Case 3:09-cv-02145-EMC Document 23 Filed 06/15/09 Page 1 of 17
`
`COOLEY GODWARD KRONISH LLP
`STEPHEN C. NEAL (170085) (nealsc@cooley.com)
`THOMAS J. FRIEL, JR. (80065) (tfriel@cooley.com)
`MICHELLE S. RHYU, PH.D. (212922) (rhyums@cooley.com)
`BRADLEY A. WAUGH (220964) (bwaugh@cooley.com)
`Five Palo Alto Square
`3000 El Camino Real
`Palo Alto, CA 94306-2155
`Telephone:
`(650) 843-5000
`Facsimile:
`(650) 857-0663
`
`COOLEY GODWARD KRONISH LLP
`MARTIN S. SCHENKER (109828) (mschenker@cooley.com)
`101 California Street, 5th Floor
`San Francisco, CA 94111-5800
`Telephone:
`(415) 693-2000
`Facsimile:
`(415) 693-2222
`
`Attorneys for Plaintiff
`ONYX PHARMACEUTICALS, INC.
`
`UNITED STATES DISTRICT COURT
`
`NORTHERN DISTRICT OF CALIFORNIA
`
`SAN FRANCISCO DIVISION
`
`ONYX PHARMACEUTICALS, INC.,
`
`Case No. C09-02145 MHP
`
`Plaintiff,
`
`FIRST AMENDED COMPLAINT FOR:
`
`v.
`
`BAYER CORPORATION, BAYER AG,
`BAYER HEALTHCARE LLC, AND
`BAYER SCHERING PHARMA AG,
`
`Defendants.
`
`(1) BREACH OF CONTRACT;
`(2) BREACH OF THE IMPLIED
`COVENANT OF GOOD FAITH AND
`FAIR DEALING;
`(3) BREACH OF FIDUCIARY DUTY; AND
`(4) DECLARATORY RELIEF
`
`DEMAND FOR JURY TRIAL
`
`Onyx Pharmaceuticals, Inc. (“Onyx”) alleges as follows:
`
`INTRODUCTION
`
`1.
`
`Onyx files this lawsuit to stop Bayer Corporation (“Bayer”) from seizing for itself
`
`what the parties agreed to share – the proceeds from a potentially lifesaving and lucrative cancer
`
`drug discovered through the parties’ longstanding scientific collaboration.
`
`1 2 3 4 5 6 7 8 9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`COOLEY GODWARD
`
`KRONISH LLP
`
`A T T O R N E Y S A T L A W
`
`S A N F R A N C I S C O
`
`FIRST AMENDED COMPLAINT
`CASE NO. C09-02145 MHP
`
`FUSTIBAL Ex. 1012
`
`

`
`Case 3:09-cv-02145-EMC Document 23 Filed 06/15/09 Page 2 of 17
`
`2.
`
`That collaboration, first formalized in a 1994 Collaboration Agreement, merged
`
`Onyx’s expertise regarding a biochemical process associated with the growth of cancer cells (and
`
`potential therapies for preventing growth of those cells) with Bayer’s experience with small
`
`molecule pharmaceutical compounds. Following years of investigation and analysis, the parties
`
`identified a compound, known as sorafenib, as a promising candidate, and agreed to move
`
`forward with development activities, including clinical trials. Under the Collaboration
`
`Agreement, the parties equally shared the costs of development. For Bayer, the American arm of
`
`a multinational pharmaceutical giant, the costs were modest. But for Onyx, a start-up company
`
`with few assets beyond the human capital of its scientists, the investment in sorafenib literally
`
`was a “bet the company” proposition. To finance its share of the cost, Onyx was forced to
`
`sacrifice all activities not essential to the development of sorafenib: the company shut down all
`
`of its discovery efforts on other compounds, laid off its entire drug discovery team, and
`
`terminated an unrelated clinical program.
`
`3.
`
`Ultimately, Onyx’s gamble paid off. Sorafenib (marketed as “Nexavar®”)
`
`received regulatory approvals worldwide for the treatment of advanced kidney cancer and liver
`
`cancer, and has generated sales to date of more than a billion dollars, as well as substantial
`
`profits, which the parties have shared. From Onyx’s perspective, the Collaboration Agreement
`
`has been an overwhelming success.
`
`4.
