COMMONWEALTH OF MASSACHUSETTS
SUFFOLK, SS. SUPERIOR COURT DEPARTMENT
BUSINESS LITIGATION SESSION
- ------------------------------------
)
CYTOGEN CORPORATION, )
)
Plaintiff, )
) CIVIL ACTION NO. 06-0313
v. )
)
ADVANCED MAGNETICS, INC. )
)
Defendant. )
- ------------------------------------)
COMPLAINT AND JURY DEMAND
-------------------------
Plaintiff Cytogen Corporation ("Cytogen"), for its complaint against the
defendant Advanced Magnetics, Inc. ("AVM"), alleges as follows:
1. Cytogen is a Delaware corporation with its principal place of business
in Princeton, New Jersey. Cytogen is a biopharmaceutical company engaged,
primarily, in the business of developing and commercializing oncology-focused
pharmaceutical compounds.
2. AVM is a Delaware corporation with its principal place of business in
Cambridge, Massachusetts. AVM is engaged in the business of developing
microscopic iron oxide particles ("nanoparticles") for use in pharmaceutical
products. Its resident agent is CT Corporation System, 101 Federal Street,
Boston, Massachusetts 02110.
3. Venue is proper in the Business Litigation Session of the Superior
Court because this case involves a complex business dispute and AVM's principal
place of business is located approximately six miles from this Court in a county
under the reach of the Business Litigation Session.
FACTS
-----
4. On or about December 21, 1999, AVM submitted a new drug application
("NDA") to the United States Food and Drug Administration ("FDA") to obtain
approval for the marketing and sale of a pharmaceutical compound known as
Combidex. Combidex is an investigational functional molecular imaging agent
consisting of iron oxide nanoparticles, which is being developed to assist in
the detection of cancerous lymph nodes by aiding in the differentiation of
cancerous from non-cancerous lymph nodes during the magnetic resonance imaging
(also known as MRI) process.
5. In or about June 2000, the FDA issued an approvable letter for
Combidex, indicating that Combidex could be approved for sale and marketing if
AVM followed certain instructions and met certain conditions contained in the
letter. The approvable letter, among other things, directed AVM to conduct and
submit to the FDA at least one additional robust study in an appropriately
defined clinical setting in order to obtain regulatory approval.
6. On or about August 25, 2000, AVM and Cytogen entered into a License and
Marketing Agreement (the "Agreement"), pursuant to which AVM granted Cytogen
"the exclusive right and license to distribute, market, offer to sell and sell
Combidex" for all applications in the territorial United States. A true and
correct copy of the Agreement is attached to this Complaint. The Agreement
provided the same rights and license for another pharmaceutical compound
referred to as Code 7228 (now known as ferumoxytol) in the field of diagnostic
imaging for oncology. In exchange, Cytogen provided AVM with a specified number
of shares of Cytogen common stock valued at approximately $13,000,000 on the
date of payment and agreed to pay AVM a royalty on future sales of Combidex once
the FDA approved Combidex for sale.
2
7. Pursuant to the Agreement, AVM is required to perform all of the work
and bear all of the out-of-pocket costs necessary to obtain FDA approval for the
commercial marketing and sale of Combidex in the United States, including all
studies, human clinical trials and other work upon which the FDA's approval was
conditioned.
8. During the negotiation of the Agreement, AVM also specifically
represented that it would meet the requirements of the FDA's June 2000
approvable letter and undertake the necessary steps to obtain FDA approval for
Cytogen to market and sell Combidex in the United States. Since those
negotiations, AVM has maintained and repeated those representations.
9. The Agreement will expire in August 2010, unless renewed by the
parties.
10. Under Paragraph 13 of the Agreement, both parties promised to "comply
with all laws and regulations applicable to such rights and obligations [under
the Agreement]."
11. Although AVM made certain attempts to respond to the requirements
contained in the FDA's June 2000 approvable letter, AVM did not submit a
response to the FDA's June 2000 approvable letter until September 2004. In
addition, AVM's response did not contain information and data required by the
FDA, including an additional robust study in an appropriately defined clinical
setting as required by the FDA's June 2000 approvable letter.
12. On March 3, 2005, the FDA's Oncologic Drugs Advisory Committee ("ODAC")
voted to not recommend approval of the proposed indication for Combidex.
13. The ODAC also informed AVM that it wanted AVM to "come back with more
data."
