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Seagen loses arbitration case to Daiichi Sankyo over cancer drug technology

An arbitrator has ruled against Seagen in a legal dispute between the biotechnology company and Daiichi Sankyo over ownership of technology used in cancer medicines developed by the Japanese drugmaker.

The decision, announced Friday, stops an attempt by Seagen to collect royalties on sale of the medicines, a right that could potentially be worth hundreds of millions of dollars to Seagen over time.

“While we are disappointed with the arbitration decision, it was important for us to pursue this legal action,” Seagen interim CEO Roger Dansey said in a statement, adding the ruling “does not impact our existing business.”

Still, the loss is a blow to Seagen, which had been seeking to claim a piece of the future revenue from Daiichi Sankyo’s drug Enhertu as well as several other experimental medicines. It also lowers the company’s value at a time when Merck & Co. is reportedly nearing a potential buyout.

The dispute between the two companies stems from a 2008 contract. Through that deal, the companies aimed to develop medicines known as antibody-drug conjugates, drugs which chemically link a targeting antibody to a tumor-killing toxin and are Seagen’s specialty. The alliance ended a few years later, but Daiichi Sankyo continued working on its own antibody-drug conjugates and came up with Enhertu, as well as a pipeline of other medicines.

Seagen has alleged in regulatory filings the chemical “linker” used in Enhertu and other medicines are “improvements” to technology Daiichi Sankyo licensed but Seagen owns. The company sought damages, a declaration that it owns the intellectual property and a running royalty stream. Seagen recently won a $42 million judgment in a separate patent infringement suit against Daiichi Sankyo.

A victory in the arbitration case, however, could have been much more lucrative. Enhertu, a fast-rising breast cancer treatment that on Friday was approved for lung cancer, is expected by analysts to generate $6 billion in annual revenue by 2026. The other medicines have also shown promise in early clinical tests against certain lung and breast cancers as well as solid tumors. In June, analysts at Stifel estimated a 5% royalty stream on these drugs would be worth about $2.5 billion.

However, the arbitrator cited “statute of limitations and disagreement with Seagen on the interpretation of the contract” in ruling in Daiichi’s favor, Seagen said.

“We are extremely pleased that, based on the facts of this matter, the arbitrator recognized that Daiichi Sankyo retains ownership of all patents at issue in the arbitration,” the Japanese drugmaker said in a statement emailed to BioPharma Dive. “Daiichi Sankyo is proud of our legacy and strength in innovative science and technology and remains committed to bringing our [antibody-drug conjugates] to patients who need new standards of care in cancer treatment.”

Seagen shares dipped about 2% on Friday trading but remain near their highs this year amid anticipation that Merck will soon pull the trigger on a buyout. The Wall Street Journal has reported that a deal could be sealed following a decision on the arbitration case, as well as results from a bladder cancer trial the company reported last month.