What the Gene Patent Case Means for Biotech Investors

11 | By Michael A. Robinson

The U.S. Supreme Court has just agreed to hear a landmark case that could have extreme money-making ramifications for biotech investors like us.

Next June, the nine justices are expected to settle – once and for all – whether companies can patent human genes in the United States.

The Patent and Trademark Office has been issuing patents on DNA for nearly 30 years, according to Bloomberg Businessweek. Roughly 4,000 of the 22,000 human genes now have some form of patent. But the American Civil Liberties Union has challenged the practice in Association for Molecular Pathology v. Myriad Genetics. Now that case will go to the highest court in the country.

At heart, the legal question sounds simple: Does Myriad Genetics Inc. (NasdaqGS:MYGN) have the right to patent two genes that signal whether a woman is at higher risk of getting cancer of the breasts or ovaries?

Myriad of course did not invent or create the breast cancer predisposition genes, referred to as BRCA genes. But it did create something called the BRACAnalysis test that looks for mutations on these genes. Those mutations are associated with much greater risks of breast and ovarian cancer. Usually firms cannot get that kind of market protection for something that is clearly a product of nature. But in this case, Myriad has developed a process of extracting a gene that makes the resulting molecule novel and chemically different from DNA that naturally occurs in our bodies.

And, after all, it took Myriad 17 years and $500 million to develop the test. Without barriers to entry, other firms could simply come in, take advantage of all that costly effort and sell a knockoff for less money.

Even if that weren’t illegal, it’s obviously unfair.

Let’s dig into the case and why it matters to you…

Indeed, protecting intellectual property of all sorts is embedded in the U.S. Constitution. And these protections have played a major role in keeping America at the forefront of nearly every major tech breakthrough for more than two centuries. Companies can rest assured that their investments and work will be protected.

That’s why this has proven to be a very tough question for the courts to answer. The Myriad case has bounced around the legal circuit, going in and out of appeals courts, for more than two years.

Clearly the courts have a vested interest in making sure that American firms continue to get the protections they need to justify spending so much time, money, and effort to design new products. On the other hand, the plaintiffs raise a point in this case that cuts to the heart of biotech research – can a company really lay claim to a gene? In other words, how could a company patent something that is integral to the human race?

As I see it, that’s why this case is so important for the Era of Radical Change. I read about genetics research all the time and I can tell you that dozens of teams all over the world are hard at work right now trying to isolate genes that could save lives and create fortunes for investors.

Many firms in that industry are heavily focused on genetics research and development. So, what happens at the high court could have a wide impact on firms throughout the sector.

Consider that it was just a decade ago that scientists mapped out the human genome. That effort has spurred a new round of cutting-edge research designed to fight a wide range of disease, such as those that affect the nervous and immune systems as well as the brain.

Let me be clear. I am sympathetic to the plaintiffs in this case. They include patients, cancer groups, doctors, and geneticists (who are represented by the ACLU). The group claims that Myriad can basically now dictate the cost of genetic testing. Not only that, they cite instances in which Myriad stopped other labs from using its process to come up with other tests.

And then there’s the impact the BRACAnalysis has on patients and their families.

Right now, Myriad has a de facto monopoly that prevents people from getting a second genetics-based opinion.

This hits me on a personal level. See, a family member of mine was just diagnosed with breast cancer. At first, it seemed we caught a break and got the best-case scenario; doctors said she had very early-stage cancer and removed lumps from her breast.

Then she had the BRACA1 and BRACA2 tests, and both came back with bad news. The doctors now want to remove her breasts and ovaries completely. Of course, like anyone else, we’d like to hope there’s a way to avoid this. In talking with my family, we wondered about getting a second opinion. But only Myriad is allowed to create these diagnostic tests and bring them to market.

That was before I had done more research on Myriad and its process.

Then, just two days later, last week, the Supreme Court decided to take up the matter. But given what I know about the courts and biotech industry, I believe the nation’s highest court will side with Myriad and give support to all the other gene patents out there.

I know from experience not being able to get a second opinion makes life tough for families already under strain. But that’s not usually the basis on which the justices render verdicts that become the law of the land.

In the end, I believe it all hinges on the main question: Does Myriad’s way of isolating the gene make it different enough that it can’t be considered a part of nature?