14. Then, on or about March 24, 2005, the FDA sent AVM a second approvable
letter, again indicating that before AVM's application could be approved, AVM
would be required to address several specific clinical and statistical
deficiencies. Among other
3
instructions, the approvable letter directed AVM to "provide additional data
from adequate and well-controlled clinical investigations" that demonstrate the
efficacy of Combidex.
15. Notwithstanding the specific instructions contained in the FDA's March
2005 approvable letter, AVM has not undertaken additional adequate and
well-controlled clinical investigations for Combidex and has publicly announced
that it has no current intention to do so.
16. AVM has also failed to commit adequate staff, resources and expertise
and to take other reasonable steps necessary to satisfy the requirements
contained in the FDA's March 2005 approvable letter and to obtain FDA approval
of Combidex.
17. Without additional adequate and well-controlled clinical investigations
and the additional data and information requested in the FDA's March 2005
approvable letter, AVM cannot meet the requirements of the FDA's March 2005
approvable letter or obtain FDA approval for the marketing and sale of Combidex
in the United States.
18. Rather than perform the adequate and well-controlled clinical
investigations requested by the FDA or take other reasonable steps necessary to
obtain timely FDA approval of Combidex, AVM has devoted substantial resources to
the rapid development of another AVM product, ferumoxytol (formerly Code 7228),
in a field in which AVM was unwilling to permit Cytogen to market or sell the
product.
19. In contrast, AVM has failed to take reasonable steps to obtain FDA
approval for Combidex. In fact, on or about December 15, 2005, Jerome Goldstein,
AVM's Chief Executive Officer, informed Cytogen of his belief that: (i) AVM
would not obtain FDA approval for Combidex for a number of years; (ii) the
Agreement would expire shortly after such approval; (iii) because there would be
only a short time for Cytogen to market Combidex, Cytogen could not justify
making the investment necessary to fulfill its obligation under the Agreement to
4
market and sell Combidex; and (iv) AVM would claim a default under the Agreement
and seek to terminate the license if Cytogen did not make the investment
necessary to fulfill its obligation under the Agreement to market and sell
Combidex. Mr. Goldstein's beliefs, if true, would deprive Cytogen of the
opportunity to realize any financial gain from the marketing or sale of
Combidex. Mr. Goldstein urged Cytogen to simply relinquish its rights under the
Agreement.
20. On or about November 2004, AVM unilaterally rejected Cytogen's proposal
made under Section 2 of the Agreement to conduct additional clinical studies for
Combidex, including: (i) clinical outcomes studies required to support the
commercial introduction of Combidex for lymph node imaging; (ii) non-oncology
imaging applications, such as those being pursued by AVM's European partner for
Combidex; and (iii) a potential therapeutic indication for Combidex.
21. AVM has continued to invest in ferumoxytol (formerly Code 7228) for a
therapeutic indication outside of the field of use licensed to Cytogen (e.g.,
diagnostic imaging applications in oncology) and has not initiated clinical
studies of ferumoxytol (formerly Code 7228) in oncology imaging despite the
protracted regulatory process for Combidex.
CAUSES OF ACTION
----------------
COUNT I
-------
BREACH OF CONTRACT
22. Cytogen repeats and incorporates by reference the allegations contained
in Paragraphs 1 through 21 above as though fully stated herein.
23. The Agreement constitutes a contract.
24. AVM has breached the terms of the Agreement by failing to reasonably
pursue FDA approval for the commercial marketing and sale of Combidex in the
United States, including, but not limited to, AVM's failure to follow the
instructions and satisfy the conditions
5
set forth in the FDA's June 2000 and March 2005 approvable letters and AVM's
failure to commit adequate resources and otherwise take reasonable steps to
obtain FDA approval of Combidex.
25. As a direct and proximate result of AVM's breaches, Cytogen has
suffered damages.
COUNT II
--------
BREACH OF COVENANT OF GOOD FAITH AND FAIR DEALING
26. Cytogen repeats and incorporates by reference the allegations contained
in Paragraphs 1 through 25 above as though fully stated herein.
27. The Agreement carried with it implied covenants of good faith and fair
dealing running from AVM to Cytogen. The conduct of AVM described above
constitutes a breach of the implied covenant of good faith and fair dealing.
