Applying for a patent term extension in Australia? The formulation for success has changed

Formulation-based PTEs may now be vulnerable to revocation 10 min read

On 1 December 2025, the Federal Court of Australia exercising its appellate jurisdiction (the Full Court) handed down a bombshell decision: while patents for new active pharmaceutical ingredients (APIs) are eligible for patent term extensions (PTE), patents for new formulations of APIs are not.

This represents a significant departure from almost 20 years of Australian authority and means that many existing PTEs are now vulnerable to challenge and revocation.

On 18 December 2025 the patentee, Otsuka Pharmaceutical Co Ltd (Otsuka), applied for special leave to appeal this judgment to the High Court of Australia. Unless and until Otsuka is successful in its special leave application and any resulting appeal, the Full Court decision will remain the legal position in Australia.

Who in your organisation needs to know about this?

In pharmaceutical and biotechnology companies with operations or dealings in Australia:

• In-house legal counsel.
• Executives and managers.
• Any other strategic decision-makers in relation to pharmaceutical products.

Key takeaways

• Unless and until Otsuka Pharmaceutical Co Ltd v Sun Pharma ANZ Pty Ltd [2025] FCAFC 161 is successfully appealed, only APIs will be eligible for PTE under Australian law, while patents for formulations of APIs will no longer be eligible.
• Many existing PTEs are now vulnerable to challenge. The Commissioner of Patents may revoke formulation-based PTEs under its statutory power to rectify the Australian Patent Register, generics and other industry competitors may commence court proceedings seeking to revoke such PTEs, and/or they may launch at risk of infringing patents during the extended period in the knowledge that this Full Court decision has substantially mitigated such risk.
• It is important for pharmaceutical patentees to urgently review their portfolios to identify any PTEs that may now be vulnerable and consider the commercial impact of the loss of such PTEs.
• Implications of loss of PTE for pharmaceutical patentees may include, for example: disruption to market and workforce plans, forecasts and resourcing in relation to affected pharmaceutical products; impacts on relevant licensing, marketing and similar contractual arrangements; timeline changes for proposed product launches; and the need for other strategic decisions in relation to loss of exclusivity and early generic entry.

Overview of the Australian PTE regime

Before a pharmaceutical substance can be marketed in Australia, it must receive regulatory approval from the Therapeutic Goods Administration and be included on the Australian Register of Therapeutic Goods (the ARTG). This can take some time, and so it may be several years before the owner of a granted patent for a pharmaceutical substance is able to commercialise the patent. This is the problem the PTE regime is designed to alleviate.

Under section 70 of the Patents Act 1990 (Cth) (the Act), a patent will be eligible for a PTE of up to five years if it satisfies the following requirements:

• The patent specification must disclose one or more pharmaceutical substances per se, or one or more pharmaceutical substances when produced by a process that involves the use of recombinant DNA technology.
• Such substance(s) must, in substance, fall within the scope of the patent claim or claims.
• Goods containing, or consisting of, at least one of the substances must be included on the ARTG.
• The period beginning on the date of the patent and ending on the first regulatory approval date for such substance must be at least five years.

Importantly, the Act defines 'pharmaceutical substance' 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,

but does not include a substance that is solely for use in in vitro diagnosis or in vitro testing.

The Act defines 'therapeutic use' as:

use for the purposes of:

(a) preventing, diagnosing, curing or alleviating a disease, ailment, defect or injury in persons;

(b) influencing, inhibiting or modifying a physiological process in persons; or

(c) testing the susceptibility of persons to a disease or ailment.

Background to Otsuka v Sun Pharma

Otsuka is the patentee of Australian Patent No. 2004285448 for a controlled release formulation of aripiprazole, which is an antipsychotic used in the treatment of schizophrenia and bipolar disorder that has been known since the 1990s. In the claimed invention, aripiprazole is the only API, and the other ingredients in the formulation—though they ensure the aripiprazole is released in the body slowly over time, thus reducing the required frequency or dosing of the drug—have no independent therapeutic effect.

Otsuka successfully sought a PTE in respect of its controlled release aripiprazole product ABILIFY, which extended the patent expiry date by almost five years, from 23 October 2024 to 25 July 2029. Sun Pharma ANZ Pty Ltd (Sun Pharma) commenced proceedings challenging the validity of the PTE on several grounds, including that formulations are not 'pharmaceutical substances' within the meaning of s70 and so they are not eligible for PTEs.

At first instance the primary judge, following a line of authority since 2006, held that a PTE can be granted in respect of a formulation, but found the PTE to be invalid on other grounds. Otsuka appealed, and Sun Pharma filed a notice of contention raising, among other grounds, the formulation argument again.

Full Court decision

Otsuka was partially successful in its appeal, but because Sun Pharma was largely successful in its notice of contention, the overall result remained the same: the PTE is invalid.

In this Insight, we focus on the formulation ground, which boiled down to one question of statutory interpretation: is the term 'pharmaceutical substance' in s70 broad enough to capture formulations of APIs?

