On 1 December 2025, the Full Federal Court of Australia handed down what can only be described as a landmark decision regarding what can, or cannot, qualify for a patent term extension (PTE) in Australia. This article briefly sets out the decision in Otsuka Pharmaceutical Co Ltd v Sun Pharma ANZ Pty Ltd [2025] FCAFC 161  (Otsuka) as well as the current practice from IP Australia

Statutory Framework and the Role of Section 70

Section 70 of the Patents Act 1990 governs applications for PTEs. Key requirements include that one or more “pharmaceutical substances per se” must be disclosed in the complete specification and fall within the scope of the claims (s 70(2)(a)). Goods containing or consisting of the substance must be included on the Australian Register of Therapeutic Goods (ARTG), with at least five years elapsing between the patent date and first regulatory approval (s 70(3)). The phrase “per se” derives from earlier judicial interpretations, such as in Boehringer Ingelheim International GmbH v Commissioner of Patents [2001] FCA 647, meaning “by or in itself, intrinsically,” without reference to methods, processes, or additional features.

Schedule 1 of the Act defines “pharmaceutical substance” as follows:

…. means 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 Full Federal Court’s decision in Otsuka represents the first Australian appellate court judicial consideration and clarification of the term “pharmaceutical substance”, particularly in relation to section 70(2)(a).

The Full Court Decision

Otsuka Pharmaceutical Co., Ltd is the patentee of Australian Patent No. 2004285448 (the Patent), entitled “Controlled release sterile injectable aripiprazole formulation and method”. The Patent’s standard 20-year term expired on 18 October 2024. The Patent describes and claims controlled release aripiprazole formulations. The only active pharmaceutical ingredient (API) in the claimed formulations is aripiprazole.

Aripiprazole is a known antipsychotic that was listed on the ARTG in 2003. The Patent addressed patient compliance by providing sustained release over weeks via particle size control (1–10 microns) and vehicles (suspending, bulking, and buffering agents). Independent claims 1 and 16 are relevant to the PTE challenge. Broadly, claim 1 is directed to a controlled-release injectable formulation releasing aripiprazole over at least one week, whilst claim 16 is directed to a freeze-dried formulation releasing over at least two weeks upon reconstitution – both claims included other integers but are not recited here as the other constituents are not relevant to the decision.

Using claim 16 as its basis, Otsuka obtained a PTE to 2029 based on ARTG listings for ABILIFY MAINTENA (freeze-dried kits) based on a single alleged “pharmaceutical substance”.

Otsuka is an appeal from a single judge decision in Sun Pharma ANZ Pty Ltd v Otsuka Pharmaceutical Co Ltd [2025] FCA 44 (Primary Judgement). The Primary Judgement held that the PTE claims were invalid on the basis of lack of enablement and lack of clarity, and the PTE being invalid for failing to comply with s70(2)(a) of the Patents Act.

Otsuka appealed the Primary Judgement and Sun Pharma expanded their PTE invalidity argument by contending that the PTE formulations were not “pharmaceutical substances” within the meaning of s 70(2)(a) of the Patents Act, because only APIs, and not formulations, fall within the meaning of that term.

Ultimately, the Full Court agreed with Sun Pharma and arrived at this conclusion through in-depth statutory construction, which is beyond the scope of this article.

The Court unanimously held that “pharmaceutical substance” is confined to active pharmaceutical ingredients (APIs)—the therapeutically active components—and excludes formulations, such as combinations of an API with inert excipients, delivery systems, or dosage forms. The Full Court ruling invalidates patent term extensions (PTEs) based on formulation claims and aligns the regime more closely with its policy intent according to the Court’s interpretation: compensating for regulatory delays primarily associated with new active entities.

The Court held that only aripiprazole – the API – qualifies as a statutorily defined pharmaceutical substance, as it alone binds to brain receptors for a therapeutic effect. Excipients are inert; the formulation facilitates delivery but does not interact therapeutically. Post-administration or reconstitution, the formulation “ceases to exist,” leaving only the API, according to the Court’s reasoning.

The Patentee filed a special leave application to the High Court of Australia seeking to appeal the Full Court decision. If the High Court elects not to hear the appeal, the Full Court decision as described herein is law.

IP Australia Practice as a result of the Full Court Decision

The ramifications of the Full Court’s decision are widespread, not least by creating a raft of “zombie” PTE extensions – that is, extended terms based on pharmaceutical substances that fall outside the court’s interpretation of this term and thus are potentially invalid within the law as it stands.

IP Australia paused requests for PTE whilst considering the Full Court decision. As of 20 February 2026, IP Australia resumed processing of some PTE applications as set out in an Office Notice.

Specifically, we have resumed processing of applications that we consider are not impacted by the Full Federal Court’s decision.

Due to the pending special leave application to the High Court of Australia, we continue to pause processing for applications that do or may relate to pharmaceutical formulations impacted by the decision, including new and pending applications and the granting of accepted applications.

IP Australia processing of PTE applications based on formulations remain suspended.

An important note is that IP Australia will not refuse a PTE application solely due to missed response deadlines where processing remains paused, and extensions of time will be available where appropriate.

IP Australia’s Patent Manual of Practice and Procedure has also been updated to reflect changes in patent examination in light of the Full Court’s decision. Of note, the Manual now states that a “pharmaceutical substance” is limited to the pharmaceutical active ingredient and excludes formulations or compositions of pharmaceutical active ingredients with excipients or carriers. The Manual explicitly recites the Full Court’s decision that “The Full Court held that claims to formulations, dosage units, compositions and the like were not directed to pharmaceutical substances. Consequently, only claims directed to the actives per se, such as compounds per se or peptides per se, relate to pharmaceutical substances.” That is, claims directed to pharmaceutical compositions that include therapeutically inactive components, such as excipients, will not be eligible for a PTE as the law currently stands.

The Manual also clarifies that a “mixture or compound of substances” refers to a mixture or compound of pharmaceutical active ingredients and does not include formulations or compositions of APIs with excipients and/or carriers.

Until the High Court of Australia rules otherwise, IP Australia has adopted the approach set down by the Full Court in Otsuka.