Salix prevails in $150M suit filed by drug partner
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Raleigh, N.C. — In a legal fight dating to 2011, Raleigh-based Salix Pharmaceuticals (Nasdaq: SLXP) has won a jury decision that throws out a lawsuit filed against it by drug partner Napo Pharmaceuticals.
Napo had sought $150 million,
The suit was over charges by Napo that Salix had not commercialized the drug Fulyzaq as required by a commercialization agreement between the two firms.
A jury in the New York State Supreme Court found that Salix had met the contract's terms, Salix said in a statement Tuesday afternoon.
Salix shares traded above $108 in late afternoon trading. Its shares have more than doubled over the past year.
“We are pleased with the verdict and appreciate the thoughtfulness with which the jury approached this case. Salix takes its contractual obligations to its partners very seriously,” stated Carolyn Logan, Salix President and Chief Executive Officer. “We continue to believe in the future of Fulyzaq (crofelemer) and look forward to continuing our commercialization efforts.”
In 2011, Napo said it terminated the collaboration agreement between the two companies over Salix’s failure to advance Fulyzaq, a promising anti-diarrhea drug for AIDs patients drug, fast enough for the California company.
Termination of the collaboration to develop the drug candidate crofelemer was effective November 4 of 2011 — a year to the date of positive phase 3 clinical trial results announced by Salix that were supposed to pave the way for a new drug application filing for a candidate already on the Food and Drug Administration’s fast track. Napo said the termination leaves it free to find another partner or develop on its own what could become a blockbuster drug.
Salix entered the collaboration agreement in 2008 to develop Napo’s anti-diarrhea compound crofelemer. Salix paid Napo $4.5 million up front plus a $500,000 equity investment in the company. Napo stood to gain up to $300 million in additional milestone payments. Crofelemer was being studied to treat chronic diarrhea for people who have HIV/AIDS. Napo said that an estimated 40 percent of HIV/AIDS patients in the United States suffer from diarrhea. Besides HIV-associated diarrhea, the compound also has potential applications in diarrhea-predominant irritable bowel syndrome, acute infectious diarrhea and pediatric diarrhea.
The Food and Drug Administration recognized the unmet medical need that crofelemer could address and clinical trials were done under fast-track status and a special protocol assessment, an agreement between companies and the FDA that expedites regulatory review. But despite achieving positive phase 3 results last year, Salix has yet to file a new drug application for crofelemer.
“Napo believes Salix has materially breached the collaboration agreement by unnecessarily stalling the advancement of this compound,” Napo attorney William A. Brewer III, said in a statement at the time“Most notably, Salix has failed to file an NDA one year after a highly successful phase 3 clinical trial or to prepare for commercial manufacture of the drug — critical tasks that were fundamental to its responsibilities.”
On Sept.16 2011, Napo sent formal notice that Salix had defaulted on the collaboration agreement. Napo said that it terminated the agreement based on “Salix’s failure to cure its breaches in a timely manner.”
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