Biosimilars Deals 2021

Otsuka Pharmaceutical Co Ltd v Sun Pharma ANZ Pty Ltd [2025] FCAFC 161

Introduction

In a landmark decision that fundamentally reshapes Australia’s patent term extension (PTE) landscape, the Full Court of the Federal Court has unanimously held that pharmaceutical formulation patents are ineligible for PTE under the Patents Act 1990 (Cth) (the Act).  In a victory for Sun Pharma over Otsuka regarding Sun Pharma’s generic aripiprazole, the Full Court found that a pharmaceutical substance is limited to active pharmaceutical ingredients and does not extend to formulations combining those ingredients with excipients.

While the Full Court also overturned the primary judge’s findings that the asserted claims were invalid for lack of clarity and lack of definition, this small win for Otsuka was rendered moot by the finding that the PTE was invalid.

Unless and until there is a High Court appeal to the contrary, patentees will no longer be able to extend the term of pharmaceutical formulation patents, and their existing patent term extensions for pharmaceutical formulation patents will now be vulnerable to challenge by a simple (and inexpensive process) in the patent office.  Patentees will be urgently reviewing their patent portfolios and revisiting their loss of exclusivity dates in Australia as they prepare for the inevitable rectification applications from generic/biosimilar applicants.  Biosimilar and generic applicants will be inducing their market entry dates, and preparing to file low-cost rectification applications in the patent office, where the originator’s exclusivity was (previously) underpinned by a formulation patent.

Background

The dispute related to Otsuka Japan’s Australian Patent No. 2004285448, entitled “Controlled release sterile injectable aripiprazole formulation and method” (the Patent).  The Patent described and claimed controlled release formulations which contain aripiprazole as the active pharmaceutical ingredient (API).  Aripiprazole molecules bind to receptors (primarily D2 receptors) in the brain, which is useful in treating schizophrenia and bipolar I disorder.

Sun Pharma commenced proceedings against Otsuka seeking to “clear the way” ahead of their Australian launch on 1 April 2025 of their generic version of the ABILIFY MAINTENA (400 mg) powder and solvent for injection.

At first instance, Justice Downes found in Sun Pharma’s favour, holding that the PTE claims were invalid because the majority of the asserted pharmaceutical substances did not “fall within the scope of” the relevant claims.  Her Honour also held that the PTE claims were invalid for lack of clarity and lack of definition.

Notably, Justice Downes rejected Sun Pharma’s argument that formulations could not constitute “pharmaceutical substances” under the Act.  Following Justice Perram’s decision in Cipla Australia Pty Ltd v Novo Nordisk A/S [2024] FCA 1414 (see our report on this judgment here), her Honour held that the definition of a “pharmaceutical substance” included formulations.

Otsuka appealed Justice Downes’ findings on the validity of the claims and the PTE.  Sun Pharma filed a Notice of Contention seeking to uphold her Honour’s orders on alternative grounds, including, critically, that formulations do not constitute “pharmaceutical substances” in the context of the statutory PTE regime.

PTE Statutory Regime

In Australia, section 70 of the Act sets out specific conditions which must be met to obtain a PTE for a pharmaceutical patent, including that:

• one or more pharmaceutical substances per se must in substance be disclosed in the complete specification of the patent and in substance fall within the scope of the claim(s) of that specification; and
• goods containing, or consisting of, the substance must be included in the Australian Register of Therapeutic Goods.

The term “pharmaceutical substance” is defined in Schedule 1 to the Act to mean:

a substance (including a mixture or compound of substances) for therapeutic use whose application (or one of whose applications) involves:

• (a) a chemical interaction, or physico-chemical interaction, with a human physiological system; or
• (b) action on an infectious agent, or on a toxin or other poison, in a human body;

Consideration

The Full Court began by tracing the legislative history of the definition.  The terms “pharmaceutical substance” and “therapeutic use” first appeared in the Patents Amendment Act 1989 (Cth).  The Explanatory Memorandum to that Act stated that the new extension scheme would be available for “therapeutic substances” in the terms of the Customs (Prohibited Imports) Regulations (the Customs Regulations), subject to three added limitations.

The term “therapeutic substance” was defined in the Customs Regulations to mean:

a substance, including a mixture or compound of substances, that has a therapeutic use and includes a surgical ligature, suture or dressing, but does not include a vaccine prepared from microscopic organisms from the body of a person or animal for use in the treatment of that person or animal only.

