Icahn Sch. of Med. at Mount Sinai v. Neurocrine Biosciences, Inc.
| Decision Date | 13 June 2016 |
| Docket Number | 15 Civ. 9414 |
| Citation | 191 F.Supp.3d 322 |
| Parties | ICAHN SCHOOL OF MEDICINE AT MOUNT SINAI, Plaintiff, v. NEUROCRINE BIOSCIENCES, INC., Defendant. |
| Court | U.S. District Court — Southern District of New York |
CROWELL & MORING LLP, 590 Madison Avenue, New York, NY 10022, By: Chieme Suzuki, Esq., Honor Costello, Esq., CROWELL & MORING LLP, 275 Battery Street, 23rd Floor, San Francisco, CA 94111, By: Gregory Call, Esq., Mark T. Jansen, Esq., Pilar R. Stillwater, Esq., Attorneys for Plaintiff.
LATHAM & WATKINS LLP (NY), 885 Third Avenue, New York, NY 10022, By: Benjamin Naftalis, Esq., Daniel G. Brown, Esq., LATHAM & WATKINS, 12670 High Bluff Drive, San Diego, CA 92130, By: Jake Ryan, Esq., Stephanie N. Grace, Esq., LATHAM & WATKINS (DC), 555 Eleventh Street, NW, Suite 1000, Washington, DC 20004, By: Michael A. Morin, Esq., Attorneys for Defendant.
The Defendant Neurocrine Biosciences, Inc. ("Neurocrine" or the "Defendant") has moved pursuant to F. R. Civ. P. 12(b)(6) to dismiss the complaint of the plaintiff Icahn School of Medicine at Mount Sinai ("Mt. Sinai" or the "Plaintiff"). Upon the conclusions set forth below, the motion is granted in part and denied in part.
These two well-advised sophisticated parties are participants in a complicated and demanding process of the research and development required to discover, identify, and develop drugs to effect a biological response to treat a disabling disease. Both Defendant and Plaintiff contend that the motion can be determined by a simple reference to the carefully drafted agreement which established the parties' relationship and industry practice. However, Neurocrine submits the reference compels a grant of the motion, while Mt. Sinai contends it will result in denial. The resolution is not as simple as the parties contend, as what follows will hopefully demonstrate.
The complicated process of discovering and developing new drug treatments requires basic research such as is performed by Mt. Sinai and its scientists. The application of that science to particular conditions such as endometriosis
and uterine fibroids was performed by Neurocrine. The testing, approval, and manufacture of the new drug is performed by a major pharmaceutical company, in this instance Abbott International Luxembourg S.a.r.l. ("Abbott"), now AbbVie Inc. ("AbbVie"). The agreements under which this process can be accomplished have generated substantial and significant litigation, of which this preliminary motion is an example.1
Mt. Sinai filed its complaint on December 1, 2015 alleging a breach of contract by Neurocrine's unauthorized sublicensing of certain rights to AbbVie, which Neurocrine had received under a license from Mt. Sinai and also by Neurocrine's failure to provide Mt. Sinai annual development reports and a copy of the agreement governing product development with AbbVie, as allegedly required by the License Agreement.
The instant motion to dismiss the complaint was heard and marked fully submitted on March 17, 2016.
The complaint describes the parties, their history, and the Plaintiff's contentions.
Plaintiff, formerly known as Mt. Sinai School of Medicine of the City University of New York, is a New York education corporation, organized under the New York Education Law and chartered by the Board of Regents of the State of New York. Its sole member is Mt. Sinai Health System, Inc., a not-for-profit corporation organized under the laws of the State of New York. Mt. Sinai has a principal place of business at 1 Gustave L. Levy Place, New York, NY 10029-6574. Mt. Sinai owns and controls certain rights in technology for the identification, discovery, and screening of drug compounds that interact in the human body with receptors for the hormone known as GnRH. Mt. Sinai's drug-discovery tools are foundational in the identification, screening, and development of drugs for the treatment of a number of endocrine disorders
, and Mt. Sinai has the exclusive right to grant licenses to the patented technology directed thereto. (Compl., ¶ 20.)
Neurocrine is a corporation organized and existing under the laws of the State of Delaware, having a principal place of business at 12780 El Camino Real, San Diego, CA 92130. Neurocrine is in the business of, among other things, developing pharmaceuticals for use in neurological and endocrine diseases
and disorders. (Compl., ¶ 22.)
AbbVie Inc. ("AbbVie") is a corporation organized and existing under the laws of the State of Delaware, having a principal place of business at 1 North Waukegan Road, North Chicago, Illinois 60064. AbbVie is in the business of, among other things, pharmaceutical development, manufacturing and sales.
