Msn Laboratories Private Ltd. v. Bausch Health Ireland Ltd.

• Court: Court of Appeals for the Federal Circuit
• Decided: June 20, 2025
• Docket: 24-1053
• Status: Unpublished

Opinion

Case: 24-1053 Document: 13 Page: 1 Filed: 06/20/2025

NOTE: This disposition is nonprecedential.

United States Court of Appeals for the Federal Circuit ______________________

MSN LABORATORIES PRIVATE LTD., MSN PHARMACEUTICALS, INC., Appellants

v.

BAUSCH HEALTH IRELAND LTD., Appellee ______________________

2024-1053 ______________________

Appeal from the United States Patent and Trademark Office, Patent Trial and Appeal Board in Nos. IPR2022- 00722, IPR2023-00016. ______________________

Decided: June 20, 2025 ______________________

TUNG-ON KONG, Wilson, Sonsini, Goodrich & Rosati, PC, San Francisco, CA, argued for appellants. Also repre- sented by RICHARD J. BERMAN, JANINE A. CARLAN, BRADFORD C. FRESE ArentFox Schiff LLP, Washington, DC.

JUSTIN JAMES HASFORD, Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, Washington, DC, Case: 24-1053 Document: 13 Page: 2 Filed: 06/20/2025

argued for appellee. Also represented by BRYAN DINER, JOSHUA GOLDBERG. ______________________

Before LOURIE, DYK, and CHEN, Circuit Judges. LOURIE, Circuit Judge. MSN Laboratories Private Ltd. and MSN Pharmaceu- ticals, Inc. (“MSN”) appeal from a final written decision of the United States Patent and Trademark Office Patent Trial and Appeal Board (“the Board”) holding that it had not shown claims 1–6 of U.S. Patent 7,041,786 (“the ’786 patent”) to be unpatentable as obvious. Mylan Pharms., Inc., v. Bausch Health Ireland Ltd., No. IPR2022- 00722, 2023 WL 6161595 (P.T.A.B. Sept. 8, 2023) (“Deci- sion”). For the reasons provided below, we vacate and re- mand. BACKGROUND Bausch Health Ireland Ltd. (“Bausch”) owns the ’786 patent, which claims a compound that is part of a group of structurally related peptides known as “guanylate cyclase receptor agonists.” ’786 patent col. 1 ll. 14–15. Guanylate cyclase receptor agonists play an important role in the op- eration of the GI tract. By binding to receptors, they stim- ulate the production of cyclic guanosine monophosphate (“cGMP”), which in turn activates a complex signaling pathway that regulates sodium and water secretion in the intestinal lumen. ’786 patent col. 1 ll. 34–35. Guanylate cyclase receptor agonists can be administered in various formulations, such as “solutions, powders, suspensions, emulsions, tablets, capsules, transdermal patches, [or] ointments.” ’786 patent col. 13 ll. 24–27. Some guanylate cyclase receptor agonists exhibit what is known as “topoi- somerism,” meaning that an individual peptide can exist in different three-dimensional structures with different levels of biological activity. Decision at *8–9; J.A. 04279. Case: 24-1053 Document: 13 Page: 3 Filed: 06/20/2025

MSN LABORATORIES PRIVATE LTD. v. 3 BAUSCH HEALTH IRELAND LTD.

