Facts

Neurim Pharmaceuticals (1991) Ltd applied for interim injunction relief against Teva UK Ltd in relation to the alleged infringement of its second medical use Divisional European Patent designating the UK for “Circadin”, which is a prolonged release melatonin product indicated for the short-term treatment of primary insomnia characterised by poor-quality sleep in patients aged 55 or over (the Divisional). Circadin was commercialised in the UK by Flynn Pharma Ltd, the second claimant.

Neurim sought relief to stop Teva from supplying or selling any generic version of Neurim’s Circadin product. The Divisional is due to expire on 12 August 2022.

Background

The background to the application is complex and involves EPO proceedings and three UK actions.

Currently, there are three melatonin products on the market in the UK: Circadin, Melatonin Mylan and Teva Melatonin.

Melatonin Mylan was launched by Generics (UK) Ltd t/a Mylan in the UK in September 2020, by which time it was already being sued for infringement by Neurim in the “First Mylan” action under the parent patent owned by Neurim (the Parent Patent), which contained essentially the same principal claim as in the Divisional.

At trial in the First Mylan action, the High Court found Neurim’s Parent Patent to be valid and infringed. Shortly after judgment was handed down, the Parent Patent was revoked in concurrent EPO proceedings when Neurim withdrew its appeal to the Opposition Division’s decision that the Parent Patent was invalid.

By this time, the Divisional was in prosecution. Grant was obtained on 30 June 2021. Neurim commenced the “Second Mylan” action claiming infringement of the Divisional on the same day.

In a series of judgments, the High Court found that the Divisional was valid and had been infringed by Mylan. It granted Neurim an interim injunction to restrain Mylan from infringing the Divisional. Mylan appealed.

The Court of Appeal granted a stay of the injunction pending judgment on the appeal which was dismissed on 27 May 2022 and on which we will report in a later newsletter]..

The third UK action is this one, which Neurim commenced against Teva on 5 November 2021. Unusually, Neurim did not apply for interim relief until March 2022.

Decision

Mr Justice Mellor set out the applicable principles as described in American Cyanamid Co v Ethicon Ltd [1975] AC 396, as follows:

1. Is there a serious issue to be tried?
2. Are damages an adequate remedy for the claimant?
3. If not, are damages under the cross undertaking an adequate remedy for the defendant?
4. If damages are not adequate for either side, where does the balance of the risk of injustice lie?
5. Where other factors appear to be evenly balanced, it is a counsel of prudence to take such measures as are calculated to preserve the status quo.

Both parties accepted that there was a serious issue to be tried, i.e., infringement and validity.

As for the adequacy of damages, Mellor J noted that he had to first consider the position in the four months between now and expiry of the Divisional, and secondly, the position post-expiry.

In relation to the first period, Mellor J found that the loss suffered by Neurim during this time could be ascertained with a reasonably high degree of accuracy as Neurim would have detailed forecasts of its expected sales revenues from September 2021 to expiry of the Divisional on the assumption that no generic product was on the market over that period. Further, there would also be market data showing the number of packs of melatonin sold each month, i.e., from Flynn, in the absence of generic competition. The court would also have the data as to sales volumes and prices from Neurim, Mylan and Teva (and any other generic that entered the market). Accordingly, although there might be a dispute as to which party was responsible for Neurim’s losses, Neurim could, in theory, be compensated for its losses.

Neurim had acknowledged that Claim 1 of the Patent was relatively narrow and that not every sale by Teva of its generic product would constitute or entail a use within Claim 1. However, Neurim said that without Neurim’s marketing authorisation (which referred, effectively, to the use covered by Claim 1), Teva would not be on the market at all. In other words, it said that Teva was piggybacking on Neurim’s marketing authorisation and that Teva’s sales outside Claim 1 were also causing Neurim losses for which it might not be able to recover damages.

Mellor J acknowledged that determining sales volumes falling in and outside Claim 1 might be difficult, but he said that the court would decide on the evidence before it. At this point in time, the uncertainty inherent in the exercise worked both ways, making its effect neutral.

Further, Mellor J said, his whole analysis was unaffected by whether a downward price spiral occurred between now and trial or not. If it happened then Neurim’s losses would be greater and the profits made by the generics would be less, but this did not alter the fact that Neurim’s losses could be calculated with a reasonably high degree of accuracy.

As for whether a downward price spiral would happen between now and expiry of the Divisional, Mellor J acknowledged the general view that a downward price spiral occurs once there are two or more generics on the market. However, he said, the current situation was unusual.

Mylan’s appeal was due to be heard in one month’s time and, although there was no evidence from Mylan in these proceedings, it seemed unlikely that it would want to engage in a downward price spiral in this intervening period. It was only likely that it would do so if forced to by Teva and Teva had assured him that it had no such intention. Considering the different positions Teva might find itself in depending on the outcome of all the litigation, Mellor J decided that, on balance, the evidence pointed to Teva continuing on the market (unless restrained) with no wish to engage in a downward price spiral.

As for the second period, Mellor J acknowledged that the position was more uncertain, as Neurim would argue that if the generics had not entered the market pre-expiry, it could have sustained its prices for longer following expiry, and the generics would argue that the price would have rapidly reduced. Given this uncertainty and considering that he might be wrong on the downward price spiral point, Mellor J decided that damages would not be an adequate remedy for Neurim in the post-expiry period.

Considering whether damages would be an adequate remedy for Teva if an injunction was granted but the Divisional was subsequently revoked, Mellor J agreed with Teva that, as shown in the evidence, its sales and prices had fluctuated, which would make it impossible to predict the volume and prices of the sales that Teva would otherwise have made during the remaining life of the Divisional.

Mellor J also accepted Teva’s argument that an injunction would deprive it of the foothold it had already established in the generic market, such that it would make it much harder for it to regain a commensurate market share after expiry of the Divisional. Overall, he concluded that damages would not be an adequate remedy for Teva. The uncertainties in trying to ascertain its damages would be considerable, he said.

As for the post-expiry period, Mellor J considered that it would be more difficult to compensate Teva adequately (on the assumption that it was injuncted but should not have been) than Neurim (on the assumption that no injunction was granted but Neurim was ultimately successful). The uncertainties were much greater in respect of Teva’s position than that of Neurim.

As for the balance of the risk of injustice and the status quo, Mellor J found that if damages had been an inadequate remedy to an equal extent on each side, the balance would have been neutral. However, since damages would be considerably less adequate for Teva, the balance came down in Teva’s favour.

In any event, the relevant status quo was that which existed at the date of Neurim’s application for interim relief, which was March 2022, by which time Teva had been on the market in the UK for four months.

Accordingly, Mellor J refused Neurim’s application for interim relief, finding that:

1. damages would be an adequate remedy for Neurim pre-expiry, but not post-expiry;
2. damages would not be an adequate remedy for Teva, either pre- or post-expiry;
3. the balance of the risk of injustice came down in favour of Teva, as calculating Neurim’s damages post-expiry was subject to fewer uncertainties than for Teva; and
4. in any event, maintaining the status quo left Teva on the market.

(Neurim Pharmaceuticals (1991) Ltd v Teva UK Ltd [2022] EWHC 954 (Pat) (26 April 2022) — to read the judgment in full, click here).