partnered with MTF (Musculoskeletal Transplant Foundation) to develop an allogeneic stem cell product. Orthofix had contacted MTF in early 2007 as part of a plan to either enhance the donor pool or explore partnerships for other allografts. Orthofix now sells that product under the trade name, Trinity Evolution.
Jefferies analyst Raj Denhoy says both products, NuVasive’s Osteocel Plus and Orthofix’s Trinity Evolution, compete with other bone void fills, harvesting bone from the iliac crest and even bone morphogenic products (BMP’s), such as Medtronic’s InFuse and are obtained from the bone marrow of donors. An FDA medical device approval is not required because the products are considered donated tissue. Therefore, says Denhoy, efficacy has not been proven and hard data is hard to come by.
Denhoy notes there are currently studies underway regarding the products’ effectiveness in promoting fusion, but none comparing the products to each other or competitive products.
Denhoy estimates that NuVasive will have sales of Osteocel Plus of $50 million in 2010, while Orthofix will reach sales of $38 million for the year. The combined sales are up 45% from sales in 2009.
Legal Journey
This lawsuit is a long, long way from seeing a jury. Patent attorneys we talked to tell us it could be up to five years before this actually goes to a trial, unless the parties settle out of court.
First, Orthofix will respond to the complaint and will likely ask for a dismissal on a number of grounds. Then the parties will undergo a long process of discovery and prepare for a Markman hearing.
A Markman hearing is a pretrial hearing in a U.S. District Court during which a judge examines evidence from all parties on the appropriate meanings of relevant key words used in a patent claim, when patent infringement is alleged by a plaintiff. It is also known as a “Claim Construction Hearing.”
At that point, the precise infringement claims made by NuVasive will be identified. NuVasive’s initial complaint alleges Orthofix directly infringes on the method claimed in one or more claims of the patent.
If a settlement is not reached at this point, there will be more motions and finally a trial.
Biological IP
In the end this case may be less about NuVasive and Orthofix and more about the nature of biological intellectual property. We’re familiar with a recent federal court decision that reportedly says one can’t patent nature. Discovering natural laws is different from describing methods to harness those laws for some purpose.
The United States District Court for the Southern District of New York addressed this issue a couple of months ago. On Monday, March 29, United States District Court Judge Robert W. Sweet invalidated seven patents related to the BRCA1 and BRCA2 genes, the mutations of which are associated with both breast and ovarian cancers.
Lawyers for the ACLU argued that genes are a product of nature and thus should not be subject to patenting, and that the patents would hinder scientific progress in the area of genetic technology. Judge Sweet agreed, stating that the patents were improperly granted because the patent holder did not invent or create the BRCA1 and BRCA2 genes. Myriad Genetics, the patent holder, plans to appeal.
We don’t know yet if this case will address the issues of discovering what exists in nature or if the case rests on methods used to get stem cells from point A to point B.
Either way, the field of orthopedics may be about to learn a lot about the right to own stem cell technologies for promoting bone growth.
