EXHIBIT 14
`REDACTED
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`Case 1:19-cv-00318-MR Document 26-1 Filed 12/06/19 Page 1 of 10
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`EXELA 2007
`Eton Pharmaceuticals v. Exela Pharma Sciences
`PGR2020-00086
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE WESTERN DISTRICT OF NORTH CAROLINA, ASHEVILLE DIVISION
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`EXELA PHARMA SCIENCES, LLC,
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`Plaintiff,
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`v.
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`Civil Action No.
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`SANDOZ, INC.,
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`Defendant.
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`DECLARATION OF MARK HARTMAN
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`I, Mark Hartman, state the following is true to the best of my knowledge, information, and belief:
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`1.
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`My name is Mark Hartman. I am over the age of twenty-one (21) years, and I am
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`competent to testify to the matters stated herein.
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`2.
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`I am currently employed as the Chief Commercial Officer for Exela Pharma
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`Sciences LLC (“Exela”). I have worked at Exela in that role since April 2015.
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`3.
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`In my capacity as the Chief Commercial Officer, I am familiar with Exela’s
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`commercial and marketing operations and strategies. This declaration is based on my personal
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`knowledge and matters that I have investigated within Exela.
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`4.
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`Exela invested significant effort in preparing for the launch of its L-Cysteine
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`product ELCYS™, including generating a production forecast for meeting the market needs for
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`the product and a market forecast for ELCYS™ based on market data from IQVIA, a healthcare
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`analytics firm. The total L-Cysteine injection market, as estimated from the IQVIA database, is
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`about 1,100,000 vials/year. The Exela marketing team also put together the pricing information,
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`safety datasheets, and package inserts to be submitted to pricing database companies that
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`customers reference for reimbursement.
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`5.
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`Towards the end of May 2019, I sent out communications to wholesalers
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`regarding availability of ELCYS™, stocking suggestion, and pricing.
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`6.
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`On May 21, 2019, Mr. Vaibhav Vaishnav of Sandoz’s business development team
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`sent a meeting invite via email to schedule a telephone call regarding Exela’s recently approved
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`products entitled “Potential Collaboration Opportunities – Sandoz / Exela,” which I accepted. I
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`had not had any contact with Mr. Vaishnav or anyone else at Sandoz prior to this meeting
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`invitation.
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`7.
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`On May 29, 2019, I sent our new product set up information to all national pricing
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`database companies announcing the approval of ELCYS™ and providing the product and pricing
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`information required by them to establish ELCYS™ in their pricing databases for customers to
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`access to ensure reimbursement for the drug was established prior to shipping product to
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`customers.
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`8.
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`On May 30, 2019, I sent out the ELCYS™ product launch packet including an
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`initial stocking incentive offer to all major wholesalers in the US soliciting their initial stocking
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`orders for ELCYS™.
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`9.
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`On May 31, 2019 at 10:30am Eastern time, I forwarded to the Exela sales team
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`the packet of information on the ELCYS™ launch in preparation for our conference call
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`scheduled for Monday, June 3, 2019 to go through the approved marketing materials and pricing
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`information on ELCYS™. Included in this launch packet was a letter to healthcare providers
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`announcing the approval and immediate launch of ELCYS™ as the only FDA Approved
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`cysteine hydrochloride injection on the market in the United States. This letter also noted that
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`ELCYS™ contains no more than 120 ppb of aluminum. This letter was part of the approved
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`marketing materials that each salesperson was to send to its customers and prospective customers
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`announcing the launch of ELCYS™.
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`10.
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`On that same day, May 31, 2019, Exela issued a press release on the ELCYS™
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`launch that stated that ELCYS™ is “available direct from Exela immediately and will be in
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`wholesalers in early June.” As I reported to my sales team at that time, Exela had produced and
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`made ready for this launch over 100,000 vials of ELCYSTM, and we were constantly producing
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`more. With the total market demand for L-Cysteine being about 90,000 vials per month, we
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`were prepared to supply the entire market demand for L-Cysteine product immediately.
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`11.
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`On May 31, 2019, I had a telephone call with Mr. Vaibhav Vaishnav and Ms.
