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Asahi Kasei Pharma Corporation v. Cotherix

March 5, 2012


Superior Court of San Mateo County, No. CIV 478533, Carol L. Mittlesteadt and Marie S. Weiner, Judges. (San Mateo County Super. Ct. No. CIV 478533)

The opinion of the court was delivered by: Bruiniers, J.


A company lawfully acquires a competitor. Can the activities of the two companies in anticipation of the merger constitute a conspiracy in restraint of trade under the Cartwright Act, the California antitrust statute (Bus. & Prof. Code, § 16700 et seq.)*fn1 ? Appellant Asahi Kasei Pharma Corporation (Asahi) sued respondent CoTherix, Inc. (CoTherix) alleging that Asahi suffered damage from such a conspiracy between CoTherix and its now parent company, Actelion Ltd. (Actelion). The trial court, relying on the opinion of our Supreme Court in State of California ex rel. Van de Kamp v. Texaco, Inc. (1988) 46 Cal.3d 1147 (Texaco), held that the Cartwright Act has no application in these circumstances and granted summary adjudication in favor of CoTherix.*fn2 Asahi claims this was error. We affirm.

I. Background

Asahi is a Japanese corporation which develops and markets pharmaceutical products and medical devices. One of its products is Fasudil, a Rho-kinase*fn3 inhibitor which Asahi sought to market for treatment of pulmonary arterial hypertension (PAH).*fn4 PAH is a chronic, progressive and often fatal disease, which is characterized by severe constriction and obstruction of the pulmonary arteries.

In order to market Fasudil in the United States (U.S.) for treatment of PAH, Asahi, on June 23, 2006, entered into a licensing agreement (the Licensing Agreement) with CoTherix, a California-based biopharmaceutical company focused on developing and commercializing products for the treatment of cardiovascular disease. CoTherix had previously obtained regulatory approval for its own inhaled PAH treatment drug, Ventavis. Under the terms of the Licensing Agreement, CoTherix agreed to obtain regulatory approvals for Fasudil, and to develop and commercialize it in North America and Europe. CoTherix was to develop oral and inhaled formulations of Fasudil for treatment of PAH, and an oral formulation of Fasudil for treatment of stable angina. It was required to use commercially reasonable efforts to develop Fasudil, and to obtain U.S. regulatory approvals for Fasudil as soon as reasonably practicable.

Actelion is a Swiss pharmaceutical company. Actelion Pharmaceuticals US, Inc. is a U.S.-based operational subsidiary of Actelion (through an intermediate subsidiary). Actelion has, since December 2001, marketed the drug Tracleer (bosentan), an endothelin receptor antagonist in the form of an orally ingested tablet which is also used in the treatment of PAH, and which has been approved by the Food and Drug Administration for use in the U.S. Tracleer is what is known in the pharmaceutical industry as a "blockbuster" drug, generating over $1 billion in revenue annually, and Actelion has held the dominant share of the relevant market. In 2006, 98 percent of Actelion's U.S. revenues were dependent upon Tracleer sales.

On January 9, 2007, Actelion, through an intermediate subsidiary, acquired all of the stock of CoTherix, pursuant to a tender offer under a November 19, 2006 "Agreement and Plan of Merger" (the Acquisition Agreement). Actelion concurrently notified Asahi that it was discontinuing development of Fasudil for "business and commercial reasons."

On November 19, 2008, Asahi filed suit against CoTherix and Actelion.*fn5 Among other claims, Asahi alleged that CoTherix and Actelion violated the Cartwright Act by forming a "combination" by "conspir[ing] together, pre-acquisition, . . . to mislead Asahi about Actelion's . . . intentions [to discontinue the development of] Fasudil," which Actelion allegedly viewed as a potential competitor to Tracleer.

