Novartis Pharma AG v. Amgen, Inc.

Background

Novartis Pharma AG and Amgen Inc. agreed to collaborate on developing and commercializing the migraine drug erenumab, sold as Aimovig. Their 2015 agreement covered collaboration outside the United States, Canada, and Japan. Their 2017 agreement covered Aimovig’s commercialization in the United States and amended parts of the 2015 agreement.

The 2015 agreement prohibited each party, directly or through its affiliates, from conducting or participating in a “Distracting Program.” The agreement defined that term to include developing, commercializing, or manufacturing a product with the same primary intended mechanism as Aimovig, including certain inhibitors or modulators.

Before the 2015 agreement took effect, Sandoz GmbH entered into a manufacturing agreement with Alder Pharmaceuticals for eptinezumab, another migraine-treatment drug. The opinion states that Sandoz and Novartis share a common corporate parent. Amgen asserted that eptinezumab was a prohibited “Distracting Product” and sent Novartis notices asserting breaches of both agreements and later terminating them. Novartis disputed the alleged breaches and asserted that any breach had been cured after Sandoz and Alder agreed to terminate their manufacturing agreement, while continuing manufacturing during a multiyear technology transfer.

Novartis sued for declarations that it had not breached the agreements or, alternatively, that any breach was not material or had been cured. Amgen filed counterclaims. Both parties sought partial judgment on the pleadings under Rule 12(c), a procedure allowing a court to decide a claim from the pleadings when the pleadings show that no material factual dispute requires further evidence.

Count II: The 2017 Agreement

Novartis sought judgment on Count II, which concerned whether it breached the 2017 agreement. Amgen sought dismissal of Counts I, II, and IV.

The court applied New York contract law. It emphasized that the agreements should be read according to their text and as a whole, and that omissions from a contract can show that the parties intended to leave out a provision. The 2017 agreement did not contain the 2015 agreement’s “Distracting Program” provision and did not expressly incorporate section 7.2 of the 2015 agreement. Although the 2017 agreement referred to and incorporated other portions of the 2015 agreement, it did not incorporate section 7.2.

The court also rejected Amgen’s argument that a survivability provision in Amendment No. 2 incorporated section 7.2 into the 2017 agreement. That provision allowed section 7.2 to survive termination of the 2015 agreement for certain Aimovig-related programs, but it did not make section 7.2 part of the 2017 agreement or authorize termination of the 2017 agreement for a breach of section 7.2.

The court concluded that the 2017 agreement did not bar participation in a “Distracting Program” and declared that Novartis did not breach the 2017 agreement based on the Sandoz-Alder manufacturing agreement. Novartis’s motion was granted as to Count II, and Amgen’s motion was denied as to Count II.

Count I: The 2015 Agreement

Count I sought a declaration that Novartis had not breached the 2015 agreement. The court noted that the pleadings showed that Sandoz became an affiliate of Novartis under Amendment No. 2 and that eptinezumab was a CGRP inhibitor. The court rejected Novartis’s argument that the manufacturing agreement was outside section 7.2 merely because it began before the 2015 agreement took effect; the alleged participation continued after Sandoz became an affiliate.

However, the court also held that section 7.2 required some involvement by Novartis in Sandoz’s participation. The affiliate did not need to act under Novartis’s instruction or direction, but Novartis had to have taken some affirmative action “through” Sandoz, directly or indirectly, by participating in, advising, assisting, or enabling the competing program. The pleadings did not resolve whether Novartis had done so. The court therefore denied Amgen’s motion as to Count I and stated that the parties could conduct discovery on the issue.

Count IV: Cure of Any Breach

Count IV sought a declaration that any breach connected to the Sandoz-Alder manufacturing agreement had been cured. Because the court ruled that Novartis did not breach the 2017 agreement, the cure issue was moot as to that agreement. The court considered the issue only as it related to the 2015 agreement.

The 2015 agreement provided a 60-day period to cure a material breach but did not define “cure” or specify how a violation of section 7.2 had to be cured. The court could not decide from the pleadings whether the agreement between Sandoz and Alder to terminate their manufacturing relationship, combined with continued manufacturing during a technology transfer lasting three to five years, constituted a cure or a continuation of the alleged breach. It also would have been premature to decide whether a breach occurred or whether it was material. The court therefore denied Amgen’s motion as to Count IV.

Disposition

Novartis’s Rule 12(c) motion was granted as to Count II. Amgen’s Rule 12(c) motion was denied as to Counts I and IV, and the court’s discussion also states that Amgen’s motion to dismiss Count II was denied. Counts I and IV remained unresolved because factual and contract-related issues required further proceedings.