Most experts had expected the two companies to emerge from the court battle in a stalemate. In late 1989, a Federal district court in Boston ruled that both companies had valid patents and that each was infringing the claims of the other.
Late Tuesday, the Court of Appeals for the Federal Circuit ruled that Genetics Institute had not proved that it had isolated a protein with the biological characteristics described in the patent. As a result, the court said Genetics Institute's claims were invalid.
At the same time, the court upheld Amgen's patent as valid and dismissed allegations that it had committed a number of procedural violations at the Patent and Trademark Office. The court also rejected arguments by Genetics Institute that its researchers had actually been first to conceive the nature of the gene that creates erythropoietin. 'Grand Slam' for Amgen
"It's a grand slam home run for Amgen," said Harold Wegner, a Washington patent lawyer specializing in biotechnology issues. Those views were quickly echoed by stock analysts. "I don't hold out any hope for Genetics Institute bringing EPO to market in the U.S.," said Teena Lerner, a biotechnology analyst with Shearson Lehman Brothers. "It's quite a windfall for Amgen."
Mark Simon, an analyst at Robertson, Stephens & Company in San Francisco, added that the market for EPO should double within three or four years as the Food and Drug Administation approved use of EPO for wider populations of patients.
Genetics Institute has few legal avenues remaining. The Patent Office is still conducting a proceeding, known as an interference, to determine whether Amgen or Genetics Institute was actually first to conceive the method of isolating the EPO gene. But both the district and appellate courts have now agreed that Amgen was the true pioneer, and that decision is expected to weigh heavily on the Patent Office because it is evaluating precisely the same legal arguments. Can Seek Rehearing
Genetics Institute can also petition the appeals court for a rehearing and it can appeal to the Supreme Court. But neither avenue is given much chance of success by patent experts.
Amgen currently manufactures EPO for treatment of anemia in kidney patients on dialysis. In addition, it has licensed rights to Johnson & Johnson for all other uses within the United States. Outside the United States, Johnson & Johnson holds a license to market EPO for all purposes. The license is from a joint venture of Amgen and Kirin Brewery Ltd. of Japan.
Last month, the F.D.A. approved the use of Johnson & Johnson's EPO for treatment of anemia in AIDS patients. But the biggest market is expected to be in treating cancer patients undergoing chemotherapy.
"We have projected a $1 billion market for J.&J., but that number assumed the presence of competition," Ms. Lerner of Shearson said. "That number is certainly going to get bigger." Patents in Rivalry
The dispute stems from rival patents obtained by the two companies. Amgen's patent covers the human gene that produces EPO and a genetically engineered animal cell that serves as a kind of organic factory. Genetics Institute received a patent on the EPO molecule itself, which it isolated from human urine. Up until now, the courts have held that Genetics Institute's patent, though based on a natural molecule, covered EPO when made through gene splicing.
Analysts had predicted that Genetics Institute and its partners, the Chugai Pharmaceutical Company of Japan and the Upjohn Company of Kalamazoo, Mich., would garner at least 20 percent of the American market for EPO. In addition, Genetics Institute has built a plant in Massachusetts to produce EPO for the European market, in conjunction with Behringer Mannheim G.m.b.H. of Germany.
Analysts said that because of the legal situation, the decision was almost certain to delay Genetics Institute's ability to become profitable. The company lost $22 million in 1990, on sales of $40.4 million, but it had expected to turn profitable as soon as the F.D.A. approved the sale of its version of EPO in the United States.
Genetics Institute will probably be forced to cease domestic production, giving up manufacturing profits and contenting itself with sales royalties, analysts said. But they added that Genetics Institute could survive the reversal. The company has a comparatively strong balance sheet, with $68 million in cash as of last November, and can still obtain royalties from the sale of EPO in Japan and Europe. It also has a number of other drugs in various stages of development.
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