{"id":2908,"date":"2024-10-06T05:13:12","date_gmt":"2024-10-06T05:13:12","guid":{"rendered":"https:\/\/usatrustedlawyers.com\/blog\/lawsuit-alleging-23-million-contract-breach-against-biogen-moves-forward\/"},"modified":"2024-10-06T05:13:12","modified_gmt":"2024-10-06T05:13:12","slug":"lawsuit-alleging-23-million-contract-breach-against-biogen-moves-forward","status":"publish","type":"post","link":"https:\/\/usatrustedlawyers.com\/blog\/lawsuit-alleging-23-million-contract-breach-against-biogen-moves-forward\/","title":{"rendered":"Lawsuit Alleging $23 Million Contract Breach Against Biogen Moves Forward"},"content":{"rendered":"\n
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A New York judge has cleared the way for litigation to continue over an alleged breach in a $275 million loan to a rare pharmaceutical manufacturer subsequently acquired by Biogen, Inc.<\/p>\n<\/div>\n

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Acting Manhattan Supreme Court Justice Anar Rathod Patel last week denied a motion to dismiss from defendants Reata and Biogen, finding that fact questions remained.<\/p>\n<\/div>\n

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The actions stem from a May 2023 loan from BioPharma Credit and others\u2014a group of private U.K.-based funds\u2014to former pharma company Reata. The $275 million loan was divided into four “tranches,” per court papers.<\/p>\n<\/div>\n

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The last two tranches were tied to commercial revenue thresholds relating to the drug Skyclarys, or omaveloxolone, which is used to treat a rare neurological condition known as Friedreich ataxia.<\/p>\n<\/div>\n

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Reata was acquired by Biogen Inc. for $7 billion in September 2023.<\/p>\n<\/div>\n

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Plaintiffs, represented by a team at Akin Gump Strauss Hauer & Feld, filed suit against Reata and Biogen in April, alleging Reata breached the agreement when it refused the third tranche and did not pay the associated fees\u2014despite a belief by plaintiffs that Reata had met the requisite revenue milestone.<\/p>\n<\/div>\n

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The fees in dispute total approximately $23 million.<\/p>\n<\/div>\n

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Reata and Biogen moved to dismiss the lawsuit in May, arguing that Biogen was not a proper defendant and that it was impossible to calculate the revenue milestone pre-merger.<\/p>\n<\/p><\/div>\n

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Acting Justice of the Supreme Court of the State of New York Anar Rathod Patel. Courtesy photo <\/figure>\n<\/p>\n<\/div>\n

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While defendants claim the language of the loan agreement shows additional fees and payments were not owed for the third tranche, plaintiffs “interpret the same provisions to mean exactly the opposite,” wrote Patel, of the Commercial Division.<\/p>\n<\/div>\n

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“The provisions disputed by these parties could be reasonably interpreted in either direction,” the ruling states. “Said provisions are either undefined within the four corners of the Loan Agreement or have such a broad definition that, absent extrinsic evidence, the parties’ intent cannot be discerned.”<\/p>\n<\/div>\n

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The loan agreement also fails to define “successor,” Patel notes.<\/p>\n<\/div>\n

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While defendants argue that Reata remains an independent corporate entity, plaintiffs claim Reata is being used as a “shell” to protect Biogen, per court papers.<\/p>\n<\/div>\n

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“Plaintiffs have sufficiently pled that Defendant Biogen is an appropriate party to this suit as a successor of Defendant Reata pursuant to the Loan Agreement or, in the alternative, through a de facto merger,” Patel found. “The Court agrees with Plaintiff that, at a minimum, the question of Defendant Biogen’s successor liability is a factual issue to be resolved through discovery.”<\/p>\n<\/div>\n

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Plaintiffs are represented by Uri Itkin, Rick D’Amato, Katie Tongalson and Darren James of Akin.<\/p>\n<\/div>\n

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Defendants are represented by Gary Bornstein of Cravath, Swaine & Moore.<\/p>\n<\/div>\n

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Bornstein did not immediately return messages seeking comment.<\/p>\n<\/div>\n

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