28. AVM breached the covenant of good faith and fair dealing implied in the
Agreement by failing to provide information and data from adequate and
well-controlled clinical investigations, as directed by the FDA.
29. AVM breached the covenant of good faith and fair dealing by failing to
commit and maintain adequate resources and expertise and to take reasonable
steps necessary to timely secure FDA approval of Combidex.
30. AVM's failure to reasonably pursue FDA approval while devoting
substantial resources to the development of another product and attempting to
obtain a waiver of Cytogen's rights under the Agreement constitutes a breach of
the covenant of good faith and fair dealing implied in the Agreement.
31. As a result of AVM's breach of the implied covenant of good faith and
fair dealing, Cytogen has suffered damages.
6
COUNT III
---------
FRAUDULENT MISREPRESENTATION
32. Cytogen repeats and incorporates by reference the allegations contained
in Paragraphs 1 through 31 above as though fully stated herein.
33. AVM represented, and has maintained, that it would meet the
requirements of the FDA's approvable letters and take reasonable steps to secure
timely FDA approval for Combidex.
34. These representations were material to Cytogen's decision to enter into
the Agreement and to its continued performance under the Agreement.
35. AVM knew or reasonably should have known that these representations
were false.
36. Cytogen relied on these representations to its detriment and has been
damaged as a result.
COUNT IV
--------
UNJUST ENRICHMENT
37. Cytogen repeats and incorporates by reference the allegations contained
in Paragraphs 1 through 36 above as though fully stated herein.
38. Because AVM has not taken reasonable steps to secure FDA approval of
Combidex as it agreed, the compound has not been approved and Cytogen cannot
market it.
39. Cytogen provided AVM with shares of its common stock, valued at
approximately $13,000,000 on the date of payment, in consideration of the
Agreement and in exchange for the exclusive right to market Combidex.
7
40. AVM has not returned the common stock and has been unjustly enriched as
a result.
COUNT V
-------
VIOLATION OF G.L. C. 93A
41. Cytogen repeats and incorporates by reference the allegations contained
in Paragraphs 1 through 40 above as though fully stated herein,
42. At all relevant times, AVM was engaged in trade or commerce within the
Commonwealth of Massachusetts.
43. AVM knew, or reasonably should have known, that its actions would not
be adequate to secure timely FDA approval to market and sell Combidex.
44. The acts of AVM set forth above, including, but not limited to, its
failure to meet the requirements of the approvable letters and to take other
reasonable steps to secure FDA approval, despite its promises, representations
and affirmations that it would do so, are unfair and deceptive acts under G.L.
c. 93A ss.ss. 2, 11.
45. AVM's violations of G.L. c. 93A described herein were performed
willfully and knowingly.
46. As a result of AVM's unfair and deceptive acts, Cytogen has suffered a
loss of money and property.
RELIEF REQUESTED
----------------
WHEREFORE, Cytogen respectfully requests that this Court enter judgment in
its favor on all Counts of the Complaint and grant the following relief:
1. Under Counts I through IV, award compensatory and exemplary damages in
an amount to be determined at trial;
8
2. Under Count V, find that AVM has committed willful violations of Mass.
Gen. L. ch. 93A ss.ss. 2, 11 and award Cytogen treble damages and attorneys'
fees;
3. Order specific performance in the form of an order that requires AVM to
comply with the directions of the June 2000 and March 2005 FDA approvable
letters, and directs AVM to take all reasonable steps to secure FDA approval of
Combidex;
4. Award Cytogen their reasonable costs, including attorneys' fees,
incurred in connection with this case; and
5. Grant such further relief as the Court deems just and equitable.
THE PLAINTIFF DEMANDS A TRIAL BY JURY ON ALL ISSUES SO TRIABLE.
Respectfully submitted,
CYTOGEN CORPORATION
By Its Attorneys,
/s/ Jeffrey W. Moss
--------------------------------------
Jeffrey W. Moss, BBO# 552421
Morgan, Lewis & Bockius LLP
225 Franklin Street, Suite 1705
Boston, Massachusetts 02110
Tel: 617.451.9700
Frank C. Testa (Pro Hac Vice, pending)
Daniel E. Orr (Pro Hac Vice, pending)
Morgan, Lewis & Bockius LLP
502 Carnegie Center
Princeton, New Jersey 08540
Tel. 609.919.6600
Dated: January 25, 2006
9