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Bausch & Lomb Incorporated v. Mimetogen Pharmaceuticals, Inc.

United States District Court, W.D. New York

June 30, 2017

BAUSCH & LOMB INCORPORATED, Plaintiff,
v.
MIMETOGEN PHARMACEUTICALS, INC., Defendant. MIMETOGEN PHARMACEUTICALS, INC., Counterclaim Plaintiff and Third-Party Plaintiff,
v.
BAUSCH & LOMB INCORPORATED, Counterclaim Defendant, and VALEANT PHARMACEUTICALS INTERNATIONAL, INC., Third-Party Defendant.

          DECISION AND ORDER

          HON. FRANK P. GERACI, JR. CHIEF JUDGE UNITED STATES DISTRICT COURT

         INTRODUCTION

         This case involves a contract between Mimetogen Pharmaceuticals, Inc. (“MPI”) and Bausch & Lomb Incorporated (“B”) regarding the development, licensing, and potential commercialization of “MIM-D3, ” a proprietary compound created by MPI for the treatment of dry eye syndrome. The Court is now called upon to interpret that contract and resolve the parties' competing motions for summary judgment.

         BACKGROUND[1]

         MPI is a privately-held biotechnology company located in Quebec, Canada. B is a global provider of eye care products and a wholly-owned subsidiary of third-party defendant Valeant Pharmaceuticals International, Inc. (“Valeant”).

         I. The Agreement

         On July 17, 2013, MPI and B entered into a Development Collaboration and Exclusive Option Agreement (the “Agreement”)[2] regarding MIM-D3, a proprietary compound created by MPI to treat dry eye syndrome. Under the Agreement, MPI granted B an option (the “Option”) to obtain an exclusive, worldwide license to develop and commercialize products using MIM-D3. Agreement § 5.1.

         The Agreement also provided for MPI to conduct an initial clinical trial, referred to as the “Initial Phase III Trial, ” in order to gather information about the safety and effectiveness of MIM-D3. See Id. §§ 2, 1.28, 1.46. The protocol for the Initial Phase III Trial (“Trial Protocol”) was attached as an exhibit to the Agreement. See Id. § 1.49.

         The parties' rights and obligations under the Agreement hinged on the outcome of the Initial Phase III Trial. If the Initial Phase III Trial was “Completely Successful” or “Successful, ” then B was obligated to exercise the Option at a specified price. See Id. §§ 5.4, 5.5(a), 5.5(b). If the Initial Phase III Trial was “Partially Successful, ” “Inconclusive, ” or “Not Successful, ” then B could choose to exercise the Option, extend the Option, [3] or decide to not exercise the Option. Id. §§ 5.4, 5.5(c). The Agreement specifically defined each of these potential outcomes:

Completely Successful” if the results of the Initial Phase III Trial or any Additional Trial indicate that (a) the efficacy of the Licensed Product on both primary sign and symptom endpoints, at the primary time point (Day 29 for the Initial Phase III Trial), as defined in the Protocol, is statistically significantly superior to the vehicle with a p value of 0.050 or less, and (b) following a formal meeting with the FDA, the FDA agrees, per its formal, final meeting minutes, that the Initial Phase III Trial or such Additional Trial is the final study required for the Approval of the Licensed Product.
Successful” means the results of the Initial Phase III Trial or any Additional Trial indicate that (a) the efficacy of the Licensed Product on both primary sign and symptom endpoints, at the primary time point (Day 29 for the Initial Phase III Trial), as defined in the Protocol, is statistically significantly superior to the vehicle with a p value of 0.050 or less, and (b) following a formal meeting with the FDA, the FDA agrees, per its formal, final meeting minutes, that there are no Significant Safety Issues and that only one additional Phase III Trial is required for Approval.
Partially Successful” means the results of the Initial Phase III Trial or any Additional indicate that (a) the efficacy of the Licensed Product on either or both primary sign and symptom endpoints, at the primary time point (Day 29 for the Initial Phase III Trial), as defined in the Protocol, is not statistically significantly superior to the vehicle with a p value of 0.050 or less, and (b) following a formal meeting with the FDA, the FDA agrees, per its formal, final meeting minutes, that there are no Significant Safety Issues and that only one additional Phase III Trial is required for Approval.
Inconclusive” means the results of the Initial Phase III Trial or any Additional Trial are not Completely Successful, Successful, Partially Successful or Not Successful.
Not Successful” means (a) the FDA determines, after a formal meeting and per its formal meeting minutes, that there are Significant Safety Issues, or (b) the results of the Initial Phase III Trial or any Additional Trial indicate that the efficacy of the Licensed Product on both primary sign and symptom endpoints at the primary time point (Day 29 for the Initial Phase III Trial), as defined in the Protocol, are not statistically significantly superior to the vehicle with a p value of 0.050 or less, and the FDA does not agree that either a sign or a symptom, that were assessed in the Initial Phase III Trial or the Additional Trial, can be used as the primary sign or symptom to support the Approval of the Licensed Product.[4]

Id. §§ 1.11, 1.53, 1.45, 1.25, 1.41 (emphasis added).

         If the Initial Phase III Trial was Partially Successful or Inconclusive and B declined to either exercise or extend the Option, then B was obligated to pay MPI a fee of $20 million (“exit fee”). Id. § 5.5(c). However, if the Initial Phase III Trial was Not Successful, then B could walk away without making any further payments to MPI. Id.

