Merck patents on Hepatitis C treatment found valid in Gilead dispute

SAN JOSE : Merck & Co told a federal jury it was seeking more than $2 billion in damages from rival Gilead Sciences Inc after the jury upheld the validity of two Merck patents in a high-profile dispute over Gilead's blockbuster cure for hepatitis C.

After returning its verdict in favor of Merck on Tuesday, the jury in San Jose, California immediately began hearing evidence on how much Gilead owes Merck for infringing the patents.

Bruce Genderson, an attorney for Merck, said the company is seeking a 10 percent royalty on Gilead's U.S. sales of nearly $21 billion for 2014 and 2015.

Merck has also asked for a royalty of 10 percent going forward on Gilead's blockbuster hepatitis C drugs Sovaldi and Harvoni, which generated $19.2 billion in worldwide sales last year.

Following the verdict, Gilead shares fell $1.92 to $91.80 in after-hours trading. Merck rose 57 cents to $53.60.

In a statement, Gilead spokeswoman Michele Rest said, "Although we are disappointed by the jury’s verdict today, there are a number of remaining issues to be decided by the jury and the judge." She declined to comment on any potential appeal.

A spokeswoman for Merck said the verdict "accurately reflects the evidence in this case."

The trial, which began on March 7, came as pharmaceutical companies race to capture a slice of the lucrative market for the newest hepatitis C treatments, which can cure well over 90 percent of patients with the liver disease.

Insurers, politicians and patient groups have denounced the list prices of the drugs. Harvoni, at $1,125 per pill before discounts, costs $94,000 for a 12-week regimen. In January, the U.S. Food and Drug Administration approved Merck's Zepatier drug.

In 2013 Merck contacted Gilead saying the active ingredient in Gilead's drugs, sofosbuvir, infringed Merck's patents, according to court papers.

Foster City, California-based Gilead then asked the U.S. District Court for the Northern District of California in San Jose to declare the patents invalid, saying they do not clearly describe any disease fighting effects. Merck, based in Kenilworth, New Jersey, counter sued for infringement.

Gilead said in court filings that Merck played no role in sofosbuvir's discovery, but that when its breakthrough potential became clear, "Merck came knocking on Gilead’s door with its two patents in hand."

Last month, U.S. District Judge Beth Labson Freeman ruled that the sale and use of Gilead's drugs infringe Merck's patents.

Michael Yee, biotech analyst for RBC Capital Markets, said "while it does not sound good that Gilead could theoretically owe billions of dollars in financial damages...it is a small amount relative to Gilead's $127 billion market cap."

He said he expected Gilead to appeal.

The case is Gilead Sciences, Inc v Merck & Co, Inc, in the U.S. District Court for the Northern District of California, No. 13-cv-4057.

(Reporting by Andrew Chung in New York and Rory Carroll in San Jose; additional reporting by Bill Berkrot; Editing by Alexia Garamfalvi, Chris Reese and Diane Craft)