Myriad Falls After Losing Bid to Block Competing Tests

Myriad Genetics Inc. (MYGN), the biggest maker of tests for hereditary risks of breast and ovarian cancer, fell the most since December after losing a court bid to block competition while a patent-infringement case is pending.

Myriad is unlikely to win lawsuits claiming tests sold by Ambry Genetics Corp. violate its patents and hurt business, U.S. District Judge Robert Shelby in Salt Lake City said yesterday in a decision. There are “substantial questions” as to whether Myriad’s ideas cover something eligible for a patent, he said.

The tests check genes known as BRCA to determine if there is a hereditary risk of developing the diseases. Public awareness of the tests has grown since Academy Award-winning actress Angelina Jolie said had a double mastectomy last year after Myriad’s product showed she had a mutation linked to the cancer that killed her mother at 56. Myriad got about 75 percent of its revenue from the tests in its last fiscal year.

Since Myriad won’t be able to block the companies from entering the market, “we expect competitive pressures to intensify,” Brandon Couillard, an analyst with Jefferies LLC, said in a note to clients, calling the ruling “severe” in its analysis of the patents.

Myriad dropped 8.3 percent to $34.60 at 4 p.m. New York time, the biggest drop since Dec. 30. The shares have risen 65 percent this year.

“We’re still in the early stages of the litigation and a trial date has not been set, but we are confident the patents at issue in this case are valid and enforceable and we will prevail,” said Ron Rogers, a spokesman for Salt Lake City-based Myriad.

‘Exclusive Rights’

Ambry, based in Aliso Viejo, California, has accused Myriad of antitrust violations, claiming it filed the patent suits to prevent competition.

“The practical result of Myriad’s patents has been to hinder or halt follow-up research, data sharing, patient testing, and the creation of additional and more affordable technologies for BRCA1 and BRCA2 testing,” Shelby said in his 106-page decision, which didn’t address the antitrust claims.

Myriad’s policy of keeping its database private “distorts rather than serves the patent system’s goal of public disclosure in exchange for exclusive rights,” the judge said.

Rogers said that more than 10,000 research articles have been written based on the information Myriad disclosed in its patents, and companies should be rewarded for taking on the risk of spending millions in research.

Supreme Court

“Myriad did not block or hinder research; in fact the opposite is true,” he said in a telephone interview. “A strong patent system made that all possible.”

Shelby wrote that, while it was clear Myriad was harmed by the competition, the patent claims were the type that the Supreme Court said weren’t eligible for legal protection. One high court decision was Myriad’s case involving isolated DNA and the second put limits on patents for diagnostic tests.

“The claims encompassed laws of nature and the court agreed with us that, given their breadth, they constituted unpatentable subject matter,” said William Gaede, a lawyer at McDermott, Will & Emery, who represents Ambry.

He said the court didn’t address Ambry’s arguments that the patents were invalid on other grounds, and that Ambry didn’t infringe them.

Quest Diagnostics

Ambry began offering tests after the June 13 U.S. Supreme Court ruling invalidating some of Myriad’s patents on genes linked to the diseases. Myriad’s lawsuits contend infringement of other patent claims that weren’t part of that high-court ruling.

Other companies, including Quest Diagnostics Inc. (DGX), also have entered the market and are challenging the Myriad patents, with all the disputes combined for pre-trial purposes. Gene by Gene Ltd. reached an agreement last month that included it stopping sales of its test.

Myriad wanted the competing products halted until a court decision on its patent-infringement claims, which could take a year or more. Shelby had to consider Myriad’s chance of winning the case and which side would experience the greater harm.

The other owners of the patents -- the University of Utah, the University of Pennsylvania, the Hospital for Sick Children in Toronto and Endorecherche Inc. -- joined in the suits.

$4,040 Test

Myriad and its partners said the order blocking tests by Ambry were necessary because the competing products have prompted insurance companies to pressure Myriad to lower its prices. Ambry sells its product for $2,280, compared with $4,040 for Myriad’s test, called BRACAnalysis, Myriad has said.

The Centers for Medicare and Medicaid Services has proposed cutting reimbursements for the diagnostic service by almost half, to $1,438 from $2,700. In a Dec. 31 court filing, Myriad said the decision, based on the multiple testing companies “further demonstrates that Myriad is suffering irreparable harm” from the lower-priced products.

The Ambry case is University of Utah Research Foundation v. Ambry Genetics, 13cv640, and the combined case is In Re: BRCA1 and BRCA2-based Hereditary Cancer Test Patent Litigation, 14md2510, both U.S. District Court for the District of Utah (Salt Lake City).

To contact the reporter on this story: Susan Decker in Washington at sdecker1@bloomberg.net

To contact the editors responsible for this story: Bernard Kohn at bkohn2@bloomberg.net Elizabeth Wasserman, Romaine Bostick

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