The Full Court stated that it was clear from this definition that “therapeutic substance” included formulations, and that this conclusion was further reinforced by regulation 2(2)(b) which provided that:

• (a) each form of a therapeutic substance shall be taken to be a separate and distinct therapeutic substance;
• (b) if a therapeutic substance is manufactured according to two or more formulations – the substance manufactured according to a particular formulation shall be taken to be a different therapeutic substance from the substance manufactured according to the other or each other formulation; and
• (c) a therapeutic substance having a particular strength shall be taken to be a different therapeutic substance from the substance having a different strength.

The question was then whether the ‘added limitations’ in the Act’s definition operated to exclude formulations from its scope.

The Full Court found that they did.  The crucial limitation was the statutory requirement that a pharmaceutical substance’s application must involve “a chemical interaction, or physico-chemical interaction, with a human physiological system” or “action on an infectious agent, or on a toxin or other poison, in a human body”.  Their Honours reasoned that this requirement “immediately and naturally puts the focus on the substance which itself produces the therapeutic effect, as distinct from any excipients present in a given formulation”.  Excipients, by definition, are not therapeutically active – they are the non-therapeutic ingredients of dosage forms.  It followed, the Court held, that “it is only the active ingredient that can have a chemical or physico-chemical interaction with a human physiological system, or that can act on an infectious agent, or on a toxin, or other poison, in a human body”.  In this way, the limitation confines the otherwise broad concept borrowed from the Customs Regulations to substances that are “active”.

The Full Court found that this construction was supported by the extrinsic materials accompanying later amendments.  The Revised Explanatory Memorandum to the 1998 Amendment Act (REM) stated that a pharmaceutical substance “may comprise combinations of active ingredients or single active ingredients” and notes that an “extension of term will not be available for claims to new processes of making pharmaceutical substances or new methods of using pharmaceutical substances where the substances themselves are already known”.  In the same section, the REM further stated:

… This has the effect of enabling a generic manufacturer to produce a generic pharmaceutical formulation containing the patented pharmaceutical substance solely for the purpose of obtaining regulatory approval while the patent is still in force. It therefore prevents a patentee from ending up with a further de facto extension of term which would occur if a generic producer could not commence any work on the patented pharmaceutical substance to meet these requirements until the extended term expired.

(Emphasis added)

The subsequent Explanatory Memorandum to the 2006 Amendment Act distinguished between four types of pharmaceutical patents:

… There are broadly four types of pharmaceutical patent: those on the active pharmaceutical ingredient (API); the formulation of the medication; the process for making the API; and methods of use of the medication. Only patents which claim a pharmaceutical substance (ie API) are currently eligible for patent extension in Australia. Pharmaceutical products are frequently the subject of multiple patents which cover different aspects of the product. These patents are potentially of different types, some of which may not be eligible for extension. In some cases the most important (or ‘blocking’) patent may not be extended and thus the most important springboarding work cannot be done until this patent expires in Australia.

(Emphasis added)

The Full Court found this “express clarification of the distinction between an API and a formulation, and the express recognition that an API is the relevant ‘pharmaceutical substance’, is entirely consistent with what [they] regard as the correct construction”.

The Court also held that its construction accorded with the purpose of the PTE regime.  The purpose, as explained in the 1998 REM and cited by the High Court in Alphapharm Pty Ltd v H Lundbeck A/S [2014] HCA 42; 254 CLR at [58], was to provide an effective patent life for newly discovered drugs that had taken extended effort and time to achieve regulatory approval.  The Court observed that “allowing extensions of term for improved or modified dosage forms of known drugs already registered on the ARTG [Australian Register of Therapeutic Goods] is inconsistent or contrary to that object”.

Turning to earlier decisions which had considered the PTE regime, the Full Court noted that there had been three first instance judgments, none of which had been the subject of appellate review, which had held that formulations fell within the scope of the definition of “pharmaceutical substance”.[1] Importantly, the Full Court considered that, although there had been a number of Full Court authorities which had considered various aspects of Australia’s PTE regimes, none of these Full Court decisions had directly and authoritatively settled the meaning of “pharmaceutical substance”. This meant that there was no prior Full Court decision the ratio of which determined any contested issue in these proceedings. Secondly, it meant that there was no decision of a Full Court to which regard might be had for the purpose of construing the term “pharmaceutical substance”.

Turning to earlier first instance authorities, the Full Court considered the reasoning in Pharmacia, Spirit and Cipla, declining to follow them.