Justices Burley, Rofe and Owens of the Full Court applied the orthodox rules of statutory construction and conducted a detailed review of extrinsic materials, concluding unanimously that the term 'pharmaceutical substance' cannot accommodate formulations. In particular, the Full Court held that the natural meaning of paragraphs (a) and (b) in the statutory definition, particularly the references to interacting with and acting on, limits the application of the definition to substances that are active and in themselves produce a therapeutic effect. The Full Court added that this interpretation is consistent with the broader purpose and policy objectives of the PTE regime, as the time, effort and expense required to obtain regulatory approval for a new formulation of an already-approved API are not as burdensome as they are for a new API.

The Full Court did not appear to expressly reconcile this interpretation with the words 'including a mixture or compound of substances' in the opening words of the statutory definition. On one view, these words contemplate the inclusion of formulations.

The Full Court rejected the various arguments advanced by Otsuka, including the following:

• The legislature has not amended the definition of 'pharmaceutical substance' to clarify its scope since it was first introduced in 1989, even when given the opportunity to do so after Federal Court decisions in 2006 and 2013 that held that formulations are eligible for PTEs. While the Full Court accepted that a failure to amend legislation may, in some circumstances, support continued adherence to judicial interpretation of that legislation, the Full Court held that it was not appropriate in this case as 'pharmaceutical substance', properly construed, has had a consistent meaning since its introduction.
• The legislature would have used the term API instead of 'pharmaceutical substance' if it intended to exclude formulations. The Full Court agreed with Sun Pharma that the term API, which is commonly used in the patent context to describe 'small' molecules (such as aripiprazole) that interact with a human physiological system, would be too narrow to encompass all of the types of active substances for therapeutic use that s70 is intended to capture, such as certain antibiotics, antibodies and antidotes.
• Even though it does not take as long to obtain regulatory approval for formulations, this should not be a relevant factor as the five-year minimum requirement in s70 acts as a guardrail against undeserved extensions. The Full Court disagreed, stating that the evident purpose of the five-year minimum is to limit, rather than 'dramatically increase', the circumstances in which the PTE regime will apply (although, arguably, Otsuka was merely advocating for maintenance of the status quo, which we discuss below).

Precedent overturned

The Full Court acknowledged the precedent set by three unappealed Australian judgments in the last 20 years—in each, a single judge of the Federal Court had accepted that the PTE regime extends to formulations. However, the Full Court concluded that 'having given consideration to the reasoning in each decision, we remain unpersuaded that the definition of "pharmaceutical substance" includes formulations':

• In Pharmacia Italia SpA v Mayne Pharma Pty Ltd [2006] FCA 305 in 2006, the judge held that a patent for anthracycline glycosides (known anticancer drugs) in a new type of solution was entitled to a PTE. His Honour, responding to a party's argument that the introduction of any non-active ingredient into a product disentitles it from being a 'pharmaceutical substance', considered that this would effectively render s70 useless given that almost every pharmaceutical product is made up of both therapeutically active and inactive ingredients.
• In Spirit Pharmaceuticals Pty Ltd v Mundipharma Pty Ltd [2013] FCA 658 in 2013, the judge held that a patent for a controlled release formulation of oxycodone was entitled to a PTE, including because the product achieves a therapeutic effect 'by at least two chemical interactions in the human physiological system'. On that point, the Full Court considered that interactions in the human physiological system are not sufficient; there needs to be an interaction with the human physiological system.
• In Cipla Australia Pty Ltd v Novo Nordisk A/S [2024] FCA 1414 in 2024, the judge held that a patent for the known API liraglutide in a formulation suitable for injection was entitled to a PTE. His Honour had reviewed some of the same extrinsic materials that the Full Court discusses in this case, but unlike this Full Court, his Honour concluded that nothing in the terms of those materials supported excluding formulations from the statutory definition of 'pharmaceutical substance'.

The Full Court also referred to several past Full Court decisions about various aspects of the PTE regime. Although the Full Court considered that those judgments were all consistent with its interpretation of 'pharmaceutical substance' in this case, the Full Court accepted that none of them directly and unequivocally settled the meaning and scope of the statutory definition.

Actions pharmaceutical patentees can take now

Review your Australian patent portfolio to identify any formulation-based PTEs that may now be vulnerable to revocation

There are three main risks in relation to such PTEs:

• It is open to the Commissioner of Patents to proactively revoke the PTEs under its power in s191A of the Act to rectify the Australian Patent Register. Whether the Commissioner is minded to do so, particularly when there is a possibility that the decision of the Full Court will be overturned by the High Court, is another question.
• Generic pharmaceutical companies and other industry competitors may commence court proceedings seeking to revoke such PTEs in order to 'clear the way' for earlier entry of their products into the market.
• During the extension period, generic pharmaceutical companies and other industry competitors may be emboldened to launch at risk of infringing the patent, knowing that the Full Court decision has substantially reduced the risk of being successfully sued for patent infringement.

Consider the commercial consequences of loss of PTE and reassess your commercial strategy accordingly

Implications of loss of PTE may include, for example:

• Disruption to market and workforce plans, forecasts and resourcing in relation to affected pharmaceutical products.
• The impact on licensing, marketing and similar contractual arrangements related to affected pharmaceutical products.
• Changes to the timing of product launches and pipeline.
• The need to make other strategic decisions in relation to loss of exclusivity and early generic entry.

Review patent filing strategies to maximise the ability to secure future PTEs