Lexpert Magazine

May 2019

Lexpert magazine features articles and columns on developments in legal practice management, deals and lawsuits of interest in Canada, the law and business issues of interest to legal professionals and businesses that purchase legal services.

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LEXPERT MAGAZINE | MAY 2019 9 APOTEX INC. V. NORDION (CANADA) INC., 2019 ONCA 23 DECISION DATE: JANUARY 16, 2019 Apotex Inc. successfully defended the Nor- dion appeal of a Limitations Act defence; the cross-appeal on damages was dismissed. MDS Inc., a life science company, had performed bioequivalence studies for Apotex to be submitted with applications for approval from the US Food and Drug Administration (FDA) to market generic pharmaceutical products in the US mar- ket. e relationship between Apotex and MDS was governed by a Master Labora- tory Services Agreement (MLSA). During the 2003 and 2004 the FDA conducted in- spections of MDS's Montréal-area labora- tory and identified serious concerns about the operation of the laboratory. is led the FDA, in December 2004, to instruct MDS to perform a review of all studies it had per- formed at its Montreal laboratory between 2000 and 2004. Apotex was formally informed by the FDA in January 2007 that the FDA's con- cerns about the Montréal-area facility had not been resolved by MDS, and that Apo- tex was required to repeat the studies or have them certified, or have the study sam- ples re-analyzed by a third-party provider. e FDA's unwillingness to accept bio- equivalence studies from MDS's Montréal laboratory caused delays in the launch of two pharmaceutical products that Apotex was seeking approval to market in the US: Amoxi Clav and Levo-Carb IR. In November 2008 Apotex brought an action against MDS for breach of con- tract and negligence claiming damages for the repeat study and certification costs, as well as lost profits for the delay in the ap- proval of Amoxi Clav and Levo-Carb IR that were caused by the problems with the MDS facility. The Trial Decision Aer a 17-day trial, Justice Laurence A. Pattillo of Ontario's Superior Court of Justice released his decision in Apotex v. Nordion, 2017 ONSC 1323 on December 22, 2017. e trial judge found that MDS's failure to meet US regulatory requirements was both a breach of the MLSA and negli- gent, entitling Apotex to recovery of repeat study costs and lost profits from the delay in bringing Amoxi Clav and Levo-Carb IR to market. Justice Pattillo found that the obliga- tions under the MLSA were continuing, and had been breached by MDS in its negligent running of the Montreal fa- cility as a whole. Two of the main battlegrounds at trial and on appeal were MDS's Limitations Act defence and the quantification of loss-of- profit damages. e trial judge held, con- trary to the submissions of Apotex, that by May 2006 Apotex knew its applications to the FDA were at risk and therefore the fac- tors at s. 5(1)(a) (i)-(iii) of the Limitations Act, 2002 were met. However, Justice Pattillo further con- cluded that it would not have been appro- priate for Apotex to have commenced a proceeding against MDS at that time, rely- ing on the "appropriateness" criterion in s. 5(1)(a)(iv) of the Limitations Act, 2002, be- cause Apotex did not know until Decem- ber 11, 2006, that it would be required to remediate the studies. He found that, prior to that date, Apo- tex was "never in a position to assess wheth- er the FDA's concerns involving the Mont- real Facility directly impacted the Studies such that they would not be accepted by the FDA." e trial judge accepted Nordion's ex- pert witness on loss of profit damages and awarded Apotex only 33% of its loss-of- profit damages claimed (based on esti- mated market share). He preferred Nor- dion's expert witness's use of actual data from the time period Apotex marketed Amoxi Clav and Levo-Carb IR in the US market: "By using the actual market share that Apotex achieved during the periods it sold Levo-Carb IR and Amoxi-Clav in the U.S., it is based on actual results," Justice Pattillo wrote. The Appeal Decision MDS appealed the trial judgment, in particular the judge's finding that Apo- tex's action was not barred by an expired limitation period. Apotex cross-appealed the damages award. e Ontario Court of Appeal (Strathy C.J.O., Benotto and Roberts JJ.A.) dismissed the appeal and cross-appeal in a decision released on January 16, 2019, in Apotex v. Nordion, 2018 ONCA 23. On appeal, Apotex maintained the pos- ition, as it had at trial, that the limitation period did not begin to run until Decem- ber 2006 because it did not know that an injury, loss or damage had occurred, as required by s. 5.1(a)(i) of the Limitations Act, 2002, until the FDA required it to remediate the bioequivalence studies in December 2006. e Court accepted this argument and found that the trial judge did not need to resort to the appropriate - ness criterion in s. 5(1)(a)(iv) of the Limit- ations Act, 2002. e Court dismissed the cross-appeal on damages. Daniel Murdoch, Jordan Moss and Elizabeth Nixon of Stikeman Elliott LLP represented Apotex Inc. John Campion of Gardiner Roberts LLP, Antonio Di Domenico of Fasken Martineau DuMoulin LLP and Stephan- ie Clark of Gardiner Roberts LLP acted for MDS/Nordion. A look at Apotex Inc.'s successful defence of Nordion's appeal of a Limitations Act defence. Ontario's appellate court agreed that the limitation period did not begin to run until December 2006 because Apotex did not know that an injury, loss or damage had occurred resulting from the defendant's performance of bioequivalence studies. RECENT LITIGATION OF IMPORTANCE BIG SUITS LITIGATION SNAPSHOT

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