Valorem Research's Lionel Hutz talks LQDA v. UTHR hearing at the Federal Circuit + argument review

Episode Summary

Executive Summary: This episode analyzes the federal circuit oral arguments in the Liquidia vs. United Therapeutics patent case, focusing on the '793 patent. The hosts discuss the hearing, the key arguments made by each side, the judges' reactions, and potential outcomes. They assess that Liquidia has an 80-85% chance of winning (affirmance), with lower odds for a remand or reversal. The final decision will determine if Liquidia can commercialize its pulmonary hypertension drug, Mutrepia, in 2024.

Main Topics: Federal Circuit Hearing Overview (Priority: 5/5): Analysis of the oral arguments at the federal circuit for the Liquidia vs. United Therapeutics patent case, focusing on the '793 patent and its implications for the drug Mutrepia. Key Arguments from United Therapeutics (UTHR) (Priority: 5/5): UTHR focused on two main arguments: whether the prior art references (Voswinkle, Jesk, and Jaha) were publicly disclosed (1B), and whether those references disclosed the relevant dosing information (2B). Judges' Reactions and Body Language (Priority: 4/5): The three-judge panel (Prost, Laurie, Reyna) had distinct reactions. Judge Reyna was favorable to UTHR, Judge Lori favorable to Liquidia, and Judge Prost silent but likely a swing vote. Body language indicated UTHR's counsel was overly aggressive. Legal Standards and Evidence (Priority: 4/5): Discussion of substantial evidence standard, the role of circumstantial evidence in proving prior art dissemination, and the tension in case law regarding declarations versus other evidence. Potential Outcomes and Odds (Priority: 4/5): Lionel estimates an 80-85% chance of affirmance for Liquidia, ~10% chance of remand, and <=10% chance of reversal. The base rate for PTAB invalidity rulings is around 85% affirmance. Future Implications for Liquidia (Priority: 4/5): If affirmed, Liquidia can commercialize Mutrepia in 2024. If reversed, an injunction and regulatory stay prevent commercialization until 2027. A remand could cause a 1-2 year delay.

Key Arguments: United Therapeutics argued that prior art references Jesk and JAHA were not publicly accessible because Liquidia failed to produce a declarant who attended the 2004 conference (Argument 1B). United Therapeutics argued that the prior art references did not disclose the specific dosage claimed in the '793 patent, making the invention non-obvious (Argument 2B). Liquidia countered that circumstantial evidence (library records, conference details) is sufficient to prove public dissemination per case law, and that a declarant is not necessary. Liquidia argued that the prior art disclosures in the abstract books rendered the '793 patent obvious, as they contained the relevant dosing information. Judge Reyna questioned the lack of a declarant, calling it a 'tension' in the case law, while Judge Lori focused on whether UTHR was trying to 'double patent' with incremental changes. The host and analyst noted that UTHR's counsel was overly aggressive, with Judge Laurie telling him to 'stop shouting.' This may have harmed their credibility.

Data Points: Affirmance Probability: 80-85% - Lionel's estimate for Liquidia winning the appeal, in line with historical base rates for PTAB invalidity rulings. Remand Probability: ~10% - Estimated chance the federal circuit sends the case back to the PTAB for clarification on whether the abstracts were 'abstract books.' Reversal Probability: <=10% - Estimated chance United Therapeutics wins, reversing the PTAB ruling and preventing Liquidia from commercializing. Conference Size: 20,000 attendees - The 2004 American Heart Association conference where the prior art was presented, highlighting the difficulty of finding a declarant 20 years later. Patent Expiry: 2027 - The '793 patent's remaining life if Liquidia loses, preventing commercialization of Mutrepia until then. Oral Argument Duration: 15 minutes per side - The strict time limit for each side in the federal circuit hearing.

Pivotal Quotes: "Look, I'm not trying to... I've kind of gone through the full analysis on what I think of the quality of the arguments. So I guess, you know, the relevant discussion today is the quality of the oral advocacy. Tell you that between the two sides, I thought Liquidia had a much more coherent kind of level presentation." — Lionel Hutz: Assessing the oral advocacy quality, noting UTHR's counsel was aggressive and less coherent. "I think it's this 2B argument of dosing. I think it's really unlikely. I mean, my odds, I think I find it less likely that we get a reversal and more likely that we get a remand approximately in kind of commensurate scope." — Lionel Hutz: Explaining that a reversal would most likely come on the dosing argument, but a remand is more probable. "A dissent at the federal circuit is kind of this like hot topic, contentious issue. So dissents are allowed. You wouldn't see a dissent in like a rule 36 because a rule 36 would just be, you know, everyone and saying, yep, we agree, rubber stamp it, move on." — Lionel Hutz: Discussing the likelihood of dissents and the advisory nature of Rule 36 affirmances.

Implications: The ruling will determine whether Liquidia can launch Mutrepia in 2024 or face a 3-year delay. An affirmance signals high confidence in PTAB's invalidity finding, impacting broader patent litigation strategies. Investors should monitor the decision closely for binary outcomes.