Pharma Co.

Shionogi Sues InterMune Over Drug Royalties

Law360, New York (July 10, 2012, 1:45 PM ET) -- Japanese pharmaceutical
companyShionogi & Co. Ltd. sued InterMune Inc. in California federal court on Thursday
for allegedly bilking it out of royalties from sales of a lung disease treatment on which they
partnered to win regulatory approval.
The controversy centers on a pact calling for the firms to share documents related to
clinical trials each was conducting on the use of pirfenidone in idiopathic pulmonary
fibrosis, a potentially fatal disorder involving scarred lung tissue.

California-based InterMune used Shionogi’s data to win European Medicines Agency

approval last year for the drug, which is marketed under the brand name Esbriet, but has
failed to pay royalties despite racking up sales approaching $10 million, according to the
lawsuit.

“InterMune has refused to pay outstanding royalties and repudiated its obligation to pay
royalties for future sales of Esbriet in all countries of the [European Union],” the lawsuit
says.

In a regulatory filing Friday, InterMune said it "strongly disagrees with Shionogi’s claims
and intends to defend its position vigorously."

According to Shionogi, which says it spent tens of millions of dollars developing the drug,
InterMune previously conducted two clinical trials on pirfenidone, one of which failed to
show positive results.

California-based InterMune subsequently applied for EMA approval in 2010 and used
Shionogi’s clinical trial data to support its case, the lawsuit says.

“InterMune repeatedly sought and obtained Shionogi’s advice, consultation and/or

assistance in connection with its [application],” the lawsuit said. Shionogi ultimately
“devoted significant resources” to helping InterMune, the lawsuit said.

Once InterMune had approval in hand, it reversed course and claimed it never used
Shionogi’s clinical trial data when seeking approval, according to the complaint. But even if
that’s true, InterMune has breached its duty as an exclusive licensee of Shionogi’s data to
actually use that data, the lawsuit says.

Under an agreement between the companies, Shionogi says it’s entitled to 6 percent of net
sales in the first two years of Esbriet’s approval. The royalties would climb to 8 percent in
the third and fourth years and 10 percent in all subsequent years.

Because idiopathic pulmonary fibrosis is rare and treatments are scarce, pirfenidone has
been designated an orphan drug in Europe and the U.S., allowing fast-track regulatory
review. The U.S. Food and Drug Administration, however, has balked at approving the
medicine without further study, telling InterMune in 2010 that another clinical trial is
needed to prove the drug’s value.

Shionogi has faced a busy year in court after partnerships and business relationships
turned sour.
Earlier this year, Cowen Healthcare Royalty Partners filed a complaint alleging Shionogi
breached an agreement to market cholesterol drug Fenoglide and irreparably harmed the
brand by destroying a $28 million batch of pills rather than fixing the pills' cosmetic flaws.

In a separate court battle, the Federal Circuit last week lifted an injunction barring Lupin
Ltd. from selling its generic version of Shionogi's diabetes drug Fortamet, ruling that
questions remain over whether the patent asserted by Shionogi is obvious.

That dispute stretches to 2009, when Lupin sought FDA approval for a generic version of
Fortamet, a blood-glucose-regulating drug. The companies had been nearing a deal for
Lupin to promote Fortamet in the U.S., but Lupin halted talks and launched its generic the
same day, leading Shionogi to seek an injunction.

Shionogi is represented by Jason S. McDonell, Katherine Salo Ritchey and Noel

Rodriguez of Jones Day.

Counsel information for InterMune was not immediately available.

The case is Shionogi & Co. Ltd. v. InterMune Inc., case number 3:12-cv-03495, in the U.S.
District Court for the Northern District of California.

--Additional reporting by Ryan Davis and Dietrich Knauth. Editing by Cara Salvatore.