How did Axsome Therapeutics use its patents to squeeze 14 more years of monopoly pricing for Auvelity?
Zachary Silbersher
Axsome Therapeutics stock price rallied this week after the announcement that it had settled its patent lawsuit against Teva. Sell-side analysts have raised the stock target now that Auvelity’s generic threat has been eliminated. Under the terms of the settlement, Teva will not enter the market until 2038 or 2039. Even if other generics emerge, Axsome is likely hampered from offering an earlier date. This could make Axsome an attractive acquisition target, similar to how Intra-Cellular was recently acquired shortly after settling with a generic for its drug, Capylta. How did Axsome accomplish such a favorable settlement? What was Axsome’s patent strategy for Auvelity.
Auvelity is protected by a massive tranche of patents. The Orange Book lists 122 patents covering Auvelity. As far as small-molecule drugs go, that is comparatively a sizeable number of patents to be listed in the Orange Book for a single drug.
A closer look at the patents is revealing. Roughly one-hundred of the listed patents all expire on the same date, November 5, 2034. Most of these patents appear to grow out of the same specification or family of patents. The fact that all of the patents expire on the same exact date suggests that terminal disclaimers were filed in many of them. Indeed, a small sampling of these patents indicates on the first page that terminal disclaimers were filed: 9408815; 10064857; 10251879; 10874665; 10894047; 11213521; 11524008.
Terminal disclaimers are essentially an agreement by the patent applicant that the patent will expire no later than another referenced patent. Terminal disclaimers are typically filed after the Patent Office rejects a patent application for double-patenting. Double-patenting is a knotty, technical patent doctrine that comes in a few different forms (statutory and obviousness-type). Yet, when the Patent Office rejects a pending patent application for double-patenting, the Office is essentially telling the applicant that they are attempting to patent the same, or substantially similar, invention twice. To overcome that rejection, the applicant has the option to file a terminal disclaimer. Doing so avoids the rejection by agreeing that both patents will expire at the same time, and therefore, the patent applicant will not extra years of monopoly protection for something already patented.
To put this in another way, the fact that Axsome has 100 patents, and many of them are covered by terminal disclaimers, suggests that many of these patents cover very similar, and possibly, indistinguishable inventions. That, in turn, speaks indirectly to an aspect of this portfolio. Although the portfolio of patents is large, it is not necessarily diverse. A successful invalidity challenge to one patent could read-through and impact the validity of scores of other patents in the portfolio.
In 2023, Axsome sued Teva under the Hatch-Waxman Act after Teva filed an ANDA for Auvelity. Interestingly, Axsome did not assert any of its patents that expire in 2034. Rather, it asserted approximately 13 patents, which are listed below. These patents expire as early as 2040 and as late as 2043. Axsome appears to have used its Auvelity patents that are expire the farthest out in the future in its patent case against Teva.
That strategy appears to have worked. Teva settled for an entry date of 2038 or 2039, depending on the circumstances. Given that Auvelity’s FDA-approved exclusivity is scheduled to expire in August 2025, Axsome leveraged its patent portfolio for Auvelity to extend the monopoly life of the drug by close 14 years. Investors rewarded the company’s stockwith a 20% surge earlier this week. While the asserted patents all expire in 2040 or after, Axsome clearly agreed to discount some years in its settlement in exchange for dropping its suit against Teva. Correspondingly, Teva appears to have made a business decision that agreeing to an entry date in 2038/2039 is preferable to deploying the resources and time required to litigate through all of Axsome’s asserted patents.
Auvelity itself is the combination of two drugs, bupropion and dextromethorphan. Neither drug is new. Bupropion is sold under the brand name Wellbutrin, among others, and dextromethorphan is an existing cough suppressant. Most of the patents are generally directed to the same thing: combining bupropion and dextromethorphan at different dosages, for different periods of time, often times to treat certain forms of depression.