`
`Bayer, as it turns out, held a different view. Now that Onyx had taught Bayer how
`
`to identify effective targeted cancer therapies and introduced Bayer to a class of compounds with
`
`potent anti-cancer properties, Bayer was no longer satisfied with the division of sorafenib’s
`
`profits. Bayer therefore devised a plan in an effort to bypass the Collaboration Agreement’s
`
`profit-sharing formula and appropriate for itself a substantially greater share of the joint venture’s
`
`blockbuster discovery. Bayer embarked on a secret program to develop a compound that the
`
`parties first identified early in their collaboration. This compound, known as fluoro-sorafenib, is
`
`identical to sorafenib, except for the substitution of a single fluorine atom in the place of a
`
`hydrogen atom. Bayer, together with its parent company, Bayer AG, and its affiliates, including
`
`Bayer HealthCare LLC (“Bayer HealthCare”) and Bayer Schering Pharma AG (“Bayer Schering
`
`1 2 3 4 5 6 7 8 9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`COOLEY GODWARD
`
`KRONISH LLP
`
`A T T O R N E Y S A T L A W
`
`S A N F R A N C I S C O
`
`2.
`
`FIRST AMENDED COMPLAINT
`CASE NO. C09-02145 MHP
`
`

`
`Case 3:09-cv-02145-EMC Document 23 Filed 06/15/09 Page 3 of 17
`
`Pharma”), then moved forward to develop the compound outside the Collaboration Agreement,
`
`surreptitiously filing patent applications and initiating clinical trials. When Onyx recently
`
`discovered this scheme and confronted defendants, they refused to concede Onyx’s rights in
`
`fluoro-sorafenib and refused to allow Onyx to join in bringing the compound to market.
`
`5.
`
`Onyx brings this suit to establish its rights to fluoro-sorafenib and to recover the
`
`damages caused by defendants’ actions.
`
`THE PARTIES
`
`6.
`
`Plaintiff, Onyx Pharmaceuticals, Inc., is a small but innovative biopharmaceutical
`
`company based in Emeryville, California. Onyx was founded in 1992 by a team of scientists
`
`internationally recognized for their understanding of the biochemical mechanisms of cancer cells.
`
`In particular, the Onyx scientists had a specialized understanding of an intracellular pathway,
`
`known as the Ras Pathway, associated with the uncontrolled growth of cancer cells. Onyx’s
`
`highly specialized knowledge of the Ras Pathway enabled it to identify targets for pharmaceutical
`
`compounds that would inhibit cancer cell proliferation and to devise laboratory tests or “assays”
`
`to assess a compound’s efficacy in doing so. Onyx also possessed a “library,” or collection, of
`
`chemical compounds to test once the assays were developed. Onyx was thus uniquely positioned
`
`with the talent and know-how to search for and identify novel drugs for treating cancer.
`
`A number of large pharmaceutical companies recognized Onyx’s unique capabilities and sought
`
`research partnerships to tap into Onyx’s expertise.
`
`7.
`
`Onyx’s commitment to translating its knowledge of cellular processes into
`
`effective cancer treatments has proved successful. Its lead cancer drug, sorafenib, is approved in
`
`over 70 countries for the treatment of patients with advanced kidney cancer and/or liver cancer.
`
`Sorafenib also is being evaluated for treatment of patients with lung cancer, breast cancer, and
`
`other cancers.
`
`8.
`
`Onyx is a corporation organized and existing under the laws of the State of
`
`Delaware, with its principal place of business located in Emeryville, California.
`
`9.
`
`Bayer Corporation is, and at all relevant times was, a corporation organized and
`
`existing under the laws of the State of Indiana, with its principal place of business located in
`
`1 2 3 4 5 6 7 8 9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`COOLEY GODWARD
`
`KRONISH LLP
`
`A T T O R N E Y S A T L A W
`
`S A N F R A N C I S C O
`
`3.
`
`FIRST AMENDED COMPLAINT
`CASE NO. C09-02145 MHP
`
`

`
`Case 3:09-cv-02145-EMC Document 23 Filed 06/15/09 Page 4 of 17
`
`Pittsburgh, Pennsylvania. Before approximately March 28, 1995, Bayer Corporation operated
`
`under the name Miles Inc.
`
`10.
