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Par Pharmaceutical, Inc. v. TWI Pharmaceuticals, Inc.

United States District Court, D. Maryland

September 27, 2016

PAR PHARMACEUTICAL. INC. and ALKERMES PHARMA IRELAND LTD.
v.
TWI PHARMACEUTICALS, INC.

          MEMORANDUM

          Catherine C. Blake United States District Judge

         Plaintiffs Par Pharmaceutical. Inc. and Alkermes Pharma Ireland Limited (collectively. "Par") filed suit in September 2011 against TWi Pharmaceuticals. Inc. ("'TWi") alleging infringement of U.S. Patent 7.101.576 ("'the "576 patent"). After a bench trial, the court ruled on February 21. 2014. that the "576 patent was invalid as obvious. Par requested, and this court granted, an injunction pending resolution of the case on appeal. On August 12. 2014. the court ordered Par to post a $ 10 million bond as security against any losses TWi might suffer over a six-month period. (Memorandum & Order. ECF Nos. 257. 258.) The FDA granted final approval to TWi's generic on August 28, 2014. On appeal, the federal Circuit vacated this court's judgment and remanded the case "for further analysis of the food effect limitation consistent with [the Federal Circuit's! precedent on inherency." Par Pharm.. Inc. v. TWi Pharms.. Inc.. 773 F.3d 1186. 1200 (Fed. Cir. 2014). On March 9. 2015. this court granted another injunction while it considered the case on remand, and ordered Par to post an additional $6 million bond. (Memorandum & Order. ECF Nos. 279. 280.) On remand, and after oral argument, the court ruled (again) on July 28. 2015. that the '576 patent was invalid as obvious. and also ruled that it was invalid for lack of enablement. (Memorandum & Order. ECF Nos. 304, 305.) That same day. Par noted an appeal to the Federal Circuit and moved for an injunction pending appeal. The court denied Par's motion, and the Federal Circuit affirmed this court's decision on December 15, 2015. Par Pharm.. Inc. v.TWi Pharms.. Inc.. 624 Fed.App'x 756 (led. Cir. 2015) (mem.). The matter presently before the court is TWi's motion to execute the injunction bonds (ECF No. 320).[1] For the reasons that follow. TWi may recover $10 million on the first bond: $2, 720, 966 on the second bond; and post-judgment interest as applicable.

         Legal Standard

         Federal Rule of Civil Procedure 65(c) authorizes a court to "issue a preliminary injunction or a temporary restraining order only if the movant gives security in an amount that the court considers proper to pay the costs and damages sustained by any party found to have been wrongfully enjoined or restrained." When a party is found to have been wrongfully enjoined, that party may recover proven damages, up to the full amount of the bond, that naturally and proximately resulted from the wrongful injunction. See Glaxo Grp. Ltd. v. Leavitt. 481 F.Supp.2d 434. 437 (D. Md. 2007). Recoverable damages are those that were suffered during the period in which the bond was in effect, and those damages must be proven by a reasonable certainty. Id. (quoting 11A Wright & Miller, Federal Practice & Procedure § 2973 and (:niv. Lite Disi.. Inc. v. Northwest Indus.. Inc.. 602 F.2d 1173. I 175 (4th Cir. 1979)).

         Analysis

         TWi seeks to recover the full $16 million from both bonds, plus interest, claiming its proven damages far exceed this amount. Par disputes the assumptions and calculations underlying TWi's damages estimate, asserting that TWi is entitled to recover no more than $3, 787, 759. While the parties dispute a number of factors in calculating their damage estimates, two primary points of contention emerge: (1) whether Par would have launched its authorized generic if its injunction requests had been denied and TWi had proceeded with an at-risk launch. and (2) the size of the market had TWi been able to launch its generic at the time of the courts* injunctions. The court also must evaluate what price, costs per unit produced, and market share TWi has established by a reasonable certainty.

         Par's Authorized Generic

         As to the first point of dispute. TWi offers a damages estimate that assumes it would have been the only generic player in the market during the pendency of the injunction period.[2] Par vigorously disputes this point, arguing that it certainly would have launched its authorized generic in 2014 had TWi proceeded with its at-risk launch. In support of its position. Par points to the fact that it did indeed launch an authorized generic on July 28. 2015. the same day TWi launched its generic product after this court issued a second opinion finding the "576 patent invalid. Additionally, it points to contemporaneous documents showing that Par had the capability of launching an authorized generic in September 2014. and it offers affidavits from Par personnel stating that it would have launched the authorized generic had TWi proceeded with its launch.

