Antitrust Law Daily Termination of agreement to develop drug did not violate antitrust, tort laws
Wednesday, September 13, 2017

Termination of agreement to develop drug did not violate antitrust, tort laws

By J. Preston Carter, J.D., LL.M.

The federal district court in Sacramento granted a biotech company’s motion to dismiss all claims brought against it by another biotech company that claimed the termination of an agreement with a third biotech company to develop a drug violated federal and state antitrust and state tort laws (Ixchel Pharma, LLC v. Biogen Inc., September 12, 2017, Shubb, W.).

In January 2016, Ixchel Pharma, LLC, and Forward Pharma FA Aps entered into an agreement to develop a drug for the treatment of a neurological disorder using the active pharmaceutical ingredient dimethyl fumarate (DMF). Under the agreement, Forward would conduct and pay for clinical trials and seek FDA approval. Upon FDA approval, Forward would manage and pay for the manufacturing and commercialization of the drug with Ixchel’s assistance. Ixchel would be entitled to royalties from the sale of the drug. In October 2016, Forward began working to set up the trials.

Biogen Inc. markets the drug Tecfidera, which also has DMF as the active pharmaceutical agreement, and which is the only FDA-approved drug containing DMF for the treatment of neurological disorders in the United States. In January 2017, Biogen and Forward settled a dispute between them in which Forward agreed to terminate contracts with Ixchel regarding the development of DMF drugs.

When Forward terminated the agreement with Ixchel, Ixchel sued Biogen, alleging: violation of the Sherman Act; tortious interference with contract; intentional and negligent interference with prospective economic advantage; violation of the California Cartwright Act; and violation of California’s Unfair Competition Law (UCL).

Sherman Act and Cartwright Act violations. The court determined that Ixchel lacked antitrust standing because it failed to sufficiently allege that it is a current or potential competitor in the market for drugs containing DMF. Ixchel claimed that Biogen and Forward entered into unlawful agreements to restrict the development of any drugs containing DMF as an active pharmaceutical ingredient for the treatment of neurological diseases in violation of the Sherman Act, 15 U.S.C. §1, and California’s Cartwright Act, Cal. Bus. & Prof. Code §16700, et seq. The court said Ixchel is not a current competitor because it concedes that "Biogen is currently the only company in the world selling any drug in that market." Also, it is not a potential competitor because it granted Forward the exclusive right to obtain FDA approval for, market, produce, and sell, the DMF drug.

Tortious interference. Ixchel alleged that Biogen intentionally and tortuously interfered with Ixchel’s agreement with Forward by causing Forward to breach the agreement. However, the court stated that the agreement was an at-will contract because Forward could terminate it at any time. It determined that Ixchel failed to allege any independently wrongful act by Biogen and that Biogen should not be held liable for seeking to enforce its own intellectual property rights and settling a dispute with Forward.

Interference with economic advantage. Ixchel also alleged that Biogen intentionally and negligently interfered with Ixchel’s economic relationship with Forward when Biogen and Forward entered into their agreement. The court, however, readily dismissed this claim, stating that Ixchel failed to allege independently wrongful conduct, "a necessary requirement to sustain its claim for interference with prospective economic advantage."

California’s UCL. Finally, the court dismissed Ixchel’s claim that Biogen violated the California Unfair Competition Law. The opinion stated that unfairness, under the UCL, must be "tethered to some legislatively declared policy or proof of some actual or threatened impact on competition." Ixchel, however, failed to identify and sufficiently allege conduct tethered to actual or threatened impact on competition. Its allegations were limited to "speculative harms to competition," the judge said.

The case is No. 2:17-00715 WBS EFB.

Attorneys: Christopher J. Judge (Banys, PC) for Ixchel Pharma, LLC. Mark Samuel Popofsky (Ropes & Gray LLP) for Biogen Inc.

Companies: Biogen Inc.; Forward Pharma FA ApS; Ixchel Pharma, LLC

MainStory: TopStory Antitrust StateUnfairTradePractices CaliforniaNews

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