`
`Onyx is informed and believes, and on that basis alleges, that Bayer HealthCare is
`
`a limited liability company whose sole owner and member is Bayer Corporation. Onyx is further
`
`informed and believes, and on that basis alleges, that in 2007, the right, title, and interest in and to
`
`the Collaboration Agreement were assigned to Bayer HealthCare LLC.
`
`11.
`
`Bayer Schering Pharma is a corporation organized and existing under the laws of
`
`Germany, with its principal place of business located in Berlin, Germany.
`
`12.
`
`Bayer Corporation, Bayer HealthCare and Bayer Schering Pharma are part of
`
`Bayer AG, a German holding company with over 100,000 employees, operations in nearly every
`
`country in the world, and sales in 2008 exceeding 32 billion Euros. Bayer AG is a corporation
`
`organized and existing under the laws of Germany, with its principal place of business located in
`
`Leverkusen, Germany.
`
`JURISDICTION AND VENUE
`
`13.
`
`This Court has original jurisdiction pursuant to 28 U.S.C. § 1332(a), in that this is
`
`a civil action between citizens of different states in which the matter in controversy exceeds,
`
`exclusive of costs and interest, seventy-five thousand dollars ($75,000.00).
`
`14.
`
`This Court has jurisdiction over the defendants because they actively do business
`
`in California and have sufficient minimum contacts in California, or otherwise intentionally
`
`availed themselves of the benefits of conducting business in California to be subject to the court’s
`
`jurisdiction. In particular, the Collaboration Agreement was negotiated within the jurisdiction of
`
`this Court, and the parties understood that Onyx’s obligations under the Agreement would be
`
`performed within this Court’s jurisdiction. The Collaboration Agreement and the Letter
`
`Agreement (described below) expressly provide that they are governed by California law.
`
`15.
`
`Venue is proper in this district pursuant to 28 U.S.C. § 1391(a) and (c).
`
`A substantial part of the events underlying this action occurred within this district. This Court
`
`also has personal jurisdiction over defendants and, accordingly venue is proper.
`
`1 2 3 4 5 6 7 8 9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`COOLEY GODWARD
`
`KRONISH LLP
`
`A T T O R N E Y S A T L A W
`
`S A N F R A N C I S C O
`
`4.
`
`FIRST AMENDED COMPLAINT
`CASE NO. C09-02145 MHP
`
`

`
`Case 3:09-cv-02145-EMC Document 23 Filed 06/15/09 Page 5 of 17
`
`INTRADISTRICT ASSIGNMENT
`
`16.
`
`The appropriate Intradistrict Assignment for this case is the San Francisco
`
`Division or the Oakland Division, pursuant to Civ. L.R. 3-2(c) and (d). A substantial part of the
`
`events underlying this action occurred within Alameda County and Contra Costa County.
`
`COMMON ALLEGATIONS
`
`The Collaboration Agreement
`
`17.
`
`In the early 1990s, Bayer AG established the goal of exploiting new business
`
`opportunities in the market for targeted cancer therapies. Bayer AG and its affiliates, however,
`
`lacked the scientific expertise to research and develop these therapies independently. Bayer AG
`
`recognized the expertise of Onyx’s scientists in the Ras Pathway, and understood that identifying
`
`compounds that inhibit proteins in the Ras Pathway could be the key to success in targeted cancer
`
`research. Bayer AG therefore approached Onyx and sought to gain access to the company’s
`
`technology, know-how, and library of chemical compounds that could have effects on the Ras
`
`Pathway.
`
`18.
`
`Bayer AG and Onyx engaged in extensive negotiations over the terms of the
`
`proposed collaboration to develop cancer drugs. Late in the negotiations, Bayer AG informed
`
`Onyx that Bayer (then known as Miles Inc.), not Bayer AG, would be the party that would sign a
`
`contract with Onyx. Shortly thereafter, on April 22, 1994, Onyx and Bayer entered into a
`
`Collaboration Agreement. Under the Collaboration Agreement and its 1996 and 1999
`
`amendments, the parties committed to work together to discover, develop and market chemical
`
`compounds having activity against proteins in the Ras Pathway.
`
`19.