One such agonist in the prior art is uroguanylin, which is known to have two topoisomers: an active “A form” which can bind to receptors and stimulate production of cGMP, and an inactive “B form,” which cannot. Decision at *8– 9; J.A. 03404. Obviousness of what is claimed in the ’786 pa- tent over uroguanylin is at issue in this appeal. Claim 1 of the ’786 patent, which is exemplary, reads as follows: 1. A peptide consisting of the amino acid of SEQ ID NO:20. ’786 patent, col. 37 ll. 2–3. SEQ ID NO:20 is the amino acid sequence for plecanatide, a synthetic analog of uroguan- ylin. Id. at col. 35; Decision at *3. The sole difference be- tween uroguanylin and plecanatide, as shown below, is a single substitution at the third position: in plecanatide, as- partic acid (Asp) is replaced with glutamic acid (Glu). Uroguanylin: Asn1-Asp2-Asp3-Cys4-Glu5-Leu6- Cys7-Val8-Asn9-Val10-Ala11-Cys12-Thr13-Gly14- Cys15-Leu16 Plecanatide: Asn1-Asp2-Glu3-Cys4-Glu5-Leu6- Cys7-Val8-Asn9-Val10-Ala11-Cys12-Thr13-Gly14- Cys15-Leu16 See Decision at *2. Glutamic acid and aspartic acid are chemically similar—the only difference is that glutamic acid has a second methylene moiety in its side chain. They are also the only two natural amino acids negatively charged at a neutral pH. Bausch markets and sells pleca- natide under the brand name Trulance® for use as an oral laxative to treat constipation. In March 2021, MSN and Mylan Pharmaceuticals Inc., (“Mylan”) separately petitioned for inter partes review, as- serting that all claims of the ’786 patent would have been obvious over U.S. Patent 5,489,670 (“Currie”), an article entitled “Purification, cDNA Sequence, and Tissue Case: 24-1053 Document: 13 Page: 4 Filed: 06/20/2025

Distribution of Rat Uroguanylin” (“Li”), and other second- ary references. Regarding claim 1, MSN and Mylan con- tended that a person of ordinary skill in the art would have been motivated to substitute aspartic acid with glutamic acid at uroguanylin’s third position to arrive at plecanatide based on: (1) Currie’s disclosure that uroguanylin “may . . . act as a laxative and be useful in patients suffer- ing from constipation,” J.A. 00237 (citing J.A. 01897), (2) Li’s disclosure that the substitution would create a com- pound with affinity to guanylate cyclase receptors “compa- rable” to that of uroguanylin, J.A. 00237 (citing J.A. 01910), and (3) evidence that the substitution was “conservative.” J.A. 00236–37 (citing J.A. 01347–48). In its preliminary response, Bausch made two main ar- guments why MSN and Mylan had not established a rea- sonable likelihood that claim 1 would be shown to have been obvious. Mylan Pharms., Inc., v. Bausch Health Ire- land Ltd., No. IPR2022-00722, Paper No. 6, at 39–62 (P.T.A.B. Jun. 29, 2022). First, Bausch contended that a person of ordinary skill in the art would not have been mo- tivated to select uroguanylin as a lead compound for modi- fication. Second, Bausch argued that a person of ordinary skill in the art would not have been motivated to substitute aspartic acid with glutamic acid at uroguanylin’s third po- sition with a reasonable expectation of success. The Board disagreed, and after joining the two peti- tions, granted institution. During the trial phase of the proceedings, Bausch reiterated its two prior arguments and also made a new contention. Specifically, Bausch ar- gued that, even if there had been a motivation to select uroguanylin as a lead compound and substitute aspartic acid with glutamic acid at its third position, any case of ob- viousness was outweighed by plecanatide’s unexpected re- sults. J.A. 01114–23. In support of that additional argument, Bausch pointed to several experiments compar- ing properties of plecanatide and uroguanylin. Id. at 01115–23. Case: 24-1053 Document: 13 Page: 5 Filed: 06/20/2025

MSN LABORATORIES PRIVATE LTD. v. 5 BAUSCH HEALTH IRELAND LTD.

In its final written decision, the Board maintained that a person of ordinary skill in the art would have been moti- vated to select uroguanylin as a lead compound and substi- tute aspartic acid with glutamic acid at its third position. Decision at *7–14. Nevertheless, the Board held that MSN and Mylan had not established that the challenged claims would have been obvious, agreeing with Bausch that the experiments it proffered demonstrated plecanatide’s unex- pected results which were sufficient to outweigh the prima facie case of obviousness. Id. at *15–24. In so concluding, the Board found that Bausch’s experiments “reflect the use of human uroguanylin as it naturally exists, i.e., a mixture with some interconversion between topoisomers, which is the closest prior art to the peptide of claim 1.” Id. at *16. MSN and Mylan separately appealed and we consolidated the cases for briefing and oral argument. Mylan has since voluntarily dismissed its appeal, leaving only MSN’s pend- ing. We have jurisdiction under 28 U.S.C. § 1295(a)(4)(A). DISCUSSION We review the Board’s decisions under the Administra- tive Procedure Act (“APA”). Taking “due account . . . of the rule of prejudicial error,” we must hold unlawful and set aside agency action, findings, and conclusions found to be . . . arbitrary, capricious, an abuse or otherwise not in accordance with the law” or “unsupported by substantial evidence.” 5 U.S.C. § 706(2)(A), (E). “Substantial evi- dence . . . means such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.” Consol. Edison Co. of N.Y. v. NLRB, 305 U.S. 197, 217 (1938). In applying those standards, “we will uphold a de- cision of less than ideal clarity if the agency’s path may rea- sonably be discerned,” but “we may not supply a reasoned basis for the agency’s action that the agency itself has not given.” Rovalma, S.A. v. Bohler-Edelstahl GmbH & Co. KG, 856 F.3d 1019, 1024 (Fed. Cir. 2017) (citations omit- ted). Accordingly, “the Board must, as to issues made ma- terial by the governing law, set forth a sufficiently detailed Case: 24-1053 Document: 13 Page: 6 Filed: 06/20/2025

