US judge sets hearing for Biogen vs Elan dispute over Tysabri
This article was originally published in Scrip
A federal judge has agreed to give Biogen Idec expedited discovery relating to documents concerning an ongoing dispute with Elan. Elan is fighting a claim from Biogen Idec that its recent $1.5 billion deal with Johnson & Johnson placed it in material breach of the commercialisation pact for the multiple sclerosis drug Tysabri (natalizumab). A hearing, originally set for the end of August, has been moved to September 10th.
The case is before Judge Deborah Batts of the US District Court for the Southern District of New York. Elan had filed a complaint in the same court to prevent the "irreparable injury" that would be caused by a possible termination of its partnership with Biogen Idec (scripnews.com, August 7th, 2009). Biogen Idec had sent Elan a letter at the end of July asserting that a financing agreement in the Elan/J&J deal has assigned or delegated rights attendant to the 2000 Elan-Biogen collaboration agreement without Biogen's consent, and that, because of this breach, Elan is threatening to end the 2000 collaboration and take full control of the drug as early as September 26th.
The dispute erupted after Elan CEO Martin Kelly confirmed to investors an undisclosed part of the deal: that J&J had an option to help finance Elan's purchase of Biogen Idec's rights to Tysabri in the event that Biogen is acquired. While Biogen Idec alleges that the J&J deal is a material breach because neither party is allowed to sell or assign its rights to a third party without permission of the other partner, Elan claims that there is nothing in the pending J&J transaction that is contrary to the 2000 collaboration agreement. (Elan disputes Biogen's view that it has effectively given J&J the right to buy Biogen's stake in Tysabri; Elan claims it would be the acquirer of Biogen's stake.)
Some Biogen Idec shareholders such as activist investor Carl Icahn have been advocating a sale of Biogen to a larger firm.
The July 28th letter had triggered what is known as a 60-day cure period, during which time the dispute needs to be resolved. Otherwise, the non-breaching party can terminate the pact and take full control of Tysabri.
Judge Batt's August 14th order granting Biogen's emergency application for expedited discovery outlines numerous documents that Biogen Idec has requested from Elan. These were to be provided by August 24th, and include:
*All documents from January 1st, 2009 to the present concerning or relating to any agreements, transactions, contracts, arrangements or understandings between or among any of Elan or Elan plc, on the one hand, and Janssen Pharmaceutical (JNJ) or J&J, on the other hand (whether past, present or future, whether actual or contemplated, whether written or oral), including but not limited to the full "set of agreements" between Elan plc and J&J/JNJ described in the [August 6th] complaint.
*All documents concerning, supporting or refuting the allegation in paragraph 19 of the complaint that a termination of the Elan-Biogen collaboration agreement would "saddl[e] Elan with draconian penalties including ongoing expense and risk-sharing obligation as to which Elan would be unable to protect itself…and could constitute the failure of a representation in the Elan-JNJ Financing Agreement and could expose Elan and Elan plc to claims by JNJ."
*All documents concerning communications by, between, or among Elan or Elan plc, on the one hand, and JNJ or J&J on the other hand, concerning Biogen or Tysabri.
*All documents concerning, supporting or refuting Elan's assertions in the complaint that "Biogen's consent is not required for Elan to enter into and consummate the Elan-JNJ Financing Agreement" and/or that "Elan's entry into and performance of the Elan-JNJ Financing Agreement without Biogen's consent does not constitute a material breach of the Elan-Biogen Collaboration Agreement," and/or that the "Elan-JNJ Financing Agreement does not constitute any assignment or delegation of rights under the Elan-Biogen collaboration agreement."
Elan is seeking a declaratory judgement that its Elan-JNC Financing Agreement does not conflict with the 2000 collaboration agreement.