`
`Onyx recognized that other companies within the Bayer AG family of companies
`
`might assist Bayer in performing under the Collaboration Agreement, and was concerned by
`
`Bayer AG’s late substitution of Bayer as the contracting party. Accordingly, “as an inducement
`
`to Onyx to execute the Agreement,” Bayer AG entered into an agreement (the “Letter
`
`Agreement”) with Bayer, contemporaneous with the signing of the Collaboration Agreement,
`
`confirming that, to the extent Bayer AG or any of its “Affiliates” conducted research,
`
`development, or marketing or otherwise undertook Bayer’s obligations under the Collaboration
`
`1 2 3 4 5 6 7 8 9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`COOLEY GODWARD
`
`KRONISH LLP
`
`A T T O R N E Y S A T L A W
`
`S A N F R A N C I S C O
`
`5.
`
`FIRST AMENDED COMPLAINT
`CASE NO. C09-02145 MHP
`
`

`
`Case 3:09-cv-02145-EMC Document 23 Filed 06/15/09 Page 6 of 17
`
`Agreement, the Affiliates would “do so in accordance with the provisions of the Agreement.”
`
`“Affiliate” was defined in the Collaboration Agreement and the Letter Agreement as any entity
`
`that, directly or indirectly, is under common ownership with Bayer. The Letter Agreement
`
`between Bayer and Bayer AG expressly recognized Onyx as a third-party beneficiary. Onyx
`
`recently was informed by Bayer, and on that basis alleges, that the Letter Agreement was
`
`transferred to Bayer Schering Pharma. Pursuant to such transfer, Bayer Schering Pharma now
`
`holds (jointly with Bayer AG) Bayer AG’s rights and obligations there-under.
`
`20.
`
`The Collaboration Agreement defined two categories of compounds, referred to as
`
`“Collaboration Compounds” and “Post-Collaboration Compounds,” that are the subject of joint
`
`development. Collaboration Compounds generally cover compounds that, before January 31,
`
`2000, were “discovered, identified or synthesized” by Onyx or Bayer and “recognized” as
`
`satisfying the standard for cancer inhibiting activity set forth in Exhibit D to the Collaboration
`
`Agreement. Post-Collaboration Compounds generally cover those compounds (a) whose
`
`chemical genus both covers a Collaboration Compound and is claimed in an Onyx or Bayer
`
`patent and (b) that were “synthesized, identified or discovered” and recognized before a later
`
`cutoff date as satisfying the standard in Exhibit D.
`
`21.
`
`The Collaboration Agreement specifies
`
`the requirements for developing
`
`Collaboration Compounds and Post-Collaboration Compounds into marketable, FDA-approved
`
`products. The Collaboration Agreement requires the parties to work together in such
`
`development and allows one party to pursue independent pre-clinical research of a Collaboration
`
`Compound only if the other party is first given the opportunity for joint pre-clinical research and
`
`declines to participate. Even then, however, the party pursuing independent pre-clinical research
`
`must offer the other party the opportunity to collaborate in development if the research looks
`
`promising.
`
`22.
`
`The Collaboration Agreement established a Joint Research and Development
`
`Committee (JRDC), populated by representatives of Bayer and Onyx, to govern the collaboration.
`
`The role of the JRDC was to manage and make decisions regarding the collaboration. The JRDC,
`
`later renamed the Joint Development Committee, still exists and continues to meet.
`
`1 2 3 4 5 6 7 8 9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`COOLEY GODWARD
`
`KRONISH LLP
`
`A T T O R N E Y S A T L A W
`
`S A N F R A N C I S C O
`
`6.
`
`FIRST AMENDED COMPLAINT
`CASE NO. C09-02145 MHP
`
`

`
`Case 3:09-cv-02145-EMC Document 23 Filed 06/15/09 Page 7 of 17
`
`23.
`
`So that those decisions could be well informed, the Collaboration Agreement
`
`established numerous obligations for information disclosure and good faith between the parties.
`
`Article 10.1 of the Collaboration Agreement, for example, requires full disclosure to the other
`
`party of “the Information and all other significant information, data, and results known or
`
`developed by each party as of the Effective Date and during the Research Term” (defined to end
`
`on January 31, 1999) “as soon as practicable” after the information is obtained or its significance
`
`is appreciated.
`
`24.
`
`Article 10.2 of the Collaboration Agreement extends the obligation to make
`
`quarterly reports to the JRDC beyond the Research Term, such that, if a party continues work on
`
`Collaboration Compounds not yet in development as of the end of the Research Term, it must
`
`provide sufficient disclosure to enable the other party to assess whether or not to pursue joint
`
`funding of pre-clinical research and/or development.