For their part, however, Myriad investors haven’t panicked, even though the tests account for more about 85% of the $405 million in sales the firm had in the fiscal year that ended in June. Yes, the stock is off more than 9% in the last five days of trading. But if the risk of losing the case were in fact high, the price would have dropped much further.

This case is certainly timely. Biotech firms, federal agencies, hospitals and colleges are investing millions each year in genetics research. They need clear guidance as to exactly what qualifies for a patent.

So, in that sense, any decision is good news for investors in the long run because it removes the one thing Wall Street hates above all else…

11 Responses to What the Gene Patent Case Means for Biotech Investors

  1. Tom S. says:

    “In the end, I believe it all hinges on the main question: Does Myriad’s way of isolating the gene make it different enough that it can’t be considered a part of nature?”

    So, why does this mean the gene can be patented, rather than the process ?

    When the Bessemer process was invented, the process was patented. No one claimed that gave the right to patent Steel…

    • wilma says:

      Please let us know when the process of patented (trademarked is varified vs process as filed under the Trade MARK for the companys protection as well as the investor..

      In this day of ages, we need to have all protections ( safe-)investments. I pray this will be a 100% sure event. My most concerns are in these findings which could slip thru your fingers.

  2. steve says:

    Good news for clarity of decision. You all know which way this will go even without any legal knowledge. Good news for “Persons, Inc.” of non-biological profit-based nature, bad news for nonprofit-based carbon-based “persons”.

  3. joan walsh says:

    Why can’t the test be licensed to others at a reasonable fee? Everyone makes money and the patients benefit as well as the researchers.

  4. Craig says:

    After the decision on Obamacare, I have no faith in the supreme court (period). That decision will lead to the continued erosion of personal freedom & liberty in this country for many years to come!

    • JennieWalsh says:

      I do NOT trust the so-called “supreme” court either. Either “Justice” Roberts is very stupid or a member of the “power-elite”, America’s worst and most deadly enemies (aka the Kingdom of Satan, global international bankster-gangster New World Order crime syndicate). He chose to ignore the fact that the “tax” bill Obamacare originated in the Senate, whereas, all tax bills must orginate in the House of Reps. At any rate, the constitution appears to be totally ignored and irrelevant in America’s plutocracy. See: —-and follow the links. These video exposes the deceit and treachery of the government’s 2 sets of books. The organized secret servants of Satan network throughout corporations, religions, education, businesses, governments everywhere throughout America and the world. Using every possible criminal method they have taken over almost all positions of power, authority, leadership, ownership and governmental positions at every level in every nation of the world. “They” will decide the outcome of this issue, to their own best advantage. MANY judges are members of this secret organized crime cartel.
      Evil (negative karma) eventually destroys itself and sometimes these evil ones get in each others’ way.

  5. George says:

    A patent on a process to identify or analyze genes is ok. It is proper and just to protect an investment like that but a patent on genes themselves that exist in nature normally and where mankind resides is ridiculous. That whole concept or patenting natural existing genes is totally absurd. Where is the uniqueness? It violates the very cornerstone of the patent process. You cant patent what is preexisting. Someone will someday declare the emperor has no clothes. Genes are biological intrinsic knowledge.

  6. Carole Early says:

    Patent on the Test provides incentive for competition to make changes that improve on it. Discovering the gene should be patent free so others can upgrade testing, diagnosis, prevention and cure. Treatment to remove or alter the gene would be even more important for preventive purposes. Radical surgery without the positive presence of malignancy is irresponsible. Tests always carry the risk of “false positives” and “false negatives”. Besides the emotional turmoil a “false positive” can cause, surgery carrys the risk of dying from a totally unrelated cause…infection. Test results vary from minute to minute. People vary from person to person. Lifestyle, habits and diet are the best “medicine”. God “invented” genes!…Amen?

  7. SportsBiz says:

    I’m as confused as Tom S about why a gene needs to be patented when it’s the process that Myriad developed not the gene. I don’t think there would be any question that the process is capable of being protected but I don’t know what is unique about the gene that would be distinct from the gene God and our parents gave us.

  8. Kevin Beck says:

    Just one little question, from a slightly different perspective: Has the Supreme Court (or any other court) issued any type of patent ruling on the case of GMO’s (genetically modified organisms)? If so, wouldn’t the same reasoning from that case apply here?

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