Asahi contends that Actelion was concerned about immediate threats to its Tracleer market share from the launch of competing products and feared that Fasudil would compete directly with Tracleer, causing potential pricing issues which would cost Actelion hundreds of millions of dollars in lost net revenue. Therefore, Asahi asserts, one of Actelion's goals in acquisition of CoTherix was to terminate the development of Fasudil. In pursuit of this goal, Actelion purportedly directed CoTherix Chief Executive Officer Don Santel to falsely reassure Asahi, after the CoTherix acquisition was announced, that "CoTherix continues to operate in the ordinary course of business, which includes the development of Fasudil." In reality, according to Asahi, Actelion never had any intention of permitting CoTherix to continue development of Fasudil, and CoTherix began halting and delaying work on Fasudil's development prior to close of the acquisition. Had it known the true facts, Asahi insists that it would have pursued contractual remedies against CoTherix and could have sued for injunctive relief under the Licensing Agreement, thereby delaying or aborting Actelion's planned acquisition. Thus, Asahi charges, Actelion conspired with CoTherix "for anticompetitive purposes to eliminate an upstart competitor in the relevant market for PAH treatments."

On August 18, 2009, CoTherix and the other U.S. subsidiaries of Actelion (Actelion US Holding Company, Actelion Pharmaceuticals US, Inc.) filed a motion for summary adjudication challenging, inter alia, Asahi's Cartwright Act claim. CoTherix argued that the Cartwright Act is inapplicable to corporate acquisition transactions; that there were no triable issues of material fact as to whether CoTherix and Actelion had conspired to interrupt the development of Fasudil; and that Asahi lacked antitrust standing.

On December 22, 2009, the trial court entered its order granting summary adjudication of Asahi's Cartwright Act claim as to CoTherix and the other U.S. subsidiaries of Actelion.*fn6 The court, citing Texaco, supra, 46 Cal.3d at p. 1168, found that "Defendants have met their initial burden under [California Code of Civil Procedure section] 437c[, subdivision] (p)(2) of showing that this cause of action has no merit because the Cartwright Act does not apply to a merger . . . and the complaint does not allege any pre-merger violation of the Cartwright Act." The court found that the third amended complaint alleged only unilateral intent by Actelion to eliminate Fasudil as a competitor to Actelion's products, and that Asahi's allegations that CoTherix and Actelion conspired to prevent Asahi from pursuing its contractual remedies against CoTherix under the Licensing Agreement "do not state a Cartwright Act violation because they do not constitute allegations of a combination of capital, skill or acts by two or more persons for the purpose of restraining competition . . . ."

On March 19, 2010, defendants moved for summary adjudication of Asahi's seventh claim for violation of the Unfair Competition Law. On May 21, 2010, the trial court granted the motion as to CoTherix.*fn7 That order disposed of all causes of action against CoTherix*fn8 and, accordingly, judgment was entered in CoTherix's favor on July 8, 2010. A timely notice of appeal was filed on July 21, 2010.

II. Discussion

A. Standard of Review

A motion for summary judgment or summary adjudication is properly granted "if all the papers submitted show that there is no triable issue as to any material fact and the moving party is entitled to judgment as a matter of law." (Code Civ. Proc., § 437c, subd. (c).) We review an order granting or denying a motion for summary adjudication de novo. (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 860 (Aguilar).) In our review, we are required to liberally construe, and draw all reasonable inferences from, the evidence in favor of the party opposing the motion. (Miller v. Department of Corrections (2005) 36 Cal.4th 446, 460, 470.) We strictly scrutinize a defendant's showing. (Saelzler v. Advanced Group 400 (2001) 25 Cal.4th 763, 768.) "In applying this exacting standard of review, we are also mindful that both California and federal decisions urge caution in granting a defendant's motion for summary judgment in an antitrust case." (Fisherman's Wharf Bay Cruise Corp. v. Superior Court (2003) 114 Cal.App.4th 309, 321.) Nevertheless, "summary judgment is available, and always remains available, even in complex cases," including antitrust actions for an unlawful conspiracy under the Cartwright Act. ...

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