explanation of its determinations both to enable meaning- ful judicial review and to prevent judicial intrusion on agency authority.” Id. On appeal, MSN argues that the Board erred in con- cluding that the experiments proffered by Bausch sup- ported its argument of unexpected results. For its part, Bausch argues that the Board’s conclusion as to unex- pected results was supported by substantial evidence. Al- ternatively, Bausch argues that the Board’s decision should be affirmed because its threshold finding that a per- son of ordinary skill in the art would have been motivated to select uroguanylin as a lead compound for modification was not supported by substantial evidence. We begin with Bausch’s alternative affirmance argument. I Whether a new chemical compound would have been prima facie obvious depends in part on a comparison with its closest prior art. See e.g., In re Payne, 606 F.2d 303, 315– 16 (CCPA 1979) (collecting cases). In doing so, a court may utilize what has become known as a “lead compound” analysis, which ordinarily follows a two-part inquiry. Otsuka Pharm. Co. v. Sandoz, Inc., 678 F.3d 1280, 1291 (Fed. Cir. 2012). In such a case, the first inquiry is whether a person of ordinary skill in the art “would have selected the asserted prior art compound[] as [a] lead compound[], [i.e.,] . . . a compound in the prior art that would be most promising to modify in order to improve upon its activity and obtain a compound with better activity.” Id. (citation omitted). The second inquiry “is whether the prior art would have supplied one of ordinary skill in the art with a reason or motivation to modify a lead compound to make the claimed compound with a reasonable expectation of success.” Id. at 1292 (citations omitted). The Board concluded that MSN had established a prima facie case of obviousness, first determining that a person of ordinary skill in the art would have recognized Case: 24-1053 Document: 13 Page: 7 Filed: 06/20/2025

MSN LABORATORIES PRIVATE LTD. v. 7 BAUSCH HEALTH IRELAND LTD.

uroguanylin as a good candidate for treating constipation and therefore selected it as a lead compound for further modification. See Decision at *7–9. That finding was sup- ported by substantial evidence. As noted, Currie discloses that uroguanylin “may . . . act as a laxative and be useful in patients suffering from constipation.” J.A. 01897. And although uroguanylin was known to interconvert between its active A form and inactive B form, particularly at low pH levels, thereby decreasing its affinity for guanylate cyclase receptors, MSN’s expert testified that that instabil- ity could be mitigated using simple techniques known to a person of ordinary skill in the art. Decision at *9 (cit- ing J.A. 03200 ¶ 29 (MSN expert declaration stating that a person of ordinary skill in the art could easily formulate a tablet of uroguanylin with a protective coating to target re- lease in the higher pH environment of the small intestine as opposed to the lower pH environment of the stomach)). It was therefore reasonable for the Board to conclude that uroguanylin was a promising compound to modify to im- prove upon its already-known laxative effects. Bausch contends that the Board’s conclusion lacks sub- stantial evidence support because another guanylate cyclase receptor agonist, bacterial ST peptide, was “a far more promising option” than uroguanylin for treating con- stipation. Resp. Br. 68. Specifically, Bausch argues that because bacterial ST peptide was “not afflicted with topoi- somerism” and produced “remarkabl[y]” more cGMP than uroguanylin, a person of ordinary skill in the art would have been motivated to select bacterial ST peptide as a lead compound instead of uroguanylin. Id. at 68–69. But the Board already considered and reasonably rejected that ar- gument. It explained that, although uroguanylin was in those respects “disadvantag[ous] relative to [bacterial ST peptide],” a person of ordinary skill in the art would still select uroguanylin over bacterial ST peptide as a lead com- pound because bacterial ST peptide was derived from path- ogenic bacteria, and thus “dangerous” for administration in Case: 24-1053 Document: 13 Page: 8 Filed: 06/20/2025

