UPDATED: In mixed decision, Supreme Court throws up a barrier around gene patents
In a mixed decision, the Supreme Court has ruled that companies can not obtain a patent on human genes. But companies like Myriad Genetics ($MYGN) will be able to nail down patent protection on complementary gene work, or cDNA, which requires human tinkering.
"A naturally occurring DNA segment is a product of nature and not patent eligible merely because it has been isolated, but cDNA is patent eligible because it is not naturally occurring," wrote Justice Clarence Thomas in the unanimous decision.
That decision marks a partial win for critics of Myriad who claimed that their patents on the BRCA1 and BRCA2 genes related to breast and ovarian cancer was blocking research and the development of more personalized therapies. Many in the biotech industry, though, had argued furiously that the absence of patents could derail the trend toward more personalized therapies.
The news immediately sparked a 10% rise in shares for Myriad, which was afraid that the Supreme Court would rule that all genetic material couldn't be patented. But the ruling throws out patents Myriad held related to the genes identified in its tests for breast and ovarian cancer, according to the AP. And it reverses a number of other patents issued over the past 30 years.
Myriad had discovered the precise sequence of the genes in question and sought a patent for the genes to protect its diagnostic test, which has been gaining widespread public attention. But they didn't alter the genes in any way, leading the Supreme Court to conclude that it shouldn't have a patent.
Despite the shrill alarms that have been sounded over the case, there's widespread feeling that the ruling itself won't have a dramatic impact on biotechnology. Myriad has a well established position in the market at this point, and has been improving the quality of its test. And just because others can use the same sequences without fear of violating patents, it's unlikely that there will be a rush to offer competing tests given the expense and technology required to develop them.
"SCOTUS ruling of cDNA being patent-eligible is in line with our base case assumption that cDNA claims will be upheld and at least in line or better than consensus and certainly the bear case, which was fear that all patents would get overturned and the stock could have big pullback," wrote RBC's Michael Yee. "We have repeatedly stated this is a win fundamentally for MYGN given 1) barriers to entry for competitive commercial BRCA-testing (accuracy, speed of processing), and 2) MYGN's launch of pan-cancer test (25 genes for 6 cancers) this year to convert BRAC Analysis revs to a newer, better test now.
Myriad says it is time now to move on.
"The Supreme Court has ruled, vacating some patent claims and upholding others. But we've always said the debate was about more than patent claims," Myriad said in a statement. "It was about human health, and innovation to make sure that cancer tests are accessible and affordable to women who need them. It's time now to move on … We also want to reach out to patient advocates and the research community. The battle that really matters isn't in court; it's the one against cancer."
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