Response to Biodel's Complaint, page-5

RETURN DATE: SEPTEMBER 29,2015
BIODEL INC.,
Plaintiff,
v.
TINILIFE MEDICAL SOLUTIONS, INC.,
Defendant.
SUPERIOR COURT
JUDICIAL DISTRICT OF
DANBURY
SEPTEMBER 11, 2015
COMPLAINT
FIRST COUNT (ACTION TO PRESERVE RIGHTS AND PROPERTY PURSUANT TO
coNN. GEN. STAT. $$
s2-422 AND 52-471AND THE FEDERAL ARBITRATION ACT,
9 U.S.C. $l et seq.)
1. Plaintiff Biodel, Inc. ("Biodel") and Defendant Unilife Medical Solutions, Inc.
("Unilife") are parties to a contract for the development and supply of a new, life-saving
emergency treatment for people with diabetes. Under the contract, Unilife granted Biodel an
exclusive license to certain technology, and agreed to help develop and supply a specialized type
of syringe for use by diabetics in an emergency. The contract provides for arbitration of
contractual disputes and for injunctive relief from a court to preserve the status quo pending
arbitration.
2. Since at least July 2015, Biodel has been attempting to resolve issues relating to
the timing and scope of Unilife's performance under the contract. In the course of those
discussions, Unilife made multiple representations about its readiness to perform which caused
Biodel to continue negotiating with Unilife rather than to pursue arbitration.
3. On September 2,2075, Defendant announced to the market that it had hired a
banker to explore a possible sale of the company or a license of its proprietary technology. The
arinouncement was made with no prior warning to Biodel, and Unilife has refused to provide
Biodel with any more specifics.4. It is a breach of contract for Unilife to unilaterally assign its contract with Biodel
to any third party or to disable itself from performing by selling off the assets that Unilife needs
to perform.
5. On September 10, 2015, Plaintiff served Defendant with notice commencing
dispute-resolution proceedings under the contract, including arbitration of any unresolved
contractual disputes. The arbitration relief Biodel is seeking will include an injunction
prohibiting any sale or technology license in violation of the contract, as well as other relief
redressing breaches of the contract.
6. By this action, Plaintiff seeks a preliminary injunction preserving the status quo
pending a ruling on the merits in the arbitration.
NATURE OF THE ACTION
7. This is an action for preservation of rights and property, brought pursuant to
Conn. Gen. Stat. S5 52-422 and 52-471, and 9 U.S.C. $ 1 el seq. ("Federal Arbitration Act").
PARTIES
8. Biodel Inc. ("Biodel") is a biopharmaceutical company engaged in the
development and commercialization of innovative treatments for people with diabetes. It is
headquartered in Danbury, Connecticut and employs approximately 35 people. It is incorporated
under Delaware law and its stock is traded on the NASDAQ Stock Market.
9. Unilife Medical Solutions, Inc. ("Unilife") is a Delaware corporation engaged in
the design and manufacture of injectable drug delivery systems. Its principal place of business is
in York, Pennsylvania. It is a wholly owned subsidiary of Unilife Corporation, a publicly held
corporation, the stock of which is traded on the NASDAQ Stock Market. Unilife is the United
States operating division of Unilife Corporation.
-2-JURISDICTI AND VENI]E,
10. This Court has personal jurisdiction over Defendant under Conn. Gen. Stat. $ 33-
929(Ð(l), (2) and (a). This action arises out of a contract to be performed in Connecticut and out
of business solicited by Unilife in Connecticut by e-mail and by in-person meetings in
Connecticut. In addition, Defendant has repeatedly solicited business in Connecticut. This
action also arises out of torlious conduct in Connecticut.
1 1. Venue is proper in the Danbury Judicial District pursuant to Conn. Gen. Stat.
$ s1-34s.
FACTUAL BACKGROUND
12. A core parl of Biodel's business is bringing to the market a Glucagon Emergency
Management system (the "GEM system") for people with diabetes. The GEM system consists of
a stored dose of powdered glucagon and liquid diluent in a customized dual-chamber syringe. It
is intended as a new, more effective treatment in cases of diabetic emergency.
13. Unilife markets itself as a developer and manufacturer of injectable drug delivery
systems. Among the devices marketed by Unilife are dual-chamber injection devices.
14. In early 2013, Unilife held discussions with Biodel, including meetings in
Connecticut, about partnering with Biodel to become the exclusive provider of the customized
syringes for the GEM program. Based on Unilife's representations that it had the required
expertise and resources, Biodel agreed in April 2013, to enter a long-term exclusive relationship
with Unilife, making Unilife the sole source of devices for the GEM program for the next 15
years. Unilife also assumed sole control over the process of filling syringes with glucagon
during all required testing and development.