humans. Decision at *8–9. That finding is consistent with Currie and Li. J.A. 01897 (Currie: bacterial ST peptide is known to be a “major cause” of diarrhea, causing dehydra- tion); J.A. 01901 (Li: exposure to high levels of bacterial ST peptide “produces a watery diarrhea that can lead to dehy- dration and death”). Accordingly, the Board’s conclusion that a person of ordinary skill in the art would have se- lected uroguanylin as the most promising compound to im- prove upon its effects as a laxative was supported by substantial evidence. In view of the foregoing, and because Bausch does not challenge the Board’s determination that a person of ordi- nary skill would have been further motivated to modify the third position of uroguanylin to make plecanatide with a reasonable expectation of success, we do not disturb the Board’s determination that MSN established a prima facie case of obviousness. We accordingly move to the issue of unexpected results. II One way to rebut a prima facie case of obviousness is to demonstrate “unexpected results.” E.g., In re Harris, 409 F.3d 1339, 1343 (Fed. Cir. 2005). In the context of chemical compounds, such a showing is often made through comparative testing, i.e., by demonstrating through experimentation that the “claimed compound[] possess[es] unexpectedly advantageous or superior proper- ties” relative to a lead compound. In re Payne, 606 F.2d 303, 315–16 (CCPA 1979). As noted, Bausch proffered several experiments com- paring the chemical properties of plecanatide, uroguanylin, and other guanylate cyclase receptor agonists in support of its argument that substituting aspartic acid for glutamic acid at uroguanylin’s third position produced unexpected results. Specifically, the experiments compared: (1) the amount of cGMP produced by each peptide at a neutral pH, (2) the amount of cGMP produced by each peptide across Case: 24-1053 Document: 13 Page: 9 Filed: 06/20/2025

MSN LABORATORIES PRIVATE LTD. v. 9 BAUSCH HEALTH IRELAND LTD.

different pHs found in the GI tract, (3) the binding affinity of each peptide for guanylate cyclase receptors, and (4) the ratio of active to inactive topoisomers after each peptide was incubated in an acidic solution. 1 Based on the results of those experiments, the Board found that plecanatide ex- hibited unexpectedly increased potency, pH sensitivity, binding affinity, and topoisomeric stability relative to uroguanylin, and that those unexpected results were suffi- cient to outweigh the prima facie case of obviousness. De- cision at *15–24. MSN argues that the Board legally erred by relying on those experiments. First, MSN argues that the experi- ments did not compare the claimed plecanatide with the “closest prior art.” Open. Br. 26–31. Second, MSN asserts that the experiments did not comport with the requirement that unexpected results must be “commensurate in scope” with the challenged claims. Id. at 31–36. Third, MSN con- tends that the experiments were insufficient to support a finding of non-obviousness because they merely demon- strate “differences in degree,” not the required “differences in kind.” Id. at 36–44. And fourth, MSN argues that the experiments did not undermine the prima facie case of ob- viousness. Id. at 44–53. We need only address the first ar- gument to resolve this appeal. To demonstrate that unexpected results are attributa- ble to a claimed compound as opposed to some other non- claimed factor, a patent owner “relying upon a comparative showing to rebut a prima face case must compare [the] claimed [compound] with the closest prior art”—i.e., the most similar compound found in the prior art. In re

1 Bausch also proffered an experiment that it con- tended demonstrated that plecanatide was unexpectedly more heat stable than uroguanylin. The Board disagreed and Bausch does not appeal that finding. Decision at *21– 22. Case: 24-1053 Document: 13 Page: 10 Filed: 06/20/2025