In Pharmacia, Justice Weinberg had held that a ready-to-use injectable solution of epirubicin hydrochloride was a “pharmaceutical substance” capable of supporting an extension of term.  His Honour, citing Justice Heerey in Boehringer Ingelheim International v Commissioner of Patents [2000] FCA 1918; (2001) AIPC 91-670, observed that Justice Heerey did not distinguish between the “active ingredients” in a compound and other components of that compound.  The Full Court, however, preferred the reasoning of Justice Bennet in the Full Court decision in H Lundbeck A/S v Alphapharm Pty Ltd [2009] FCAFC 70; 177 FCR 151 at [242] over that of Justice Weinberg in Pharmacia, noting that Justice Bennett had recognised that an active ingredient is seldom administered on its own without excipients but that this did not displace the fact that a “pharmaceutical substance” is limited to the active ingredients.

In Spirit, Justice Rares had found that the controlled release formulation OxyContin achieved a “therapeutic use” via two chemical interactions “in the human physiological system” (emphasis added):  the first being the disintegration of the matrix in the GI tract, and the second being the interaction of oxycodone with nerve cell receptors.  The Full Court identified this as an error.  The disintegration of a dose form to release the active ingredient is not an interaction with a human physiological system in the relevant sense – it is merely the breakdown of excipients to release the drug in the human physiological system.  The only chemical or physico-chemical interaction relevant to the definition is the interaction of the active ingredient (oxycodone) with the nerve cell receptors

In Cipla, at [58], Justice Perram stated that he saw nothing in the 1989 amendments that supported the exclusion of formulations from the definition of “pharmaceutical substance”.  The Full Court disagreed, noting that a pharmaceutical substance is a sub-class of a “therapeutic substance” as defined in the Customs Regulations, and that the express requirement that pharmaceutical substances have a chemical or physico-chemical interaction with a human physiological system explains they do not include a formulation.  The Full Court also noted that Justice Perram, at [186], accepted that if the High Court’s reference to “tablet” in footnote 40 of Alphapharm was not read as an illustration of a method, it was inconsistent with the construction that his Honour had reached.  The Full Court considered that the High Court used “tablet” in the footnote “as an example of what is not a pharmaceutical substance per se” – claims to a dosage form containing an active ingredient, rather than the pharmaceutical substance or active ingredient itself.

Applying this reasoning to the present case, the Full Court held that the formulations claimed in the Patent were not pharmaceutical substances for the purposes of the PTE regime.  The relevant pharmaceutical substance was aripiprazole – a substance that had been on the ARTG since May 2003, before the Patent’s priority date.

Alternative Grounds

The Full Court also upheld Sun Pharma’s alternative contentions: the Freeze-dried Formulations did not satisfy the definition of “pharmaceutical substance” because they cease to exist after reconstitution; the ARTG Goods did not “contain or consist of” the Controlled Release Injectable Formulations; and the claims were not to pharmaceutical substances “per se” because they included process features and limitations on use.

Validity

The Full Court addressed Otsuka’s appeal on claim validity.  The Court upheld the finding that the claims were limited by result, but found that the primary judge erred in concluding the claims were invalid for lack of clarity and lack of definition.

In overturning the primary judge’s lack of clarity and lack of definition finding, the Full Court enumerated a number of principles which it considered to have resonated throughout Australian patent law, including that:

• the mere fact that knowledge, skill and even some experimental tests may be necessary in putting a patented invention into practice is not sufficient to invalidate the patent if the nature of the invention is adequately described;
• the duty of the patentee is to state clearly and distinctly, either in direct words or by clear and distinct reference, the nature and limits of what it claims. If using language that is avoidably obscure or ambiguous, the patent is invalid; and
• it is not the duty of the inventor to define the scope of its claim so as to ensure that it can never be difficult to decide the question of infringement, but only to enable the court to formulate the question which a skilled addressee, wishing to avoid infringement, should ask itself. However, that is not on the basis of any hypothetical infringer. The test is more practical.

Otsuka’s victory on lack of clarity and lack of definition, however, was a pyrrhic one, given the Court’s findings on PTE validity.

Outcome and Implications

The Full Court dismissed the appeal, finding the PTE to be invalid, with Otsuka ordered to pay Sun Pharma’s costs.  The matter is now primed for Otsuka to seek special leave to the High Court.

In the meantime, the Full Court decision definitively resolves a question that has been the subject of consistent but unreviewed first instance authority.  Patents claiming formulations, whether modified release dosage forms, new delivery systems, or other combinations of known active ingredients with excipients, are not eligible for PTEs.

