Pharma Deal Gone Bust Prompts Lawsuit

     MANHATTAN (CN) – A Canadian health care company is under legal fire after attempting to back out of a deal to buy a name-brand skin treatment once it learned a generic brand was approved.
     Steifel Laboratories , a skincare health product manufacturer and subsidiary of GlaxoSmithKline, on Monday sued Krim Biopharma Inc. in Manhattan Federal Court, for pulling out of a deal to buy the rights to Soriatane, a skincare product used for treating psoriasis.
     The deal – which had been scheduled to close this week – was allegedly scuttled when Krim realized the Food and Drug Administration had recently approved a generic version of Soriatane. But Steifel contends Krim merely used that fact as a way to renegotiate the purchase at a far lower price.
     In September 2014, Steifel began auctioning the rights to make, sell, and market Soriatane. After a months-long process, Krim in May 2015 won the bid and agreed to pay the purchase price of $180 million. As part of the purchase agreement, Krim was able to obtain inventory, assignment of contracts, and intellectual property related to the drug,
     However, on July 17, Krim sent Steifel a letter terminating the agreement, accusing the seller of breaching its representations and warranties, the lawsuit alleges.
     Specifically, Krim said it discovered another company, Prasco, had received approval from the Food and Drug Administration to market a generic version of Soriatane, and that there had been a “precipitous drop” in the market share of Soriatane as a result.
     Krim also referenced a potential FDA violation at one of Steifel’s plants in Italy.
     Krim allegedly said it was still willing to deal for Soriatane, albeit for less than half the original price. The termination letter included a new proposal for $85 million.
     Steifel countered by arguing the FDA had already approved two other generic versions of Soriatane before the agreement was signed, and that the alleged violations in Italy were related to another product line.
     “KRIM was using the termination notice in bad faith to renege on its obligations under the purchase agreement in an attempt to negotiate a lower price,” the complaint says. “Indeed, despite the wrongful termination notice, KRIM continued to act as though the purchase agreement was in effect by engaging in financial audits of Steifel and Prasco, and by gaining access to [those companies’] confidential records.”
     Steifel has since called for arbitration to decide the issue, but filed for the injunction to keep the promised money in escrow. A hearing is scheduled Wednesday on the requested injunction.
     Representatives of the parties could not immediately be reached for comment.
     Steifel is represented by William Wachtel of Wachtel Missry in New York.