Merchant, 575 F.2d 865, 869 (CCPA 1978) (collecting cases). Thus, where one or both of the claimed or lead com- pounds can exist in different three-dimensional structures, it follows that for comparative testing to satisfy the closest- prior-art requirement, it must compare the “structurally closest” forms of those compounds. See Astrazeneca Pharms. LP v. Teva Pharms. USA, Inc., 583 F.3d 766, 775 (Fed. Cir. 2009) (citing Merchant, 575 F.3d at 868)). At the Board, MSN’s argument that the experiments did not compare the claimed plecanatide with the closest prior art was built upon multiple premises. First, MSN as- serted that plecanatide, like uroguanylin, exhibits topoi- somerism and could exist in both an active A form and inactive B form. See J.A. 00928–29. And because the chal- lenged claims did not recite any structural limitations, MSN asserted that they encompassed both the active A and inactive B forms of plecanatide. Id. In support of its posi- tion, MSN proffered submissions made by Bausch to the European Patent Office (“EPO”) stating that plecanatide “can exist in two different iso[mers], only one of which is biologically active.” Id. (citing J.A. 03352). Furthermore, MSN contended that the experiments only used the active A form of plecanatide. J.A. 00928 (citing J.A. 01371– 72 ¶ 168)). Next, MSN contended that highly pure active A-form uroguanylin could have been used for comparative testing. In support of this contention, MSN presented additional re- search showing that the highly pure active A form of uroguanylin had been shown to be easily purified and maintained in acidic and slightly alkaline solutions and as a lyophilized powder. Id. (citing J.A. 04286 Fig 6C: 1% in- terconversion of A- to B-form uroguanylin after one hour at pH 4.5 and 5% interconversion after 70 hours at pH 7.7, J.A. 04292 lyophilized powder of A-form uroguanylin re- mained 99% topoisomerically pure after one year in stor- age). Case: 24-1053 Document: 13 Page: 11 Filed: 06/20/2025

MSN LABORATORIES PRIVATE LTD. v. 11 BAUSCH HEALTH IRELAND LTD.

MSN therefore asserted that because Bausch’s experi- ments compared the active A form of plecanatide with a mixture of active A- and inactive B-form uroguanylin, when similarly pure active A-form uroguanylin could have been used, the requirement that comparative testing must be between the claimed compound and the structurally closest lead compound was not satisfied. J.A. 00929. The Board disagreed. It explained, relying on addi- tional research presented by Bausch showing that “topolog- ical isomers of human uroguanylin are not stable in solution and are readily interconvertible,” that “[s]ome amount of interconversion to the inactive conformation was inevitable in [] testing.” Decision at *16 (citing J.A. 04291). Accordingly, the Board found that the closest prior art to the claimed plecanatide was not highly pure active A-form uroguanylin, but rather a “mixture” of A- and B-form uroguanylin. Id. It then found that such a mixture was used in the experiments. Decision at *16 (“Patent Owner’s tests reflect the use of human uroguanylin as it naturally exists, i.e., a mixture with some interconversion between topoisomers.”) (citing no evidence in support). The Board did not come to a conclusion as to whether plecanatide ex- hibits topoisomerism. Id. (“[T]he extent to which [pleca- natide] interconverts between an active and inactive topoisomer, if at all, is not clear on this record.”). Nor did it address the statements put forward by MSN that Bausch made at the EPO suggesting that plecanatide can exist in both active and inactive topoisomers. Id. Those would seem to be essential inquiries. We therefore conclude that the Board’s determination that the experiments compared the claimed invention with the closest prior art lacks adequate explanation, for three reasons. First, the Board sidestepped the critical threshold issue of whether the claims encompass plecanatide com- pounds in both the active and inactive forms. As noted, to satisfy the closest-prior-art requirement in this context, the patent owner must compare the “structurally closest” Case: 24-1053 Document: 13 Page: 12 Filed: 06/20/2025