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`Shubhra Mehrotra of Sandoz’s business development team along with Dr. Phanesh Koneru, CEO
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`of Exela. I had not had any contact with Ms. Mehrotra prior to this call. The Sandoz
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`representatives wanted to talk about Exela’s “recent approvals” and whether Exela was set up to
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`do marketing for those products. Exela had received FDA approval for only two products in
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`April 2019, one of which was ELCYS™. During the call, Sandoz provided an overview of
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`Sandoz’s U.S. operations and explained that they were looking for products to in-license. I gave
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`a brief overview of Exela and its product line. I explained that Exela had its own sales and
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`marketing team and that Exela was not interested in licensing its products at this time.
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`12.
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`Beginning approximately June 3, 2019, Exela began sending out communications
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`directly to customers such as hospitals and infusion centers regarding FDA approval and
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`availability of ELCYS™. Around the same time, Exela also launched its Early Adapter
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`Program, which offered a reduced price for ELCYS™ in exchange for a customer’s commitment
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`to purchase L-Cysteine product from Exela. In the first wave, nineteen customers signed Letters
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`of Commitment to participate in the Exela Early Adapter Program, plus another twelve
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`customers had signed up for Tier 1 pricing via the Premier ProvideGx program. During the
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`second wave, only two additional customers signed up for the Exela Early Adapter Program.
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`13.
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`14.
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`On June 20, 2019, Exela began shipping ELCYS™ to wholesalers.
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`As part of its sales efforts, Exela collects data and observations from its sales
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`team in various forms. The Exela sales team generally uses the program ZENDESK to record
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`notes on calls with customers. Key Account Managers (KAMs) will also report to me with
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`comments from customers, either in person or in emails. The Exela Regional Managers (RMs)
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`also collect customer feedback and data from KAMs and they send that information to me to be
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`compiled into a master summary. I have also communicated directly with customers regarding
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`the sale of ELCYS™ and Sandoz’s continued presence in the market. I collected the
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`observations below via these various methods.
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`15.
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`Exela’s sales teams have observed and reported to me several instances of health
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`systems buying or committing to buy several months, and even up to a year’s supply of Sandoz’s
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`unapproved product, many of these customers having made bulk purchases after the ELCYS™
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`launch.
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`16.
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`As reported to me by my team, based on their observations (at my direction) of
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`historical trends, watching what is kept at wholesalers, and conversations with hospitals, multiple
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`customers who normally did not maintain large stocks of L-Cysteine have recently purchased
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`unusually large supplies from Sandoz. For example,
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` informed Exela that it had purchased a full year’s worth of Sandoz’s product in July 2019
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`and, as of October 2019, was still working through that supply and declining to purchase from
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`Exela. Similarly, at least as of early October 2019,
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`were still purchasing Sandoz’s product and declined to purchase from Exela.
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`17. My team has observed and reported to me similar patterns with customers across
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`the country. Our sales team indicated to me that
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` informed us that they had purchased
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`“a large quantity of Sandoz product in bulk” and that they do not intend to convert to ELCYS™.
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`after our ELCYS™ launch, and as of October 2019 was still working through that inventory and
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` had purchased a full year’s supply of Sandoz’s product
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`declining to purchase from Exela. Similarly,
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`and as of October 2019 were still working through that inventory and declining to purchase from
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` purchased four months of Sandoz’s product at one time,
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`Exela.
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`18. My sales team also learned from customers and reported to me that Sandoz was
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`informing them that it would continue to supply its product for the foreseeable future, it was not
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`planning to leave the market, and that it had sufficient quantities of product to last at least
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`through the end of 2019.
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`19.
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`In addition, multiple customers who had signed up to join the first wave of
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`Exela’s Early Adapter Program later reneged on their letters of commitment to purchase agreed
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`amounts of product from Exela, and instead purchased from Sandoz.
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`20. While I do not have access to Sandoz’s exact pricing data, based on information I
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`have learned from Group Purchasing Organizations (GPOs) and information my sales team has
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`reported to me from the field, my best estimate is that customers have been able to purchase
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`Sandoz’s unapproved product anywhere from one-half to one-fourth of the price of Exela’s
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`product.
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`21.
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`As reported to me,
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` the
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`major distributors’ (Amerisource, McKesson, and Cardinal) websites that show those distributors
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`have so much of Sandoz’s product on hand that the distributors are not placing limits on the
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`quantity of Sandoz product that customers can purchase at any one time.
