As the yearslong litigation over ownership of CRISPR gene editing continues, investors have forged ahead with funding the technology’s development by biopharma.
Just five days after securing FDA approval for the first-ever CRISPR-based therapy in December 2023, Vertex Pharmaceuticals paid $50 million upfront to Editas Medicine for a non-exclusive license for the technology. Editas—co-founded by Feng Zhang of the Broad Institute of MIT and Harvard, current holder of key CRISPR patents—will also be eligible for another $50 million and annual license fees of up to $40 million a year for the next 10 years. But later this year, pending the decision of a federal patent court, Editas and the Broad might have to share ownership of the gene editor.
CRISPR-Cas9 technology has been embroiled in legal battles for more than a decade. To date, the U.S. Patent and Trademark Office (USPTO) has maintained that the Broad Institute’s patent is valid, thwarting an interference claim by the University of California, the University of Vienna and Emmanuelle Charpentier, collectively known as the CVC group. Charpentier, along with the University of California, Berkeley’s Jennifer Doudna, was awarded the Nobel Prize in Chemistry in 2020 for developing the technology.
But the decision awarding the patent to the Broad Institute has once again been appealed, with a ruling expected from a federal court in the second half of this year, and patent attorneys following the case say there’s still a chance things could swing in favor of CVC.
University of Illinois College of Law patent expert Jacob Sherkow told BioSpace that a CVC win would not immediately or necessarily invalidate the Broad’s patents, but such an outcome would raise the possibility of invalidation “years off into the future.” Should that happen, companies seeking to work with CRISPR-Cas 9 technology might need to start negotiating deals with CVC instead.
Another win for the Broad would, on the other hand, preserve the status quo, with the Broad and Editas in the driver’s seat when it comes to demanding licenses, he added.
“I can imagine there’s several companies, including ours, who are gonna be curious to see what happens with the CRISPR field,” said Daniel Dornbusch, the CEO of Excision BioTherapeutics, which is developing CRISPR-based therapies.
Biopharma investors and companies don’t seem to be particularly worried, however. The global CRISPR-Cas9 gene-editing market size was estimated to be $2.56 billion in 2022 and is expected to grow to $14.65 billion by 2032, according to Precedence Research. So far, Vertex and CRISPR Therapeutics’ Casgevy, which treats sickle-cell disease and beta thalassemia, is the only approved CRISPR-based therapy. It carries a sticker price of $2.2 million, which is in line with other gene therapies on the market.
Does IP Matter?
In a 2022 report, BMO Capital Markets analyst Kostas Biliouris wrote that investors remain bullish on companies with strong IP portfolios, while companies using technologies affected by IP litigation have been under pressure. But Biliouris told BioSpace that the Vertex-Editas deal has changed things. This is because, he said, people saw the amount of money companies may need to pay for licensing if their drugs get approved, and it turned out to be immaterial compared to the potential market for the drug.
Analysts at William Blair said Vertex could start revealing Casgevy revenues as early the second quarter of 2024 and that the therapy has the potential to generate $84.4 million this year. (Vertex is set to announce its second quarter financial results on August 1.) “So investors do not even care about these $50 million [in licensing fees] because this is a multibillion dollar drug,” Biliouris said.
One company that Biliouris tracks is Intellia Therapeutics, a company co-founded by Doudna that is developing CRISPR-based therapies. He recently maintained a buy rating on the company’s stock, months after investors saw that the impact on Vertex following its deal with Editas was “minimal.”
“I can confirm that I get zero questions on Intellia’s IP. Zero. The only thing that can challenge Intellia is if the drugs are approved,” Biliouris said. He explained that he values know-how more than IP, and that what he’s looking for is efficacy, safety and potential uptake compared to existing therapies.
Building on his argument, Biliouris highlighted the market cap of Editas, the exclusive licensee of some of the Broad’s CRISPR patents, which currently is hovering around $400 million. “If the IP was valuable, Editas, which now is supposed to have all the IP for CRISPR-Cas9, could be valued much higher than where it’s valued now, which shows you that the market doesn’t really assign any value to IP,” Biliouris said. “And this is not only for CRISPR-Cas9.”