Unless and until there is a High Court appeal to the contrary, patentees will no longer be able to extend the term of pharmaceutical formulation patents, and their existing patent term extensions for pharmaceutical formulation patents will now be vulnerable to challenge by a simple (and inexpensive process) in the patent office.  Patentees will be urgently reviewing their patent portfolios and revisiting their loss of exclusivity dates in Australia as they prepare for the inevitable rectification applications from generic/biosimilar applicants.  Biosimilar and generic applicants will be inducing their market entry dates, and preparing to file low-cost rectification applications in the patent office, where the originator’s exclusivity was (previously) underpinned by a formulation patent.

[1] Pharmacia Italia SpA v Mayne Pharma Pty Ltd [2006] FCA 305 (Pharmacia); Spirit Pharmaceuticals Pty Ltd v Mundipharma Pty Ltd [2013] FCA 658 (Spirit); Cipla Australia Pty Ltd v Novo Nordisk A/S [2024] FCA 1414 (Cipla).

About Pearce IP

Pearce IP is a specialist firm offering intellectual property specialist lawyers and attorneys with a focus on the life sciences industries.  Pearce IP and its leaders are ranked in every notable legal directory for legal, patent and trade mark excellence, including: Chambers & Partners, Legal 500, IAM Patent 1000, IAM Strategy 300, MIP IP Stars, Doyles Guide, WTR 1000, Best Lawyers, WIPR Leaders, 5 Star IP Lawyers, among others.

In 2025, Pearce IP was recognised by Australasian Lawyer and New Zealand Lawyer’s 5 Star Employer of Choice, and is the “Standout Winner” for inclusion and culture for firms with less than 100 employees. Pearce IP was awarded “IP Team of the Year” by Lawyers Weekly at the 2021 Australian Law Awards. Pearce IP is recognised by Managing IP as the only leading ANZ IP firm with a female founder, and is certified by WEConnect International as women owned.

This morning the Full Court published its decision in Otsuka Pharmaceutical Co Ltd v Sun Pharma ANZ Pty Ltd [2025] FCAFC 161 confirming that pharmaceutical formulation patents are no longer eligible for a patent term extension in Australia.

In the fight between Otsuka and Sun Pharma over Sun Pharma’s launch of a generic version of ABILIFY MAINTENA (aripiprazole), the Full Court of the Federal Court of Australia held that only patents for active pharmaceutical substances – not pharmaceutical formulations- are eligible for a patent term extension.   The decision was handed down on 1 December, but published today.

The Full Court decision has huge ramifications for stakeholders in the Australian pharmaceutical sector.  Originator companies will no longer be able to extend the term of pharmaceutical formulation patents, and their existing patent term extensions for pharmaceutical formulation patents will now be vulnerable to challenge. Given this seismic shift in the law, we expect Otsuka to seek special leave to appeal to the High Court of Australia.

In the meantime:

• Patentees will be urgently reviewing their patent portfolios and revisiting their loss of exclusivity dates in Australia as they prepare for the inevitable rectification applications from generic/biosimilar applicants; and
• Biosimilar and generic applicants will be inducing their market entry dates, and preparing to file low-cost rectification applications in the patent office, where the originator’s exclusivity was (previously) underpinned by a formulation patent.

Our detailed blog on the Otsuka decision and its implications will follow.

Read more about the Australian patent extension regime in our free PTE eBook which can be downloaded Pharmaceutical Patent Term Extensions in Australia

About Pearce IP

Pearce IP is a specialist firm offering intellectual property specialist lawyers and attorneys with a focus on the life sciences industries.  Pearce IP and its leaders are ranked in every notable legal directory for legal, patent and trade mark excellence, including: Chambers & Partners, Legal 500, IAM Patent 1000, IAM Strategy 300, MIP IP Stars, Doyles Guide, WTR 1000, Best Lawyers, WIPR Leaders, 5 Star IP Lawyers, among others.

In 2025, Pearce IP was recognised by Australasian Lawyer and New Zealand Lawyer’s 5 Star Employer of Choice, and is the “Standout Winner” for inclusion and culture for firms with less than 100 employees. Pearce IP was awarded “IP Team of the Year” by Lawyers Weekly at the 2021 Australian Law Awards. Pearce IP is recognised by Managing IP as the only leading ANZ IP firm with a female founder, and is certified by WEConnect International as women owned.