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`22.
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` as of October 16,
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`2019,
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`had a six-week supply of Sandoz’s product in stock.
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`23.
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`Based on the information Exela’s sales representatives have collected and
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`reported to me, the situation is similar for other major distributors as well. While Sandoz has
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`announced that it has stopped selling product as of October 8, 2019, these distributors have made
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`no such announcement and, as reported to me, have continued to sell the Sandoz product.
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`24.
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`Sandoz’s continued sale and distribution of its unapproved product has caused
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`and is causing Exela to lose sales. As an example,
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`received a shipment of 100 cartons (1,000 vials) of ELCYS on June
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`20, 2019, but as of September 24, 2019 they had made zero sales. During October,
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` only sold 23 cartons (230 vials) of ELCYS™, with 17 (170 vials) of those coming in on
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`October 25, 2019, once they had exhausted their Sandoz inventory.
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`25.
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`As of the end of September (the last month for which complete sales data is
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`available), Exela holds approximately 19% of the L-Cysteine market share with Sandoz retaining
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`the remaining approximately 81% market share based on Exela’s best calculation. Of Exela’s
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`market share,
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` comes from a single customer
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`, effectively baring it from
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`purchasing Sandoz’s unapproved product. Without this single customer, which Sandoz is
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`essentially barred from, Exela’s share position would only be
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` of the total market three
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`months after launch.
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`26.
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`Exela’s sales force has received and reported to me comments from multiple
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`customers who declined to purchase Exela’s product because they already have a substantial
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`inventory of the Sandoz product. In addition, there are numerous customers who had already
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`signed up to purchase ELCYS™ as part of Exela’s Early Adapter Program, but subsequently
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`reneged on their letters of commitment to purchase the agreed amounts of product from Exela,
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`instead purchasing Sandoz’s unapproved product.
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`27. My team has reported to me that some customers have also expressed the
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`(mistaken) belief that Exela must be making up or exaggerating the serious toxicity issues with
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`aluminum problems to sell products.
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`28.
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`As reported to me by my sales team, the clinical pharmacist
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` was concerned about the aluminum toxicity issue and reached out to their Sandoz sales
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`representative regarding the aluminum content of the Sandoz product only to be told that the
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`sales representative was “unaware” of its aluminum content.
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`29.
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`Exela’s sales team has also reported to me that Sandoz has informed customers,
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`, that they were going to file an
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`abbreviated new drug application (ANDA) to market their own generic version of L-Cysteine,
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`suggesting Sandoz might try to maintain its L-Cysteine market domination perpetually.
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`30.
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`In another instance, on August 14, 2019, it was reported to me that the Sandoz
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`representative informed
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` that Sandoz had no plans of pulling out
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`of the market and that they were waiting on FDA to get approval to continue selling in the US.
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`31.
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`Sandoz’s continued presence in the market is harming Exela’s relationships with
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`its current customers, both for other Exela products and potential customers for ELCYS™, and
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`Exela’s opportunities to build goodwill in the marketplace due to it safe, FDA-approved product.
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`For example, Exela’s sales team received and reported to me comments from customers that
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`Exela was just saying that Sandoz would be coming off the market to create panic (“hysteria,” in
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`the words of one customer) so that we could charge more for our product.
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`32.
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`The damage to Exela’s credibility and reputation is especially harmful because of
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`Exela’s size and age. Exela is a relatively small company in the market, offering a portfolio of
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`ten drugs (seventeen SKUs) compared to the hundreds of drugs in the portfolios of companies
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`such as Sandoz. In addition, Exela is a relatively new company that does not have the advantage
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`of decades-long customer relationships like the more established players in the market.
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`33. The loss of revenue due to Sandoz's sales has also created long-term financial
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`harm for Exela. The loss of ELCYS™ revenue has forced Ex이a to borrow
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`The loss of revenue has also forced Exela to delay
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`regulatory filings for approval of several drugs currently in its development pipeline, which in
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`turn delays the public's access to the benefits of these new drugs. It also financially harms Exela
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`by delaying its ability to commercialize those products.
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`I declare under penalty ofpeijury of the laws of the United States of America that the foregoing
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`is true and correct.
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`Executed on 5山 day of November, 2019, in Lenoir, North Car이ma.
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`/s/
`Mark41artman
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