`
`25.
`
`Article 20.2 addresses patent disclosures, obligating a party to disclose to the other
`
`party patentable inventions arising in the course of the collaboration. This section also requires a
`
`party to furnish the other party with drafts of any patent application that discloses a Collaboration
`
`Compound, allowing adequate time for review and comment before filing.
`
`26.
`
`Article 26.2 of the Collaboration Agreement recognizes (similar to the Bayer AG
`
`Letter Agreement) that Bayer may perform its obligations through Affiliates and provides that, in
`
`such cases, Bayer “shall remain responsible and be guarantor” of the Affiliates’ compliance with
`
`the provisions of the Collaboration Agreement.
`
`27.
`
`Article 28.1 of the Collaboration Agreement provides that any assignment of rights
`
`or obligations under the Agreement by Bayer to any Affiliate shall not relieve Bayer of its
`
`responsibilities for performance of its obligations under the Agreement.
`
`28.
`
`In the course of negotiations, the parties emphasized the importance of a
`
`collaborative relationship built on principles of trust and good faith. To embody this model, the
`
`parties included in Article 3.6 of the Collaboration Agreement an express covenant of good faith:
`
`In all matters related to the collaboration established by this Agreement, the
`Parties shall be guided by standards of reasonableness in economic terms and
`
`1 2 3 4 5 6 7 8 9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`COOLEY GODWARD
`
`KRONISH LLP
`
`A T T O R N E Y S A T L A W
`
`S A N F R A N C I S C O
`
`7.
`
`FIRST AMENDED COMPLAINT
`CASE NO. C09-02145 MHP
`
`

`
`Case 3:09-cv-02145-EMC Document 23 Filed 06/15/09 Page 8 of 17
`
`fairness to each of the Parties, striving to balance as best they can the legitimate
`interests and concerns of the Parties and to realize the economic potential of the
`Products. In conducting research, development, and commercialization activities
`under this Agreement neither Party shall prejudice the value of a Product by
`reason of such Party’s activities outside of the Field.
`
`29.
`
`The Collaboration Agreement also sought to ensure that Onyx and Bayer shared in
`
`the risks as well as the rewards of drug discovery. For example, the parties were to share equally
`
`in the costs of co-developing Collaboration Compounds and Post-Collaboration compounds for
`
`the marketplace, which might entail expensive and lengthy clinical trials for which approval
`
`would be far from assured. If successful, however, the parties would share in the rewards. For
`
`any co-developed Collaboration Compound sold in the marketplace, the reward was to be an
`
`equal share of the profits. For any Post-Collaboration Compound, the reward was to be a royalty
`
`paid by the seller.
`
`Steps in the Collaboration
`
`30.
`
`Early in the collaboration, the parties agreed that one Ras Pathway protein, raf
`
`kinase, would be a good target for investigation. Raf kinase was understood to be involved in
`
`processes leading to cell division and proliferation. The parties hypothesized that raf kinase
`
`inhibitors, or chemical compounds that inhibit raf kinase, would prove effective in controlling
`
`cancer cell growth. Using their expert knowledge of the Ras Pathway, Onyx scientists created a
`
`unique assay, exclusive to the collaboration, that could test the raf-inhibitory activity of any
`
`compound.
`
`31. With the assay in hand and its own library of small molecule compounds in house,
`
`Onyx began searching for a Ras Pathway inhibitor. This effort succeeded, and Onyx identified an
`
`inhibitor, dubbed N34213. Although N34213 was too weak an inhibitor to develop as a cancer
`
`treatment, the basic chemical structure of that compound provided the key information that Bayer
`
`and Onyx used to create thousands of synthetic compounds for further evaluation. As the number
`
`of synthesized compounds increased over the course of the collaboration, the parties decided that
`
`Bayer would conduct initial tests on the synthesized compounds, using the assay created by
`
`Onyx. Onyx thus conveyed the assay protocol to Bayer, along with various purified reagents
`
`1 2 3 4 5 6 7 8 9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`COOLEY GODWARD
`
`KRONISH LLP
`
`A T T O R N E Y S A T L A W
`
`S A N F R A N C I S C O
`
`8.
