Canada: Pharmacapsules @ Gowlings: October 30, 2008

Last Updated: November 13 2008

Edited by Jennifer Wilkie and Chantal Saunders


  • First Section 8 Trial Decision
  • The Financial Crisis: Implications for Life Sciences Companies - Part II
  • UK Advances in Stem Cell Research Law
  • Further Delays for the European Commission's Proposed Pharmaceutical Legislation

First Section 8 Trial Decision
By Beverly Moore

Apotex v. Merck; s. 8 Decision on merits; October 21, 2008

On October 21, 2008, the Court released its first decision on a s. 8 damages case. The Court held it has jurisdiction to hear a case pursuant to s. 8 of the Patented Medicines (Notice of Compliance) Regulations ("Regulations"). In addition, the section is intra vires and does not violate the division of powers in the Constitution Act.

The Court held that Apotex was not entitled to claim Merck's profits. "Profits" as referred to in s. 8 refers only to a second person's lost profits. The entire content of s. 8 focuses on compensation for loss suffered by the generic. It is a reasonable balance when compared to the injunction-like provisions of the remainder of the Regulations. The Court also held that although the Federal Courts Act allows for equitable remedies, these must be found in the Regulations, and are not.

The Court accepted that it had discretion to move the start date of the compensation period (from the date the Minister certifies the NOC could otherwise have been issued). However, in order to do so, it had to be satisfied on the evidence that another date was more appropriate. In this case, it was argued that Apotex should have served its NOA earlier approximately 2 months earlier than it did and therefore the compensation period should be reduced accordingly. However, the Court held that there was no evidence that the Minister knew or cared when the NOA was sent or that this would have impacted the approvability date. Thus, no other date was accepted.

In addition, the Court refused to dismiss, at this stage, Apotex' claim for compensation due to alleged lost market share and acknowledge Apotex may argue for damages beyond the compensation period in this regard if said damage could not have been or was not rectified in that period. No costs were awarded for the trial.

The full text of the decision can be found at:

The Financial Crisis: Implications for Life Sciences Companies - Part II
By Michael Herman

In the first part of this article (October 10, 2008 - Volume 7, No. 13), we examined the consequences of the current financial crisis (or "tsunami" as it is now often referred to) on the funding environment for life sciences companies. As we noted, the existing situation is bleak for companies which require funding to continue their research, development and commercialization programs and it is most difficult to discern when in the future the situation may improve.

As we further noted in the first part of this article, one consequence of the financial crisis has been a further surge in mergers and acquisitions activity as pharmaceutical companies look to acquire biotechnology companies which have promising products but significant cash constraints. According to some sources, M&A activity in 2008 has already hit a record US$167 million.

Roche Holdings AG is one of the large pharmaceutical companies to indicate its intention to look to acquire smaller companies. In fact, in Canada, Roche recently completed the acquisition of ARIUS Research Inc. for approximately $190 million. (Gowlings represented Roche in connection with this acquisition.) ARIUS is the developer of a proprietary antibody platform which identifies and selects antibodies based on their functional ability to effect disease before progressing into clinical development. In commenting on the transaction, Roche's Head of Global Research said that ARIUS provided an excellent fit with Roche's own research in the fields of cancer and immunology.

Bristol-Myers Squibb Company, coming off a strong third quarter financial performance, announced that it will use its strong balance sheet and cash position to supplement its pipeline with purchases. Its CEO stated that "we have a long list of companies, compounds, [and] technologies we would like to acquire over the next several years and I'm confident we'll do it".

Eli Lilly and Company, which has apparently won the sweepstakes to acquire ImClone Systems Inc., confirmed in announcing the deal that one of its key strategic priorities is to increase the flow of high quality, innovative new therapies, including through targeted acquisitions. It added that the acquisition of ImClone supports its increased focus on biotechnology.

In recent weeks, GlaxoSmithKline Plc has joined the list of other major pharmaceutical companies in publicly announcing that it will keep its cash available for small to medium acquisitions. GlaxoSmithKline's CEO stated that the financial mess has created opportunities for purchases, especially of biotechnology companies which are struggling to get financing, although he added that the company will be extremely selective.

In other words, we are seeing an acceleration of the recent trend of pharmaceutical companies looking to fill their product pipelines by acquiring or otherwise locking-up biotechnology assets. The big pharmaceutical companies, with their strong balance sheets and cash reserves, are ideally positioned. The financial crisis has dried up funding sources previously available as the lifeline for emerging biotechnology companies and eliminated, temporarily at least, financial buyers from the acquisition landscape. For those biotechnology companies facing a funding crunch, an out-licence arrangement or outright sale to a large pharmaceutical company may be the most palatable or only option available. Consequently, if they have not already done so, it is incumbent on these companies to start assessing transactions with strategic partners and positioning themselves so that, if approached, they have considered how to structure transactions in an acceptable manner while maximizing the value which they receive.

For more information, please see:

UK Advances in Stem Cell Research Law
By Natalie Rizkalla-Kamel

Britain's House of Commons voted 355 to 129 on a complete draft bill authorizing proposals to allow scientists to use hybrid animal-human embryos for stem cell research and clarifying laws that allow the screening of embryos to produce babies with suitable bone marrow or other material for transplant to sick siblings.

Prime Minister Gordon Brown is a strong advocate of stem cell research and says Britain owes it to future generations to support the research. However, opponents warn an easing of laws on creating embryos could lead to the genetic engineering of human beings.

Similar work to create human embryos from animal eggs is also being conducted in China and the United States. Forming animal-human hybrids for research or reproductive purposes is forbidden under Canada's Assisted Human Reproduction Act.

For more information, please see:

Further Delays for the European Commission's Proposed Pharmaceutical Legislation
By Melissa Binns

A further delay has been announced for the European Commission's proposed pharmaceutical legislation which was set to be presented last week. In addition to a Communication on the future of the European Union single market for human-use pharmaceuticals, the proposed legislation also contains two Directives: a Directive relating to strengthening and rationalising pharmacovigilance; and a Directive relating to information communicated to patients.

According to the Commission, further technical changes are responsible for this unexpected delay. It is speculated, however, that the legislation has been delayed due to the controversial proposed Directive relating to information to patients. Critics of this legislation continue to maintain that this proposed Directive will undermine the European ban on direct consumer advertising. In particular, lobby groups claim that a lack of distinction between "information" and "advertising" is particularly problematic.

It remains uncertain how long the legislation has been delayed and proponents of the legislation have expressed concern that the much needed Directives could be delayed until after the parliamentary elections next June.

For more information, please see:

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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