Gonadotropin releasing hormone ("GnRH") is implicated in numerous endocrine diseases
including prostate cancer, ovarian cancer, breast cancer, and endometriosis. (Compl. ¶¶ 3, 38, 40–43.) Stuart C. Sealfon, M.D., a world-renown neurologist at Mt. Sinai, was the first to make stable cell lines expressing the cloned receptor for GnRH ("GnRH-R") and invented a method to identify drug compounds that modulate the receptor's molecular signaling using the cell lines. (Id. ¶¶ 39–40.) Dr. Sealfon's patented inventions, assigned to Mt. Sinai, are foundational drug-discovery tools. Both Parties recognized the Sealfon tools as essential for Neurocrine to identify and develop new drugs that inhibit GnRH activity and can be used to treat endocrine disorders. (Id. ¶¶ 5, 40–46, 50.)
The parties, on August 27, 1999, entered into a Nonexclusive License Agreement ("License Agreement") which provided that Neurocrine may "grant sublicenses under the License only with the prior written consent" of Mt. Sinai. (Compl. Ex. 1, D.I. 1-1 ("License Agreement") § 2.1(c).) During their negotiations, the Parties recognized that if Neurocrine identified a promising drug candidate, Neurocrine likely would sublicense the remainder of the drug development efforts, which require expensive Phase 3 clinical trials, to a major pharmaceutical corporation. (Compl. ¶¶ 47, 54, 57.) Neurocrine sought an unconditional right to sublicense the licensed rights to third parties. (Id. ¶¶ 54–55.) As reflected in Section 2.1(c), the Parties agreed to a future negotiation for the right to grant sublicenses. (Compl. ¶¶ 56–57.) The Parties intended that Mt. Sinai would, consistent with industry practice, receive additional consideration, such as a share of revenues paid by a future sublicensee. (Id. )
Given the foundational nature of the Sealfon drug discovery tools, the Parties recognized that both the identification of beneficial drug compounds, and their subsequent development through commercialization, would depend on the use of the licensed tools. (Id. at ¶ 50.) The expected drug candidates could not be discovered, and subsequently developed, "but for" the use of the Mount Sinai licensed technology. (Id. ) To reflect this understanding, the Parties defined these enabled drugs, i.e., all drugs "identified or discovered using" the Sealfon tools, as "Licensed Products." (Id. ; License Agreement § 1.5.)
The License granted to Neurocrine by Mt. Sinai is alleged to also broadly extend to the development of the enabled drugs. (Compl. ¶ 48–49; License Agreement §§ 1.6, 2.1(a).) Neurocrine received a "worldwide license to make and use the subject matter covered under the Licensed Patent Rights to identify, screen for, and/or develop products." (License Agreement § 1.6.) Neurocrine has explained over the years in its filings with the SEC that the License Agreement is a "license to certain patents and patent applications related to GnRH, to develop and commercialize licensed products worldwide," or that, "[i]f we were to default on our obligations ... we could lose some or all of our rights to develop, market and sell products covered by the licenses." (Compl. ¶¶ 49, 70.)
Neurocrine used the licensed Sealfon tools to identify "Elagolix" as a strong candidate for treating endocrine disorders
. (Compl. ¶ 58.) Neurocrine had contractual obligation to provide annual development reports, including a "complete written list of Licensed Products discovered in the previous year" , Neurocrine discovered Elagolix not later than early 2001 (Compl. ¶ 60).
Neurocrine reported successful Phase 2 results for Elagolix in 2006, 2009, and finally on May 24, 2010. (Id. ¶¶ 60–064, 67–69.)
In January 2008, with Elagolix showing great promise, Neurocrine began discussions with Abbott International, now AbbVie, for AbbVie to license rights to develop and commercialize Elagolix and other GnRH-antagonist drugs discovered by Neurocrine using the Sealfon tools. Neurocrine contacted Mt. Sinai shortly after the discussions with AbbVie began and informed Mt. Sinai that it was in discussions to sublicense the Sealfon tools to an unnamed company. (Compl. ¶ 66.) Neurocrine recognized it needed to obtain Mt. Sinai's consent for the intended sublicensing. (Id. ) Neurocrine never sought Mt. Sinai's consent to sublicense to AbbVie. (Id. at ¶ 67.) Market analysts have predicted AbbVie will sell $1.2 billion worth of Elagolix each year after its expected approval by the FDA for treatment of endometriosis
and uterine fibroids. (Id. ¶¶ 86–87.)
On June 15, 2010, Neurocrine and AbbVie publicly announced their agreement (the "AbbVie Agreement") under which "Abbott will receive worldwide exclusive rights [from Neurocrine] to develop and commercialize Elagolix and all next-generation GnRH antagonists, for women's and men's health." Neurocrine did not seek or obtain Mt. Sinai's consent before transferring the drug development program to AbbVie. (Id. ¶¶ 54–57, 71).
Neurocrine initially refused to provide Mt. Sinai a complete, unredacted copy of its June 2010 agreement with AbbVie, but subsequently provided it. (Id. ¶¶ 77–78, 91.) The AbbVie Agreement excluded rights under Mt. Sinai's license...
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