`
`FIRST AMENDED COMPLAINT
`CASE NO. C09-02145 MHP
`
`

`
`Case 3:09-cv-02145-EMC Document 23 Filed 06/15/09 Page 9 of 17
`
`necessary to carry out the assay.
`
`32.
`
`Bayer synthesized and ran initial tests on compounds. They discussed some of
`
`these results with Onyx, and transferred some of these compounds to Onyx for further evaluation.
`
`Following discussions with Onyx, Bayer also synthesized additional compounds that were
`
`structural analogs of compounds that showed promising activity.
`
`Sorafenib and Its Analogs
`
`33.
`
`This collaborative process ultimately led the parties to their pioneering cancer drug
`
`sorafenib. Sorafenib was so effective at inhibiting raf kinase, in fact, that it satisfied the specified
`
`standard for inhibitory activity set forth in Exhibit D by a factor of more than 1000. Eventually,
`
`the parties learned that sorafenib inhibited other biological targets as well, rendering it a “multi-
`
`kinase” inhibitor.
`
`34.
`
`Sorafenib was not the only compound discovered and recognized to have
`
`inhibitory activity under the collaboration. Bayer filed a patent application on January 13, 1999
`
`(during the Research Term) that illustrates over 100 compounds (including sorafenib) that have
`
`raf-kinase inhibitory activity satisfying the standard specified in Exhibit D.
`
`35.
`
`The January 13, 1999 patent application also shows that a sorafenib molecule can
`
`be modified at one particular location with minimal effect on its raf-kinase inhibitory activity.
`
`The chemical formula for sorafenib is illustrated below in Figure 1, with an arrow pointing to the
`
`position “2” on the central ring structure of the molecule. In sorafenib, that position has a
`
`hydrogen atom attached to the ring (per standard chemical drawing practice, the hydrogen is not
`
`shown). The January 13, 1999 application explicitly shows two substitutions at this position.
`
`In one case, a chlorine atom (Cl) replaces the hydrogen. In another case, a much larger, methyl
`
`group (CH3), replaces the hydrogen. In both cases, the compounds were confirmed to have raf
`
`kinase inhibitory activity well within the specified standard in Exhibit D to the Collaboration
`
`Agreement.
`
`1 2 3 4 5 6 7 8 9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`COOLEY GODWARD
`
`KRONISH LLP
`
`A T T O R N E Y S A T L A W
`
`S A N F R A N C I S C O
`
`9.
`
`FIRST AMENDED COMPLAINT
`CASE NO. C09-02145 MHP
`
`

`
`Case 3:09-cv-02145-EMC Document 23 Filed 06/15/09 Page 10 of 17
`
`Figure 1: Sorafenib (indicating position “2”)
`
`36.
`
`The illustrated compounds are not the only ones discussed and described in the
`
`January 13, 1999 application. In text, the patent application explains that “halogens,” a class of
`
`elements to which both fluorine and chlorine belong, can be substituted for one another in the
`
`compound. The patent that ultimately issued from this application as United States Patent
`
`No. 7,351,834 claims the chemical structures of sorafenib and its halogenated brethren, and
`
`reports the raf kinase-inhibiting properties of the entire family. Accordingly, the raf kinase-
`
`inhibiting properties of sorafenib, chloro-sorafenib and fluoro-sorafenib were recognized well
`
`before the cutoff date for the recognition of Collaboration Compounds, January 31, 2000.
`
`37.
`
`The chemical formulas for sorafenib and the fraternal twins chloro- and fluoro-
`
`sorafenib, are illustrated below in Figures 2, 3 and 4, respectively.
`
`1 2 3 4 5 6 7 8 9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`COOLEY GODWARD
`
`KRONISH LLP
`
`A T T O R N E Y S A T L A W
`
`S A N F R A N C I S C O
`
`10.
`
`FIRST AMENDED COMPLAINT
`CASE NO. C09-02145 MHP
`
`

`
`Case 3:09-cv-02145-EMC Document 23 Filed 06/15/09 Page 11 of 17
`
`Figure 2: Sorafenib
`
`Figure 3: Fluoro-Sorafenib
`
`Figure 4: Chloro-Sorafenib
`
`38.
`
`The parties fully understood, well before the cutoff date for the recognition of
`
`Collaboration Compounds, January 31, 2000, that sorafenib and its halogenated twins would
`
`exhibit raf kinase-inhibitory activity well within the specified standard. This is no surprise given
`
`that sorafenib and its halogenated brethren are, chemically speaking, nearly identical.