         II. The Initial Phase III Trial

         The Initial Phase III Trial included 403 participants and was conducted over an 8-week period beginning on October 10, 2013. Participants were divided into two groups: the active drug group (which received MIM-D3) and the placebo[5] group (which received only a placebo). Both groups were placed in a Controlled Adverse Environment chamber (“CAE chamber”), which subjected the participants' eyes to a stressful, drying environment.

         After exposing participants to the CAE chamber, researchers evaluated the effectiveness of MIM-D3 by measuring certain signs and symptoms and then comparing the active drug group to the placebo group. The Trial Protocol separated the signs and symptoms into three categories: Primary Efficacy Variables, [6] Secondary Efficacy Variables, and Exploratory Efficacy Variables. See Trial Protocol § 6.1.

         In May 2014, MPI provided B with the results of the Initial Phase III Trial. The parties agree that the Initial Phase III Trial was not Completely Successful, Successful, or Partially Successful as those terms are defined in the Agreement. Because the Agreement does not independently define the term Inconclusive, the parties' rights and obligations under the Agreement depend on whether the Initial Phase III Trial was Not Successful.

         The parties agree that part (a) of the Not Successful definition does not apply because the FDA did not determine that there were any Significant Safety Issues in the Initial Phase III Trial.

The parties also agree that the first half of part (b) does apply because the results of the Initial Phase III Trial did not indicate that MIM-D3 performed “statistically significantly superior” to the placebo with respect to the primary sign and symptom endpoints. The parties' dispute focuses on the second half of part (b), [7] which consists of the following language:

[T]he FDA does not agree that either a sign or a symptom, that were assessed in the Initial Phase III Trial or the Additional Trial, can be used as the primary sign or symptom to support the Approval of the Licensed Product.

         Agreement § 1.41(b)(2). If that language applies, then the Initial Phase III Trial was Not Successful; if it does not, then the Initial Phase III Trial was Inconclusive.

         III. FDA Meeting Minutes

         On July 15, 2014, representatives from MPI and B met with FDA officials to review and discuss the Initial Phase III Trial results. The FDA then circulated the formal “Meeting Minutes” from that meeting. The Meeting Minutes include questions submitted by MPI, the FDA's responses to those questions, and a summary of any discussion that took place at the meeting regarding those questions.

         The first question posed to the FDA was: “Does the Agency agree that the assessed endpoints can be used as a primary sign endpoint in support of the approval of the product?” See Meeting Minutes at 2. With respect to the change in participants' “corneal fluorescein staining in the central region” following exposure to the CAE chamber, the FDA responded as follows:

A change in corneal fluorescein staining in a pre-specified area (e.g., central region) at a pre-specified time following exposure to a dry environment is acceptable as a “sign endpoint” when coupled with a “symptom endpoint” to support the efficacy of a product for the treatment of dry eyes. The use of proprietary testing procedures may raise questions about the ability to generalize the test results to support a more generalized label.

Id. With respect to the change in participants' “fluorescein staining in the total cornea (sum of the inferior, central and superior regions)” following exposure to the CAE chamber, the FDA provided the same response. Id. at 2-3. Fluorescein staining in the central region of the cornea and fluorescein staining in the total cornea[8] were both measured as Exploratory Efficacy Variables in the Initial Phase III Trial. See Trial Protocol § 6.1.3; ECF No. 47-1, at ¶ 29.

         Second, MPI asked: “Does the Agency agree that the assessed endpoints can be used as a primary symptom endpoint in support of the approval of the product?” Meeting Minutes at 3. With respect to participants' response to a question about “blurred vision” in the OSDI Questionnaire, [9] the FDA provided the following response:

It is not recommended. A change in a patient's response to a question about an ocular symptom at a pre-specified time is acceptable as a “symptom endpoint” when coupled with a “sign endpoint” to support the efficacy of a product for the treatment of dry eyes. For the purposes of assessing vision, it is generally expected that vision would be measured using a standardized chart. A single question concerning the quality of an individual's vision may be acceptable as a “symptom endpoint.” We are not aware of validation studies of any single (or subset) question from the OSDI Questionnaire. The use of proprietary testing procedures may raise questions about the ability to generalize the test results to support a more generalized label.

         Id. The FDA also applied this response to all other symptom endpoints listed by MPI. Id.

MPI's third question read as follows:
If the following sign and symptom endpoints, specifically, change from Pre-CAESM to Post-CAESM in fluorescein staining in the central region or total cornea (sum of the inferior, central and superior regions) and one of the following OSDI questions “blurred vision” or “poor vision” that demonstrated improvements in the recently completed Phase 3 study (MIM-725) are replicated as primary endpoints in a subsequent Phase 3 study, would the clinical data from these two Phase 3 studies and the Phase 2 study (MIM-724) be sufficient evidence to support efficacy of a dry eye indication? Would an additional efficacy study be required?

Id. at 4. The FDA gave the following response:

A single efficacy study is unlikely to be sufficient to support a New Drug Application (NDA) because after an adjustment for multiplicity, it appears that neither of the completed studies demonstrated efficacy of the proposed drug product. It is recommended that at least two additional efficacy studies be conducted.

Id.

         IV. B's Decision to Not Exercise the Option

         On August 1, 2014, MPI sent the Meeting Minutes to B. B's receipt of the Meeting Minutes triggered a 30-day deadline for B to decide how to proceed with respect to exercising, extending, or deciding not to exercise the Option. See Agreement § 5.4. Ultimately, B allowed the 30-day deadline to come and go without exercising or extending the Option. B did not pay MPI the exit fee.

         V. ...


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