By Julie Steenhuysen
CHICAGO (Reuters) - A federal appeals court affirmed the right of Myriad Genetics to patent two genes linked to breast cancer, overturning a lower court ruling that threatened a key element of the biotech business.
The U.S. Court of Appeals for the Federal Circuit in a ruling on Friday backed Myriad's right to patent two "isolated" human genes -- BRCA1 and BRCA2 -- that account for most inherited forms of breast and ovarian cancers.
Women who test positive using Myriad's gene test, called BRACAnalysis, have an 82 percent higher risk of breast cancer and a 44 percent higher risk of ovarian cancer in their lifetimes.
Some groups have protested that patenting human DNA is immoral and unethical and impedes genetic research. But attorneys representing biotechnology companies expressed relief, saying the lower court's decision, if left standing, could have been potentially devastating to the industry.
"It would completely turn the industry upside down," said James Crowne, a spokesman for the American Intellectual Property Law Association.
The precedent-setting case is likely to be further appealed, either to the full bench of the appeals court or to the U.S. Supreme Court.
The lawsuit filed by the American Civil Liberties Union and the Public Patent Foundation on behalf of the Association for Molecular Pathology and more than 20 other plaintiffs had sought to have Myriad's gene patents invalidated.
One member of the three-judge appellate panel dissented, saying that despite Myriad's process of isolating a human gene it still could not be patented.
"We're not overjoyed but we're breathing a sigh of relief," said Jim Mullen, a patent expert with the law firm Morrison Foerster. "Myriad is almost certainly going to go to the Supreme Court."
The appeals court also said that Myriad's method for screening potential therapies was patentable.
The judges did, however, agree with the district court that Myriad's method of analyzing DNA sequences did not involve sufficient transformation, and thus could not be patented.
The court's backing for the patents on the two genes was very important to Myriad's molecular diagnostic testing, Richard Marsh, the company's general counsel, told Reuters.
"It's even more important for the biotech industry because, going forward, personal medicine is very reliant on isolated DNA," he said.
"That is a very significant result that is very important to the biotech industry," Wexler said.
"That ruling will continue to have the effect of preventing our clients, including geneticists, from doing the testing and research they want to do," Park said. "We'll certainly be consulting with our clients about next steps both with this court and the Supreme Court."
The industry is also watching a case (Prometheus Laboratories v. Mayo Collaborative Services) at the Supreme Court over whether certain diagnostic tests can be patented.
Goldman Sachs analyst Isaac Ro said the Myriad ruling lifts a "near-term" threat to investors, but because of the major ramifications for genetic research and the biotech industry, he expects the case to be heard by the Supreme Court before 2012.
The BRCA franchise represents 88 percent of Myriad's sales, which were $27.9 million in the most recent quarter, Ro said.
Shares of Myriad closed slightly lower on Friday, down 0.3 percent to $21.27, underperforming the NYSEArca biotech index which gained 0.7 percent.
(Additional reporting by Debra Sherman in Chicago and Diane Bartz in Washington; Editing by Lisa Von Ahn, Phil Berlowitz)