`
`39.
`
`Ultimately, the parties chose to develop sorafenib and began clinical trials in late
`
`2000. In accordance with the Collaboration Agreement, the parties co-funded the clinical trials,
`
`and Onyx made substantial payments to Bayer, which otherwise funded and managed the trials.
`
`The trials ultimately proved successful, leading to FDA approval in 2005 and 2007 for the
`
`marketing of sorafenib for treating patients with kidney and liver cancer, respectively.
`
`1 2 3 4 5 6 7 8 9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`COOLEY GODWARD
`
`KRONISH LLP
`
`A T T O R N E Y S A T L A W
`
`S A N F R A N C I S C O
`
`11.
`
`FIRST AMENDED COMPLAINT
`CASE NO. C09-02145 MHP
`
`

`
`Case 3:09-cv-02145-EMC Document 23 Filed 06/15/09 Page 12 of 17
`
`Bayer’s Secret Scheme to Develop Fluoro-Sorafenib
`
`40. Meanwhile, as the jointly-funded clinical trials progressed and Bayer began to
`
`realize that sorafenib was destined for success, defendants secretly launched a plan to displace it.
`
`In or around 2003, Bayer, along with other subsidiaries of Bayer AG, surreptitiously began filing
`
`patent applications directed to fluoro-sorafenib. Fluoro-sorafenib was not a compound that Bayer
`
`had recently discovered or, indeed, that involved any new discovery effort by Bayer or its
`
`Affiliates following the end of the Research Term in early 1999. On the contrary, Onyx and
`
`Bayer had explicitly identified fluoro-sorafenib in 1998. Nonetheless, neither Bayer nor its
`
`Affiliates disclosed the patent filings for fluoro-sorafenib to Onyx, which remained unaware of
`
`these actions. Then, in or around 2005, Bayer and its Affiliates announced clinical trials on a
`
`cancer drug they referred to as DAST. But the announcement omitted the chemical formula for
`
`DAST, leaving Onyx unaware that DAST was a code name for fluoro-sorafenib. Nor did
`
`defendants ever notify the Joint Development Committee that they were beginning clinical trials
`
`on a compound that arose from the collaboration. Defendants have given Onyx no chance to
`
`review and comment on the clinical trial submissions, much less to participate in the trials.
`
`41.
`
`In or around April 2007, Bayer Affiliates made a presentation to Onyx of various
`
`cancer compounds they were investigating. But despite the fact that clinical trials for fluoro-
`
`sorafenib had been initiated in 2005 and were ongoing, the executives and employees attending
`
`the April 2007 meeting failed to disclose to Onyx that Bayer Affiliates were developing fluoro-
`
`sorafenib.
`
`42.
`
`Bayer Affiliates then began publishing their research and discovery efforts with
`
`DAST. In June 2007, Bayer HealthCare AG and Bayer Schering Pharma announced DAST as
`
`being one of their development candidates for cancer therapy (again without revealing that it was
`
`fluoro-sorafenib).
`
`43.
`
`In early 2009, as the details of the DAST clinical trials became better known,
`
`Onyx asked Bayer Affiliates to reveal the chemical structure of DAST. Initially, they denied that
`
`DAST was a Collaboration Compound, but refused to reveal more. Finally, on March 31, 2009,
`
`an executive of Bayer HealthCare Pharmaceuticals, Inc. (an Affiliate of Bayer), admitted that the
`
`1 2 3 4 5 6 7 8 9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`COOLEY GODWARD
`
`KRONISH LLP
`
`A T T O R N E Y S A T L A W
`
`S A N F R A N C I S C O
`
`12.
`
`FIRST AMENDED COMPLAINT
`CASE NO. C09-02145 MHP
`
`

`
`Case 3:09-cv-02145-EMC Document 23 Filed 06/15/09 Page 13 of 17
`
`chemical structure of DAST was, indeed, fluoro-sorafenib. According to the executive, because
`
`Bayer had postponed testing of fluoro-sorafenib until after January 31, 2002, Bayer had not
`
`“recognized” that the compound satisfied the specified standard for ras inhibitory activity by that
`
`date. Accordingly, the executive declared, Bayer and its Affiliates are entitled to develop and
`
`market fluoro-sorafenib “unrestrained” by Onyx.