forms of the claimed compound and lead compound. See Astrazeneca, 583 F.3d at 775 (citations omitted). Nor- mally, that requires determining the structural character- istics of what is said to be the claimed compound. See id. But the Board did not do so here, explicitly leaving open the question whether the challenged claims encompass both active and inactive topoisomers of plecanatide. Deci- sion at *16. We therefore will vacate and remand the Board’s decision that testing the claimed compound showed unexpected properties over the prior art. On re- mand, the Board should determine, based on the evidence put forward by the parties, whether plecanatide exhibits topoisomerism and whether the testing of the challenged claims should encompass both the active and inactive forms. Second, the Board did not address MSN’s contention that highly pure A-form uroguanylin could be maintained as a lyophilized powder. Guanylate cyclase receptor ago- nists can be administered in both solution and powder for- mulations. ’786 patent col. 13 ll. 24–27. If it is true, as MSN contends, that uroguanylin can be maintained and therefore tested in its active A form as a lyophilized pow- der, that would support MSN’s argument that the experi- ments did not use the closest prior art. But in finding that the closest prior art is a “mixture” of A- and B-form uroguanylin, the Board only cited evidence stating that uroguanylin solutions could not be maintained for ex- tended periods of time. Decision at *16 (cit- ing J.A. 004291). Its broad conclusion that a mixture of A- and B-form uroguanylin—regardless of its formulation—is the closest prior art therefore does not reasonably follow from the solution-specific evidence it cited in support. Finally, the Board did not address whether the experi- ments submitted by Bausch actually used what it deter- mined to be the closest prior art—a solution consisting of a mixture of A- and B-form uroguanylin. Of the four experi- ments, only two (analyzing cGMP production and pH Case: 24-1053 Document: 13 Page: 13 Filed: 06/20/2025

MSN LABORATORIES PRIVATE LTD. v. 13 BAUSCH HEALTH IRELAND LTD.

sensitivity) provide any information regarding the precise composition of the peptide solutions used, stating that the peptides were “purified (>95% purity) using a published procedure (38).” ’786 patent, col. 15 l. 55. But purity in this context can refer to either of two different things: pu- rifying uroguanylin topoisomers from one another or puri- fying uroguanylin from other compounds. Published procedure 38 (“Klodt”), does not appear to specify what level of purity the procedure it used is referring to. See J.A. 04696–04704. As for the other two experiments, nei- ther indicates whether the peptides used were purified at the topoisomer or compound level. J.A. 05372 (binding af- finity experiment: broadly stating without explanation that the peptides analyzed “were purified by RP-HPLC” prior to testing); J.A. 05070–87 (interconversion experi- ment: providing no information as to how the analyzed pep- tides were initially purified). On remand, the Board will need to reevaluate the experimental evidence consistent with its determination regarding what is the closest prior art compound as discussed above. To complicate this last issue further, MSN takes con- tradictory positions as to what level of purity Klodt refers. In the context of its closest-prior-art argument, MSN as- serts that Klodt refers to purity with respect to other com- pounds, not topoisomerism. See Oral Arg. at 3:56–4:50, available at https://oralarguments.cafc.uscourts.gov/de- fault.aspx?fl=24-1011_04072025.mp3 (Klodt “doesn’t say topoisomeric purity, it just says purity, [which refers to] ex- cluding other peptides, [not] isolating a particular topoiso- mer of a single peptide”); see also Reply Br. 5–6 (“The Board never accepted [that] ≥95%” purity meant the uroguanylin was “≥95% topoisomerically-pure A-form.”) (emphasis in original). But for its commensurate-in-scope argument, MSN asserts that the same procedure in Klodt was used to purify peptides at the topoisomer level. See Open. Br. 31 (stating that because plecanatide was purified using the procedure outlined by Klodt, only “purified A- Case: 24-1053 Document: 13 Page: 14 Filed: 06/20/2025

form” plecanatide was used in the cGMP production and pH sensitivity experiments). In sum, without more explanation from the Board as to its determination that the experiments compared the chal- lenged claims to the closest prior art, we cannot reach a judgment on MSN’s challenges to the Board’s holding of non-obviousness. Should the Board determine that the ex- periments cannot be shown to have compared the closest prior art compound, their value with respect to its unex- pected results determination is considerably diminished. CONCLUSION We have considered the parties remaining arguments and find them unpersuasive. For the foregoing reasons, we vacate the Board’s decision and remand for further pro- ceedings consistent with this opinion. VACATED AND REMANDED COSTS The parties shall bear their own costs.