Parallel teams of Cooley litigators and business lawyers delivered a favorable outcome last week on behalf of longtime client Onyx Pharmaceuticals, Inc, which reached a settlement of a jury trial in a dispute with its partner, the international pharmaceutical company Bayer.  In a complex set of agreements announced at the mid-point of trial pending in the United States District Court for the Northern District of California (under the caption Onyx Pharmaceuticals, Inc. v. Bayer Corporation, Bayer AG, Bayer Healthcare LLC, and Bayer Schering Pharma AG Case No. C09-2145 EMC (N.D. Cal.)), Onyx obtained a significant stake in a compound at the heart of the dispute as well as other important monetary and non-monetary benefits.

Onyx filed suit in spring of 2009 after learning that Bayer was developing DAST, a new drug virtually identical to sorafenib, the anti-cancer compound that the parties had discovered and successfully developed under a collaboration agreement.  Onyx sought rights to DAST (later known as regorafenib), as well as damages for Bayer’s alleged blocking of clinical trials of sorafenib.  Cooley defeated Bayer’s motion for summary judgment in May 2011 and multiple additional Bayer pre-trial motions, ensuring that the jury would hear all of Onyx’s claims.

Onyx and Bayer agreed to the following terms regarding the development and commercialization of regorafenib: Bayer will pay Onyx a royalty of 20% of future worldwide net sales of regorafenib in human oncology; Onyx will have no obligation to pay past or future development and commercialization costs of regorafenib; and Onyx will have the right to conduct up to 50% promotional detailing for regorafenib in the United States with Bayer, and to provide related medical science liaisons, under a fee-for-service arrangement.

Additionally, Bayer paid Onyx a one-time lump sum of $160 million and Bayer will have no obligation to pay royalties to Onyx for sales of Nexavar (market name for sorafenib) in Japan for any period after December 31, 2011.  Bayer could also make future payments to Onyx of up to an aggregate of $15 million in 2012-2013 based on future Nexavar pricing in Japan.

Finally, the provision of the collaboration that governs a change of control or acquisition of Onyx  was deleted in its entirety.  As a result, Onyx’s rights under the collaboration agreement, including profit sharing, co-development and co-promotion of Nexavar (but not promotion of regorafenib), will survive any change of control of Onyx.

The Cooley litigation team representing Onyx was led by Chairman Steve Neal and litigation partners Marty Schenker and Michelle Rhyu, and included partner Jeff Gutkinand associates Ben Kleine, Bryan Boyle, Dan Knauss and Candace Jackman.  The Cooley business team was led by partners Bob Jones, Marya Postner and Ken Krisko, and included Alison Freeman-Gleason.

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