The patent application files at the Patent Office for the patents are revealing. For instance, for U.S. Patent No. 10,780,064, the patent examiner provided reasons for allowance upon granting this patent. Those reasons indicate that combining dextromethorphan and bupropion was already in the prior art. Indeed, a study from 2005, long before the filing date of any of Axsome’s patents, discloses a combination of both drugs. Rather, for the ‘064 patent, the examiner found that it was not obvious “to administer 105mg of bupropion hydrochloride and 45 mg of dextromethorphan at a frequency of once a day for the first 3 days and twice a day thereafter for at least 11 days.” (U.S. Patent Application No. 16/853,062, Notice of Allowance at 2, Oct. 1, 2020). The examiner acknowledged that these specific dosages were taught in the prior art, but nevertheless found, “there is nothing in the art that would guide a skilled practitioner to select the very specific instantly claimed amounts from a large genus in the art.” The examiner allowed the following patents asserted against Teva for the same reason: 10,925,842; 10,940,124; 10,966,942.
In other words, the “invention” behind many of Auvelity’s patents is not the drugs themselves, which both previously existed in the market. Nor is it the combination of those two drugs, which also already taught in the art. But instead, the point of novelty boils down to specific dosages for specific days. That type of narrow distinction over the prior art may not be immune from an invalidity challenge.
Axsome’s patent strategy was not focused only piling up as many patents as possible. It also appears to have focused on patenting as many detailed features of the label for Auvelity. This is not without reason. Generics are obliged to essentially copy of the label of the brand pharmaceutical. By doing so, they fall prey to the allegation that they are inducing doctors to prescribe the drug in accordance with the label’s instructions. Accordingly, when a patent reads directly on the label, that almost ensures that the generic will necessarily infringe that patent. That means, the only way for the generic to avoid infringement is to challenge the patent’s validity.
Axsome’s patents are examples of this. The ‘636 patent is directed to a “A method of treating major depressive disorder in a human patient who is consuming alcohol,” which includes administering buproprion and dextromethorphan, and “reducing but not discontinuing consumption of alcohol by the human patient.” Auvelity’s label provides that one contraindication is “Abrupt discontinuation of alcohol.” Similarly, the ‘797 patent is directed to “A method of treating major depressive disorder in a human patient who has moderate hepatic impairment . . . defined as Child-Pugh B” with the same dosage otherwise indicated in Auvelity’s label. The label states, “No dose adjustment of AUVELITY is recommended in patients with mild (Child-Pugh A) or moderate hepatic impairment (Child-Pugh B).”
In sum, many of Axsome’s patents for Auvelity cover generally the same thing, combining buproprion and dextromethorphan to treat depression at the dosages in the label. They each recite minor tweaks that collectively appear to read upon different discrete aspects of Auvelity’s label. The drugs themselves are not novel, and neither is the idea of combining them.
All together, this collectively suggests that Axsome has over 100 patents that are all minor tweaks on the same idea—combining two existing drugs to treat depression. Based on the examiner’s reasons for allowance, the distinctions over the prior art and the understanding of a person of ordinary skill are potentially slight. That suggests that each patent, standing alone, could be invalidated if subject to an invalidity challenge by a generic.
But the patents are not standing alone. They are listed as a massive thicket, and they become a different beast altogether when more than 100 of them are listed in the Orange Book. The time, resources and costs required to challenge 120 odd patents is not only non-negligible, it could be cost-prohibitive, and undermine a generic’s business case for the drug. Axsome asserted only 13 patents against Teva, but challenging just those patents would have been a significant undertaking that could have taken three to five years.
Worse, even if Teva was successful, Axsome had more than 100 additional patents that it could have theoretically dipped into to assert against Teva, thereby tying it up in court for many more years. This possibility most likely colored Teva’s business decision to settle with Axsome. And given that Axsome has a wall of 100 patents expiring in 2034, that most likely set a hard floor on Axsome’s settlement position—namely, it was never going to settle for anything soon than an entry date of 2034.
More generics may emerge with ANDAs for Auvelity. They are also certain to face a lawsuit from Axsome threatening a mountain of patents. Given its settlement with Teva, Axsome is possibly contractually prohibited from offering any other generics an earlier entry date without offering the same entry date to Teva. That would make it nearly impossible for Axsome to agree to an earlier entry date for any other generic, which means that for another generic to earn an earlier date would require litigating through all of Axsome’s patents. The business case for any generic to do so is likely difficult to justify.
For now, Axsome’s patent strategy for Auvelity appears to have worked, and it may justify an acquisition of the company sometime soon. Patent thickets, however, have met antitrust allegations before, not with success. Whether the law changes its view of patent thickets in the years to come remains to be seen.