         Notwithstanding the evidence offered by Par establishing its capability of launching an authorized generic in 2014. TWi has pointed to sufficient evidence to establish by a reasonable certainty that Par would not have launched an authorized generic in September 2014 had this court denied its request for injunctive relief pending appeal. First. Par represented in its briefing that, had the court denied its initial request for injunctive relief. "Par expects that the generic product will capture virtually the entire market for branded Megace® ES sales in a matter of days or weeks." (Mem. Supp. Mot. I'RO 13. ECF No. 229.) Par made no mention of the mitigating effects of launching an authorized generic in its arguments regarding irreparable harm, further. Par offered the expert declaration of Dr. Walter Vandaele in support of its motion for a Temporary Restraining Order, in which Dr. Vandaele states that "the vast majority of MegaceR1 ES sales would be lost to competition from TWi's generic megestrol ES within a few months or even weeks of TWi's market entry, and essentially all Mcgace® ES sales would be lost to the generic thereafter." (Decl. Vandaele Supp. Mot. TRO 3. ECF No. 235.) Dr. Vandaele made no mention of an authorized generic when considering the impact of a "premature" TWi launch. Indeed, the only contemporaneous statement to the court acknowledging even the possibility of an authorized generic launch was contained in Par's reply brief in support of its TRO motion, addressing the appropriate amount for an injunction bond: "further, TWi's bond calculations fail to address the economic reality that Par would need to compete on price to retain market share, including potentially by launching its own generic product through the normal generic channels of trade." (Reply Supp. Mot. TRO 20, ECF No. 255.) The court sees no reason to credit this single, hedged statement over Par's affirmative representations of what would happen in the case of a premature TWi launch, finally, while these statements alone might not be sufficient to establish a reasonable certainty, the litigation posture in August 2014 was significantly different from July 2015. when Par actually launched its authorized generic. Namely, in August 2014. Par was appealing this court's finding of invalidity, and expressed great certainty that it would prevail at the federal Circuit: "Plaintiffs have a substantial chance of reversing this case on appeal .... Plaintiffs have shown that they are likely to succeed on the merits on appeal." (Reply Supp. Mot. TRO 2, ECF No. 255.) Given this apparent certainty, it is not likely that Par would have launched its own generic and accepted the inevitable and irreversible price erosion that would follow. Taken together. Par's contemporaneous statements to this court establish by a reasonable certainty that it would not have launched an authorized generic while its appeal was pending.

         A different scenario existed, however, at the time of the court's second injunction in March 2015. The Federal Circuit had remanded the case to this court, but only on one limited issue that did not portend the court reaching a new finding on the issue of invalidity. At this point. Par reasonably could have expected that TWi ultimately might succeed on its claims. Thus. Par's conduct in July 2015-launching its authorized generic alongside TWi's generic launch -is illustrative of the conduct Par likely would have taken had the court denied its second request for injunctive relief in light of its impending reconsideration of the case. Accordingly. while TWi has established by a reasonable certainty that it would have been the only generic player on the market from August 28. 2014. until March 9. 2015. there is a much higher likelihood that Par would have launched its authorized generic had the court denied its request for injunctive relief on March 9. 2015.

         The "but for" market, then, for the purposes of calculating recoverable damages on the injunction bonds, contemplates TWi being the only generic on the market from August 28. 2014. until March 8. 2015. and Par launching its authorized generic on March 9. 2015 (at the start of the time period covered by the second bond).

         Price, Market Share, and Costs per Unit

         To calculate recoverable damages, the court must ascertain the price at which TWi could have sold its generic product, and the share of the market TWi would have enjoyed had the injunctions not been issued. TWi contends that it would have charged $ __ per Bper unit, which is approximately __ % of the $777.51 sale price of Par's Megace® LS product. Par does not offer evidence to contradict that TWi would have charged this amount if it had offered the only generic on the market, and that price is consistent with estimates of generic drug pricing provided by the Federal Trade Commission and cited by Par's expert. Dr. Vandaele. (Suppl. Decl. Vandaele Supp. Mot. TRO 4, ECF No. 277-1.) Accordingly. TWi has established by a reasonable certainty that it would have charged $ __ per unit during the pendency of the first injunctive bond. TWi's expert. Craig Elson. assumed TWi would capture 88% of the market upon entry, which is consistent both with Par's predictions in its request for injunctive relief and reflective of the combined market share actually garnered by TWi's generic and Par's authorized generic after launching last year. The court will accept Mr. F.lson's calculations of market share for the period covered by the first injunctive bond.

         As for the time period covered by the second bond, the best evidence of the price per unit is what actually happened after the simultaneous launch of TWi's generic and Par's authorized generic on July 28, 2015. Having to compete with Par's authorized generic on pricing. TWi only has been able to charge an average of $ __ per unit. Thus, for the time period covered by the second bond. TWi's damages will be calculated using a price of $ __ per unit. A closer question is what market share TWi would have enjoyed during the time period of the second bond in this but-for world. While TWi has enjoyed less than 40% of the market share since launching alongside Par's authorized generic, in the but-for world governing the court's analysis. TWi would have launched its product several months before Par launched its authorized generic. While TWi certainlv would have lost market share due to competition from the authorized generic, the amount of that loss has not been considered or quantified by the parties' experts. Without expert testimony on this matter, the court cannot say with reasonable certainly that TWi would have maintained its 88% market share. Accordingly, the court will look to the best evidence in front of it. the market share split after the actual launch of the two generics. Considering this split, ...


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