On 1 December 2025, the Full Court of the Federal Court of Australia delivered one of the most notable patent decisions of the year in Otsuka Pharmaceutical Co Ltd v Sun Pharma ANZ Pty Ltd [2025] FCAFC 161, clarifying the scope of the patent term extension (PTE) provisions of the Patents Act 1990 (Cth). 

The Full Court concluded that a "pharmaceutical substance" refers only to “active” ingredients, and that formulations are not included in this definition. The decision will have major implications in Australia, preventing originator pharmaceutical companies from obtaining extended protection for secondary patents, such as those claiming new formulations of known drugs, and presenting new opportunities for earlier generic market access for a host of products that may be covered by invalid PTEs.

Background and first instance decision

As outlined in our previous article, Otsuka is the patentee of Australian Patent No. 2004285448 (Patent), covering certain controlled release injectable and freeze-dried formulations of aripiprazole, an antipsychotic agent. The patent’s standard term expired on 18 October 2024, but Otsuka obtained a PTE based on ABILIFY MAINTENA kits registered on the ARTG that contained the formulations claimed in the Patent.  Sun Pharma challenged the validity of the PTE, arguing that the relevant claims (the PTE Claims) were invalid and that the PTE was improperly granted.

At first instance,[1] the primary judge found that:

• eight of Otsuka’s ten asserted “pharmaceutical substances” did not fall within the scope of any of the PTE Claims as they did not take all of the essential integers of those claims, meaning the PTE was improperly granted; and
• each of the PTE Claims was invalid for failing to define the invention and lacking clarity.

Otsuka appealed the above findings of the primary judge. On that appeal, Sun Pharma argued that the finding that the PTE was invalid should be upheld but for additional or alternative reasons, including that formulations are not “pharmaceutical substances” within the meaning of that term in the Patents Act.  

The Full Court decision

The Full Court dismissed Otsuka’s appeal but upheld the finding that the PTE was invalid on different grounds from those found by the primary judge.

A formulation is not a “pharmaceutical substance”

The central issue on the appeal was whether a formulation (i.e. a mixture of an API and excipients) falls within the definition of a “pharmaceutical substance” eligible for a PTE.  Prior to this decision, three decisions of single judges at first instance had held that the definition of “pharmaceutical substance” could include a formulation, but none of these decisions was appealed. As such, this was the first time the Full Court had the opportunity to weigh in and directly consider the question.

The Full Court found that the definition of “pharmaceutical substance” is restricted to new active substances that exert a therapeutic effect, and does not extend to new formulations, delivery methods or dosage forms containing known substances.  Key to the Full Court’s reasoning was the requirement that “the application of a “pharmaceutical substance” 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”, which in the Full Court’s view “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 with such a substance”. The Full Court observed that excipients, by definition, are not therapeutically active, and 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. 

The Full Court held that the natural and ordinary meaning of the words of the definition of “pharmaceutical substance” “operates to limit substances falling within the definition to those which are “active” (i.e., capable of “interacting with” a human physiological system in specified ways, or “acting on” certain harmful presences).” 

The Full Court also considered that the legislative history and policy rationale for the current term extension regime was always intended to compensate for regulatory delays in bringing new active substances to market, not for improvements in delivery or formulation of known substances.  The Court found that the reasoning in earlier first instance decisions (such as Pharmacia, Spirit and Cipla) that had found that formulations could qualify were incorrect, and preferred the construction given to the definition in the Full Court authorities of Alphapharm and Boehringer, which focused on the API. 

As a result, the Full Court held that claims of the Patent directed to particular formulations of a known active ingredient did not justify the grant of Otsuka’s PTE. 

Lack of clarity and definition

Otsuka did succeed on its argument that the primary judge had incorrectly found that the PTE Claims failed to define the invention and lacked clarity based on the wording of a particular feature in the claims concerning controlled-release of aripiprazole (as discussed in our previous article). 

• The Full Court found that the primary judge had “set the bar too high” regarding claim clarity and found that the question is not to be based on a hypothetical consideration of whether or not infringement of any embodiment within the scope of the claim may be difficult to ascertain.
• The Full Court found that the relevant question for the PTE Claims is pragmatic, focusing on a specific formulation rather than hypotheticals that were not in dispute.  Where a real-world example of the test was available, it demonstrated that a skilled person could determine if that example fit within the scope of the claims set out in the Patent.

However, while Otsuka succeeded on this ground of its appeal, it was ultimately a hollow victory given the Full Court’s decision that the PTE was invalid, having been based on claims to formulations, rather than a “pharmaceutical substance”.

Conclusion

Prior to this decision, the Australian Patent Office has adopted a practice of allowing PTEs on formulation patents, based on the decisions in Pharmacia and Spirit. This practice has been adopted despite the apparent difficulties in the reasoning in those decisions, and despite the policy rationale of the term extension provisions as expressed in the extrinsic materials that introduced them. This practice has also led to inconsistent outcomes with no policy rationale: claims to oral formulations and injectable formulations have been allowed PTEs as “a mixture of substances”, while claims to transdermal patch formulations have been denied PTEs because they include a backing layer that is a “separate physical integer”. 

The Full Court’s decision in this case is the first time an appellate court has directly considered whether a claim to a formulation of a known API falls within the scope of the definition of “pharmaceutical substance”. The decision is a significant course correction by confirming that PTEs are only available for patents claiming new active pharmaceutical substances, not for new formulations, delivery methods, or dosage forms of known substances.  

While Otsuka may yet seek special leave to appeal to the High Court, this decision narrows the scope for extending the term of patent protection in Australia and aligns with a policy of rewarding primary research in new and inventive pharmaceutical substances, rather than allowing extensions on secondary patents or incremental improvements. The decision also renders a number of PTEs vulnerable to challenge.