Teva Hit With $200M Suit by Ex-Directors of Cephalon Subsidiary

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By Jacob Rund

Israeli drugmaker Teva Pharmaceutical Industries Ltd. is facing a lawsuit that it halted the development of a chronic digestive disorder treatment to avoid $200 million in milestone payments.

Two former directors of Ception Therapeutics Inc., now owned by Teva subsidiary Cephalon Inc., filed suit Feb. 1 in the Delaware Chancery Court. They seek at least $200 million in damages and ownership of the treatment Ception first began developing.

Cephalon acquired Ception for $250 million in 2010, giving it the rights to the treatment—an antibody known as Reslizumab.

According to the complaint, Cephalon breached its merger contract with Ception that assured development and commercialization of the antibody, as well as a $150 million payment to former Ception stockholders if the U.S. Food and Drug Administration approved it. Another $50 million was promised in the contract if the European Commission granted marketing authorization for the treatment, the suit said.

The Deal

The complaint said that without the milestone payments, Ception wouldn’t have accepted Cephalon’s buyout offer over a competing offer from Wyeth Pharmaceuticals Inc., which is now owned by Pfizer Inc.

Cephalon paid $100 million in 2009 for the option to acquire Ception at the future $250 million purchase price. According to the suit, Wyeth offered about $250 million for the company, plus $325 million in milestone payments.

The former directors are accusing Cephalon of breaching its contractual obligation to use “commercially reasonable efforts” to continue developing the treatment. Ception and its stockholders invested more than $100 million to help develop and commercialize Reslizumab for treating two different types of medical disorders, the suit claims.

Teva is accused of tortious interference for allegedly slowing down work on the remedy to prevent paying Ception stockholders.

Teva’s U.S. subsidiary, also being sued by the ex-directors, didn’t immediately respond to a request for comment.

The case is Himawan v. Cephalon Inc. , Del. Ch., No. 2018-0075, complaint filed 2/1/18 .

To contact the reporter on this story: Jacob Rund at jrund@bloomberglaw.com

To contact the editor responsible for this story: Yin Wilczek at ywilczek@bloomberglaw.com

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