On January 20th, Bristol-Myers Squibb (BMS) and Merck & Co. settled a year-long patent fight over Keytruda (pembrolizumab). BMS claimed that Merck & Co. had infringed BMS and Ono’s patents related to the use of program cell death 1 (PD-1) antibodies to treat cancer in the US, Europe, Australia, and Japan. As a part of the settlement, Merck & Co. agreed to pay BMS and Ono an initial payment of $625m, and royalties of 6.5% of Keytruda’s global sales from 2017 to 2023, and 2.5% from 2024 through 2026. The royalties will be shared between BMS and Ono at a 75:25 ratio. GlobalData considers this patent settlement case to have set BMS in a “heads I win; tails you lose” situation.

BMS can sit back and enjoy the stream of royalty revenue coming from Keytruda, while Merck & Co. pays the bill for the drug’s aggressive clinical development program.

BMS and Ono’s Opdivo (nivolumab) has been in close competition with Keytruda to become the first available PD-1 drug in various cancer indications. Opdivo had a clear win against Keytruda in 2015 and the first half of 2016; however, it has seen major setbacks recently as it flopped in a first-line trial for non-small cell lung cancer (NSCLC), and BMS has just given up the accelerated approval pathway for the Opdivo + Yervoy (ipilimumab) combination in NSCLC. In contrast, Keytruda has been speedily expanding into the first-line setting in NSCLC. Nevertheless, BMS can now sit back and enjoy the stream of royalty revenue coming from Keytruda, while Merck & Co. pays the bill for the drug’s aggressive clinical development program.

GlobalData expects more patent litigations to take place, as more PD-1-targeting drugs are expected to launch in the next couple of years. So far, Roche’s Tecentriq (atezolizumab) has not received any complaints, probably because it is hitting another target in the pathway, the program death ligand 1 (PD-L1). However, as more “me too” PD-1/PD-L1 drugs get on the market, we will soon see big pharma companies trying to throw their competitors in costly legal battles.

Anyway, more patent litigations, better for BMS.

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