crackedtooth schreef:
Insmed from Unterburg
Insmed (INSM5,6,7,8,9 $1.54) Buy
Tercica, Inc. (TRCA5,8 $5.27) Under Perform
Court Issues Markman Ruling – Net Neutral for Both Sides; Looking Ahead to the
Trial
· It was announced today that the U.S. District Court for the Northern
District of California issued the Markman rulings on summary judgment and claim
construction in the on-going patent litigation between Insmed and Tercica.
Through these rulings, the Judge has laid out the definitions of the terms and
the parameters of the patents in the upcoming trial.
· The Court ruled to interpret the claims of the 414 patent (the
manufacturing of IGF-1) broadly during the trial. It has stated should the 414
patent be read interpreted as written, Insmed would be infringing on the patent.
However, it has also stated that it is disputable as to whether or not the
original inventors can claim production of IGF-1 at the time the patent was
written.
· We believe this could be a key ruling as Insmed has always argued that
the 414 patent was built around a protein that was not bioactive at the time of
invention. Therefore, one could argue the patent is not completely enforceable.
We highlight that in the Markman Hearing, Judge Wilkins made several comments
to the same effect asking Tercica/Genentech why they did not write the patent
for a bioactive protein if they claim that they can indeed make it. We believe
come time for the trial in November, this issue of enablement will be key for
this particular patent.
· Additionally, the Court ruled that the 151 patent (method of use) is
not invalid. Consequently, Insmed will not be able to challenge the patent's
validity at the trial.
· Recall that we believe the 151 Patent could potentially provide a
moral victory for Insmed. In the original patent filing, a pivotal study was
referenced in which the effects of IGF-1 were observed in a hypoxic rat.
Although the first study was successful in showing results, the pivotal study
was repeated but failed. The company claims the USPTO was never informed of the
second study. Should Insmed win on this patent, there is the possibility of the
jury being negatively biased towards the other side as they continue to see the
rest of the case.
· There was no ruling on the 287 patent (composition of matter) as
neither Insmed nor Tercica filed any motions on it. We will await the trial for
a ruling on this patent.
· The judge presiding over the case returns from sabbatical on September
1. All pre-trial materials are due to be filed by September 27. Though the
trial is slated to start on November 5, we would not be surprised if the start
date were to slip. Once started however, the trial will last 2 weeks.
· We also point out that win, lose or draw, we are confident there will
be an appeals process. The next step would be to go to the Federal Circuit in
which decisions are made by a panel of judges. This process could take anywhere
from 12-18 months.
· Finally, long before the litigation comes to a final conclusion, we
believe Insmed will be established as a commercial organization. Even if Insmed
were to lose the current case, we suspect the judge is likely to stay any
royalties until the appeals process is complete or alternatively pay the royalty
into escrow.
· We believe the Markman ruling is a net neutral for both Tercica and
Insmed. We reiterate our Buy rating on INSM with a $3 PT and would take
advantage of this morning’s weakness to add to positions.