Patent mistake could waste $560m investment by Cubist

The US company wants to register an Israeli patent for its skin infection treatment but missed the deadline.

US company Cubist Pharmaceuticals (Nasdaq: CBST) holds a patent for Cubicin, a drug for treating skin infections, in which it claims to have invested $560 million. The company filed an appeal with the Tel Aviv District Court objecting to the Israel Patent Office’s decision not to extend the deadline for submitting a patent extension request. The patent is due to expire on October 8.

The appeal states that the appellant is the registered owner of patents. Cubist was founded in 1992, and has been listed on Nasdaq since 1996. The company lost $76 million on sales of $58 million in 2004.

Cubist alleges that because of a human error, it failed to file a request to extend its patent within the 60-day legal limit. In the first half of August 2005, a few days after becoming aware of the error, the company filed a request with the Patent Office for a postponement of the deadline for filing an extension of its patent, but the Patent Office rejected this request. The company’s appeal alleges that the expiration of its patent will cause it irreversible damage, as a result of its $560 million investment in development of the patent-protected preparation and manufacturing process.

If the appellant is not allowed to extend its patent, and generic companies begin production and marketing of a corresponding generic drug, the appellant will not be able to enjoy the results of its enormous investment.

The appellant alleges that the Patent Office’s decision severely damages the incentive for ethical drug companies to manufacture and develop new drugs and register patents in Israel for future marketing purposes.

According to the appellant, the Patent Office’s attitude is clearly designed to accommodate and reward generic companies, such as Teva Pharmaceutical Industries Ltd. (Nasdaq: TEVA; TASE: TEVA), whose entire purpose is to copy existing drugs. This attitude constitutes a burden on ethical drug companies, which have expanded the potential basket of health services all over the world.

The Patent Office has not yet filed a response.

Published by Globes [online] - www.globes.co.il - on September 25, 2005

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