Allergan (AGN) is known as one of the more litigious drug companies out there. It has carved out a reputation for being highly-acquisitive and for doggedly protecting its drug patents. The company may have broken the mold after it sold its Restasis patents to the St. Regis Mohawks; in my opinion, Allergan was attempting to “rent” the Mohawks’ sovereign immunity in order to protect Restasis patents from an inter partes review (“IPR”) from Mylan (MYL).
The Mohawks received an upfront fee of over $13 million and annual royalties of $15 million starting in 2018. The odd arrangement made it appear as if Allergan was actually paying the Mohawks to take the patents off its hands. Why would Allergan (1) transfer patents for a product generating run-rate revenue of over $1.5 billion and (2) pay for the privilege to do so. Inherently, the arrangement only made sense if it could use the Mohawks’ sovereign immunity as an “insurance wrapper” to protects the patents from generic competition.
When Judge William Bryson invalidated the patents in October 2017 he raised serious concerns about the Mohawk deal. In February the Patent Trial And Appeal Board (“PTAB”) of the U.S. Trademark Office ruled Allergan could not use the Mohawks’ sovereign immunity to thwart an IPR for Restasis. The company and Mohawks later appealed the decision. During oral arguments for the appeal the judge asked “the $64,000 question,” for which AGN’s legal counsel had no cogent answer. According the Shocking The Street, an investment service the Shock Exchange runs in conjunction with Seeking Alpha, the “$64,000 question” could kill Allergan’s Restasis IPR appeal and crush the stock. Read more: