On December 22, 2017, Patillo J. of the Ontario Super Court of Justice held that Apotex was entitled to $11,303,131.80, plus pre-judgment interest, for losses flowing from delays in the US Food and Drug Administration (FDA)’s approval of Apotex’s amoxicillin-clavulanic acid and levodopa-carbidopa products caused by the contractual breaches and negligence by MDS Pharma Services (MDS): Apotex Inc v Nordion (Canada) Inc, 2017 ONSC 1323. Apotex contracted with MDS, a full-service pharmaceutical contract research organization, to carry out bioequivalence studies that were included in Apotex’s US regulatory submissions for the aforementioned products. Due to MDS’s failure to comply with the US regulatory framework for conducting such studies, Apotex was unable to rely on the MDS studies, which required Apotex to repeat the studies, delaying US market entry.

Facts

Apotex and MDS entered into a Master Laboratory Services Agreement (MLSA) in 1999 that generally governed the relationship between the parties in relation to laboratory research studies, and three separate Project Agreements (in 2003 and 2004) that dealt with specific bioequivalence studies for the drugs in question. Over a number of years, the FDA cited numerous compliance issues at MDS, including concerns that MDS’s bioanalytical methods could not accurately measure concentrations of Active Pharmaceutical Ingredient. In 2005, MDS engaged in a five-year review to address these issues, but the FDA issued a letter in 2006 concluding that systemic failures rendered MDS’s review incapable of discriminating between valid and invalid study data. On January 10, 2007, the FDA informed Apotex that it must take certain steps in relation to submissions that relied on MDS studies conducted between 2000 and 2004. Apotex ultimately repeated the affected studies and modified its FDA submissions accordingly.

MDS liable in breach of contract and negligence

The Court found that as a result of its issues with the FDA, MDS had breached s. 8.1 of the MLSA, which provided that in conducting its projects for Apotex, MDS would comply with all applicable government regulatory requirements and industry standards and practices. MDS suffered serious failures in compliance and ought to have foreseen the effect those failures would have on its customers, including Apotex. The Court accepted Apotex’s evidence that the Levo-Carb and Amoxi-Clav studies had to be repeated.

The Court further granted Apotex’s concurrent claim in negligence. As a result of the close relationship between Apotex and MDS in respect of the studies, Apotex was owed a duty of care which was breached by MDS’s failure to abide by FDA regulations. The damage suffered by Apotex was a reasonably foreseeable consequence of the breach.

Damages

The Court allowed Apotex’s claim for the cost of the repeat studies (approximately $3M) and approximately $600K and $7.7M for lost profits from the delay in the US launch of Levo-Carb and Amoxi-Clav, respectively (less than the $27M sought). The Court made findings as to the date Apotex would have launched absent MDS’s contractual breach and negligence and in assessing lost profits, Apotex’s estimated market share, and allowances.