In contrast to Biliouris’ views, McDonnell Boehnen Hulbert & Berghoff LLP patent lawyer Kevin Noonan argued that nobody wants to invest in a company that’s heading for lawsuits “even though people recognize that lawsuits happen.” Noonan told BioSpace that if he were a venture capitalist, part of his due diligence would focus on licenses and patents.
If a company was working on CRISPR-Cas9 in eukaryotic cells, for example, Noonan said he “would almost absolutely insist that there was a Broad license.” The Broad’s patents specifically mention genome editing in eukaryotic cells, which include human cells. Noonan explained that the uncertainty around the outcome of the interference case wouldn’t affect this insistence. “If Broad loses, then I’m free of them. I don’t have to pay them anymore,” he said, as a company can’t enforce a license based on a patent which it doesn’t own.
‘Wait and See’ Not Necessarily a Bad Approach
Noonan explained that the closer products get to market, the more licenses are going to cost. However, Sherkow said he doesn’t think it is unreasonable for CRISPR therapy developers to wait for an outcome on the ongoing patent interference case.
“I think that’s not necessarily a bad strategy,” Sherkow said, adding that while there may have been discounts around 2015 on getting a license, he believes “the size of that discount is starting to shrink.”
According to Sherkow, getting a license right now amid the uncertainty only makes sense for companies that are flush with cash and are more risk-seeking. With the high interest rate market, that doesn’t apply to a lot of companies, he said.
Nevertheless, Dornbusch said he can imagine that if a company was close to commercialization in the next couple of years, there might be reason for them to seek a license from both the Broad and the CVC group.
Hypothetically, the terms of a license from CVC could potentially be better now than if they’re negotiated after any decisions come down. However, Sherkow argued this still might not be the smartest move.
“If you get that wrong, that is a lot of money you set on fire,” Sherkow said.
Noonan similarly said that the only overture to CVC he would recommend considering at the moment is to make a one-time payment for a covenant not to sue, which could then “be converted to a more conventional license should [CVC] prevail.”
Ultimately, regardless of whether CVC or the Broad wins the interference case, one would then need to watch for the outcome of separate interference cases between the prevailing party and ToolGen and Sigma Aldrich, both of which have also filed CRISPR-Cas9 patents.
“I do think that that the level of uncertainty, I would say, is in some ways unprecedented,” Noonan said.
Dornbusch noted that part of what will determine which CRISPR therapies make it to clinic will be where the associated IP rights are and how the patent disputes are resolved. “It’s a complex field,” Dornbusch told BioSpace.
In the past, the Broad has proposed the idea of creating a patent pool, which is when multiple patent owners jointly license their patents to third-parties. However, this is an outcome Sherkow doesn’t believe will materialize in the CRISPR space for a number of reasons, not least the small number of companies that would need to buy a CRISPR license. Noonan was more optimistic, arguing that “there’s always room for a patent pool” if the parties involved have overlapping patent rights.
Dornbusch noted that Excision was was told by lawyers that its own patented CRISPR technologies could end up in a patent pool. When he and his colleagues asked they lawyers if they knew anything that suggested a patent pool would be created, however, they were told, “‘No. We’re just guessing,’” Dornbusch said. “So I think there’s a lot of speculation around the world.”
It’s worth noting that not all CRISPR-related IP is affected by this legal uncertainty. Excision, for example, is using various CRISPR technologies to work on curative treatments for viral infectious diseases including HIV. However, it is also using newer CRISPR systems it licensed from the University of California, Berkeley. That IP covers alternative, non-Cas9 nucleases, which are not currently in dispute.
Which licenses Excision secures in the future will depend on which final constructs it selects for commercialization. Dornbusch says those are still in development. He also highlighted that there’s a whole new generation of gene editors coming along, including a “mini” CRISPR system from Stanford and a non-CRISPR editing system from the Arc Institute in California revealed last June.
“I think we’re looking at different options,” Dornbusch told BioSpace. “And fortunately, there are many options at this point.”
Clarification (July 22): Exicisions’ discussions with attorneys regarding the ongoing patent dispute pertained to IP the company already held, and the lawyers said a patent pool was one potential option. In addition, the company is usingvarious CRISPR technologies, not just CRISPR-Cas9, to tackle HIV.
