Asahi Kasei Pharma Corp. v. Actelion Ltd.

• Citation: 222 Cal.App.4th 945,169 Cal.Rptr.3d 689
• Decision Date: 12 March 2014
• Docket Number: A133927
• Parties: ASAHI KASEI PHARMA CORPORATION, Plaintiff and Appellant, v. ACTELION LTD., et al., Defendants and Appellants.
• Court: California Court of Appeals

222 Cal.App.4th 945

169 Cal.Rptr.3d 689

ASAHI KASEI PHARMA CORPORATION, Plaintiff and Appellant,

v.ACTELION LTD., et al., Defendants and Appellants.

A133927

Court of Appeal, First District, Division 5, California.

Filed December 18, 2013

As Modified on Denial of Rehearing January 16, 2014

Certified for Partial Publication.^*

Review Denied March 12, 2014

See 5 Witkin, Summary of Cal. Law (10th ed. 2005) Torts, § 732 et seq.

Superior Court of San Mateo County, No. CIV478533, Marie S. Weiner, Judge.

Morgan, Lewis & Bockius, San Francisco, Thomas M. Peterson, Rollin B. Chippey II, Benjamin P. Smith, Christopher J. Banks and Tera M. Heintz for Plaintiff and Appellant.

Mayer Brown, Evan M. Tager, Craig W. Canetti, Lee N. Abrams, Donald M. Falk, Palo Alto; Cotchett, Pitre & McCarthy, Burlingame, Joseph W. Cotchett and Nancy L. Fineman for Defendants and Appellants Actelion Ltd., Actelion Pharmaceuticals Ltd., Actelion Pharmaceuticals US, Inc. and Actelion U.S. Holding Company.

Ropers, Majeski, Kohn & Bentley and Susan H. Handelman, Redwood City, for Defendants and Appellants Jean–Paul Clozel, Martine Clozel and Simon Buckingham.

Bruiniers, J.

Asahi Kasei Pharma Corporation (Asahi) is a Japanese corporation which develops and markets pharmaceutical products and medical devices. One of its products is Fasudil, a drug which Asahi sought to market in the United States (U.S.) for treatment of pulmonary arterial hypertension (PAH). In order to obtain regulatory approvals for Fasudil, and to develop and commercialize it in North America and Europe, Asahi entered into a licensing and development agreement (the License Agreement) with CoTherix, Inc. (CoTherix), a California-based biopharmaceutical company focused on developing and commercializing products for the treatment of cardiovascular disease. Appellant Actelion Ltd. is a Swiss pharmaceutical company that markets a PAH treatment drug, bosentan (under the tradename Tracleer), and holds the dominant share of the relevant market. Actelion Ltd., through a subsidiary, acquired all of the stock of CoTherix, and concurrently notified Asahi that CoTherix would discontinue development of Fasudil for “business and commercial reasons.”

Asahi filed suit in the San Mateo County Superior Court against CoTherix, Actelion Ltd., Actelion Pharmaceuticals Ltd., Actelion Pharmaceuticals US, Inc., Actelion U.S. Holding Company (collectively Actelion), as well as three Actelion executives.¹ The case went to trial on four of Asahi's claims: intentional interference with the License Agreement; interference with Asahi's prospective economic advantage; breach of a confidentiality agreement between Actelion and CoTherix (on a third-party beneficiary theory); and breach of confidence.¹ The jury returned a unanimous liability verdict against Actelion and the Individual Defendants (collectively Defendants), awarding nearly $546.9 million in compensatory damages, and finding that all Defendants acted with malice, oppression or fraud. The jury awarded punitive damages against the Individual Defendants. Posttrial, the court offset the verdicts for the amounts previously awarded to Asahi in an International Chamber of Commerce arbitration proceeding (ICC Arbitration) against CoTherix. Defendants' motions for judgment notwithstanding the verdict were denied. The trial court denied a motion for new trial on damages, conditioned on Asahi's acceptance of a remittitur of certain damage categories.

2.. In Asahi Kasei Pharma Corp. v. CoTherix, Inc. (2012) 204 Cal.App.4th 1, 138 Cal.Rptr.3d 620 (Asahi I ), we affirmed the trial court's grant of summary adjudication of Asahi's claims under the Cartwright Act, the California antitrust statute (Bus. & Prof.Code, § 16700 et seq.).

Defendants contend, inter alia, that any actions taken to interfere with the License Agreement were privileged and not actionable, and that Asahi's damage claims are speculative and unsupported. The Individual Defendants further challenge the award of punitive damages. Asahi cross-appeals from the conditional new trial order. In the published portion of this opinion we address the scope of liability for tortious interference with a contract by a nonparty to the contract, and we affirm the judgment in favor of Asahi. In the nonpublished portion of our decision we reject the challenges of Actelion and the Individual Defendants to the trial court's evidentiary rulings and to the damage awards, and we deny Asahi's cross-appeal.