`
`44.
`
`On April 15, 2009, Onyx proposed a meeting of executives to negotiate in good
`
`faith toward a resolution of the parties’ dispute regarding whether fluoro-sorafenib is covered
`
`under the Agreement. The executives met, but the parties were unable to resolve the dispute.
`
`45.
`
`In May 2009, Bayer HealthCare Pharmaceuticals, Inc., which is responsible for a
`
`clinical trial of fluoro-sorafenib in the U.S., reported on the results of a phase II trial in kidney
`
`cancer and announced its intention to move forward with a phase III trial. Onyx is informed and
`
`believes that if fluoro-sorafenib secures FDA approval, Bayer and its Affiliates intend to market
`
`Onyx and Bayer’s joint discovery—fluoro-sorafenib—as a direct competitor to the parties’ joint
`
`product, sorafenib, thereby reaping all of the benefits of the parties’ collaboration without sharing
`
`the rewards.
`
`46.
`
`Onyx is informed and believes, and based thereon alleges, that its damages exceed
`
`the amount of seventy-five thousand dollars ($75,000), exclusive of costs and interest.
`
`FIRST CLAIM FOR RELIEF
`
`(BREACH OF CONTRACT)
`
`47.
`
`Onyx re-alleges and incorporates by reference paragraphs 1-46, inclusive, as
`
`though fully set forth herein.
`
`48.
`
`Onyx performed all of the terms and conditions of the parties’ Collaboration
`
`Agreement, as amended.
`
`49.
`
`Defendants breached the Collaboration Agreement by, among other things:
`
`(a)
`
`failing to disclose their research and development plans for fluoro-
`
`sorafenib;
`
`(b)
`
`failing to treat fluoro-sorafenib as a Collaboration Compound; and
`
`1 2 3 4 5 6 7 8 9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`COOLEY GODWARD
`
`KRONISH LLP
`
`A T T O R N E Y S A T L A W
`
`S A N F R A N C I S C O
`
`13.
`
`FIRST AMENDED COMPLAINT
`CASE NO. C09-02145 MHP
`
`

`
`Case 3:09-cv-02145-EMC Document 23 Filed 06/15/09 Page 14 of 17
`
`(c)
`
`undermining the value of sorafenib through their development of fluoro-
`
`sorafenib.
`
`50.
`
`Defendants further breached their obligations under the Collaboration Agreement
`
`and the Letter Agreement to cause their Affiliates to comply with the provisions of the
`
`Collaboration Agreement.
`
`51.
`
`Alternatively, in the event a compound must be tested to be recognized under the
`
`Collaboration Agreement as a Collaboration Compound, defendants breached the Collaboration
`
`Agreement if (as Bayer claims) they deferred testing of fluoro-sorafenib until after January 31,
`
`2000.
`
`52.
`
`As a proximate result of defendants’ breach of the Collaboration Agreement and
`
`the Letter Agreement, Onyx has sustained, continues to sustain, and will sustain damages,
`
`including, but not limited to lost sales, damage to goodwill, and the inability to profit from sales
`
`of fluoro-sorafenib. In addition, defendants were, are, and will be unjustly enriched through their
`
`appropriation for themselves of the entire value of fluoro-sorafenib.
`
`SECOND CLAIM FOR RELIEF
`
`(BREACH OF IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALING)
`
`53.
`
`Onyx re-alleges and incorporates by reference paragraphs 1-46, inclusive, as
`
`though fully set forth herein.
`
`54.
`
`A covenant to deal fairly and act in good faith is implied in the Onyx/Bayer
`
`Collaboration Agreement and later amendments.
`
`55.
`
`Defendants breached these covenants by, among other things:
`
`(a)
`
`failing to disclose their research and development plans for fluoro-
`
`sorafenib;
`
`(b)
`
`failing to treat fluoro-sorafenib as a Collaboration Compound; and
`
`(c)
`
`undermining the value of sorafenib through their development of fluoro-
`
`sorafenib.
`
`1 2 3 4 5 6 7 8 9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`COOLEY GODWARD
`
`KRONISH LLP
`
`A T T O R N E Y S A T L A W
`
`S A N F R A N C I S C O
`
`14.
`
`FIRST AMENDED COMPLAINT
`CASE NO. C09-02145 MHP
`
`

`
`C