I. Background and Procedural History

While many of the underlying facts were vigorously disputed at trial (and in the briefing on this appeal), we focus on the evidence and inferences supporting the judgment. (Lewis v. Fletcher Jones Motor Cars, Inc. (2012) 205 Cal.App.4th 436, 443, 140 Cal.Rptr.3d 206 [we imply “all necessary findings supported by substantial evidence” and “ ‘construe any reasonable inference in the manner most favorable to the judgment, resolving all ambiguities to support an affirmance’ ”].) ³

Fasudil was originally formulated in 1984 for intravenous use in treatment of cerebral vasospasm after subarachnoid hemorrhage, a type of stroke, and received regulatory approval in Japan for this use in 1995. Asahi later secured approval in China. Fasudil is protected by a “composition of matter” patent covering the molecule until 2016, and by a formulation patent until 2019.

In 1997, new research showed Fasudil could inhibit a human body protein known as Rho-kinase, which contributes to constriction of smooth muscle in arterial blood vessels. Studies found inhibition of Rho-kinase could slow or even reverse cellular changes associated with certain diseases. One such disease is PAH, a chronic, progressive and often fatal disease that is characterized by severe constriction and obstruction of the pulmonary arteries. Studies indicated that Fasudil had the potential to promote healing of blood vessel lesions and limit the scarring associated with PAH.

Development of Fasudil for new medical uses was commercially attractive to Asahi if it could be done expeditiously. To recoup investment, a drug must be developed sufficiently early in its patent life to ensure an adequate period of market exclusivity after receipt of regulatory approval and before generic competition arrives.

In order to gain regulatory approvals necessary for new medical uses of Fasudil, Asahi entered into the License Agreement with CoTherix on June 23, 2006. CoTherix had previously obtained regulatory approval for its own inhaled PAH treatment drug, Ventavis. Under the terms of the License Agreement, CoTherix agreed to obtain U.S. and European regulatory approvals for Fasudil to treat certain diseases, and to develop and commercialize it in those markets. CoTherix was to develop oral and inhaled formulations of Fasudil for treatment of PAH, and an oral formulation of Fasudil for treatment of stable angina (SA). It was required to use commercially reasonable efforts to develop Fasudil, and to obtain U.S. regulatory approvals for Fasudil as soon as reasonably practicable. (Asahi I, supra, 204 Cal.App.4th at p. 4, 138 Cal.Rptr.3d 620.) Pursuant to the License Agreement, CoTherix prepared a development plan projecting that it would complete development and file for regulatory approval of extended release oral Fasudil (ER Fasudil) for treatment of SA in 2009, ER Fasudil for treatment of PAH in 2010, and inhaled Fasudil for treatment of PAH in 2011. Asahi considered CoTherix's ability to move quickly in clinical development of Fasudil to be particularly important to preservation of Fasudil's market exclusivity before facing generic competition.

Actelion Ltd. has, since December 2001, marketed Tracleer, an endothelin receptor antagonist and oral PAH drug that has been approved by the Food and Drug Administration (FDA) for use in the U.S.⁴Tracleer is what is known in the pharmaceutical industry as a “blockbuster” drug, generating over $1 billion in revenue annually, and Actelion has held the dominant share of the relevant market. In 2006, 98 percent of Actelion's U.S. revenues were dependent upon Tracleer sales. ( Asahi I, supra, 204 Cal.App.4th at p. 5, 138 Cal.Rptr.3d 620.)

At trial, Asahi presented evidence that Actelion acquired CoTherix specifically because it saw Fasudil as a significant threat to its market dominance with Tracleer and that Defendants used unlawful means to stop the development of Fasudil, thereby interfering with the License Agreement. Specifically, Asahi argued that Defendants used extortion and fraud to “painstakingly kill[ ]” Fasudil as a competitive product.

Actelion had been following Ventavis since 2002 and had considered acquiring CoTherix to get rights to the drug, but as late as May 29, 2006, considered the company a second-rate opportunity because of Ventavis's shortcomings. Shortly after the June 28, 2006 public announcement of the License Agreement, Martine noted Fasudil's promise and the company began to explore the option of acquiring CoTherix. In July 2006, a director of business development for Actelion Pharmaceuticals Ltd., Carina Spaans, referenced CoTherix, Fasudil and another company in her notes, with the following comment: “Buying both companies will leave the market for Tracleer free for Actelion.” Negotiation of an acquisition of CoTherix began in August. Martine personally conducted due diligence on Fasudil in early October. Ultimately, Martine recommended returning Fasudil to Asahi, after noting “potential pricing issues if [F]asudil was also working in PAH.” “[F]rom the beginning, Martine was of the opinion that [Actelion] would not go ahead with Fasudil.” Martine's conclusions were shared with Jean–Paul. Meanwhile, in late October, the results of CoTherix's Phase I study were promising. The plan was to move ahead with the Phase II clinical study in early 2007. CoTherix had ordered supplies of ER Fasudil for Phase II clinical use. On November 19, 2006, Actelion U.S. Holding Company and...