15. As a result of the April 2013 exclusive agreement, Biodel became wholly
dependent on Unilife for development of the GEM program and bringing it to the rnarket.
-3-16. Unilife had full knowledge of the impofiance of the GEM program to Biodel's
financial condition and of the dependence of Biodel on Unilife for the program's success. The
program was featured prominently in Biodel's public reports, where Biodel noted its continued
reliance on Unilife for the program's success.
17. Unilife also had full knowledge that the success of the GEM program was in large
part dependent upon its meeting various testing and approval benchmarks before competitors, so
that the GEM system could be the first of its kind to be marketed to the public.
18. Unilife also had full knowledge that the 2013 exclusive contract does not permit it
to abandon development of the GEM's program, or to assign its obligations to a third party
without prior notice to and consent by Biodel.
19. On September 2,2015, Unilife issued a press release in which it announced that it
is exploring a potential sale of the company as well as a possible licensing of the company's
proprietary technology. This announcement was made without any warning to Biodel despite the
obligations in the contract for Biodel approval of any assignment, and despite the ongoing
discussions between the parties regarding Unilife's ability to meet the timetable for various
deliverables under the contract. During those discussions Unilife had in fact represented on
numerous occasions that it was ready, willing, and able to meet the GEM's program benchmarks.
20. Upon reading the September 2 announcement, Biodel contacted Unilife and
sought more details and assurance that its contract rights would not be breached further. But
Unilife refused to provide any more information or assurance.
21. In the weeks before the September 2 announcement, Unilife engaged Biodel in a
series of discussions that, at the time, were accompanied by assurances that Unilife remained
committed to the program and prepared to meet upcoming benchmarks. In those discussions,
-4-Unilife at first demanded increased payments for its performance under the contract, but that
offer proved illusory when Unilife refused to agree to tie those payments to actual performance.
Unilife then proposed selling the program assets back to Biodel, but that also proved illusory
when Unilife refused to identi$ any companies that could assume production of the GEM
syringe and refused to allow Biodel to perform any meaningful due diligence on the assets to be
acquired.
22. While it professed to be negotiating with Biodel, Unilife also refused to provide
Biodel personnel access to the Unilife facility to inspect the progress to date and to confirm the
existence and condition of equipment that Unilife was required to purchase and prepare for the
GEM program.
23. While it professed to be negotiating with Biodel, Unilife also denied Biodel
auditors access to information they required as part of their review.
24. Unilife's pre-September discussions with Biodel were also accompanied by
threats that unless Biodel agreed to pay Unilife additional funds either to perform under the
contract or to acquire assets from Unilife, then the GEM program would fall farther and farther
behind schedule and its value would decline.
25. These actions by Unilife have now been revealed to be part of a bad faith,
deceptive scheme to stall for time under the contract in order to coerce Biodel into making
payments to ransom the GEM program or to allow Unilife to find a third-party buyer of some or
all of its business without complying with the notice or consent provisions of the contract.
26. Biodel has been and will continue to be harmed by the delays caused by Unilife's
conduct and by the threat that a sale of Unilife assets will strip out valuable parts of the business
and leave behind a shell unable to perform the obligations under the contract.
521. Section 13 of the agreement between Biodel and Unilife, as amended (the
"Agreement") establishes the procedure for resolving "[a]ny contractual dispute arising under
this Agreement (the 'Dispute')." Under Section 13, any Dispute not resolved by good-faith
discussions between the parties "must be refened to and finally resolved by arbitration."
28. By written notice on September 10, 2075, Biodel invoked the dispute resolution
procedure under Section 13 to resolve the parties' contractual disputes arising under the
Agreement. The notice does not embrace Biodel's claim based on a violation of the Connecticut
Unfair Trade Practices Act alleged in the Second Count, which is not a contractual dispute
arising under the Agreement.
29. Biodel intends to initiate arbitration by no later than November 7,2015, and
potentially sooner, unless the parties' discussions pursuant to Section 13 resolve their Disputes.
30. Section 13 provides that "fe]ither Party may, without waiving any remedy under
this Agreement, apply to the arbitral tribunal and/or any coutt having jurisdiction any interim,
provisional, injunctive or conservatory reliefthat is necessary to protect the rights or property of
that Party until the arbitration award is rendered or the Dispute is otherwise resolved."
3 1. While the dispute-resolution procedure pursuant to Section 13 is underway,
Biodel will suffer irreparable harm if Unilife is permitted to consummate a transaction that
impedes Unilife's ability to perform its obligations under its agreement with Biodel, and Biodel
has no adequate remedy at law to redress that harm. Biodel will likely prevail on the merits of
the dispute, and the equities of the case demand that the Court issue a preliminary injunction
until a final ruling in the arbitration.
32. Biodel respectfully requests the entry of a preliminary injunction as set forth in
the Claim for Relief below.
-6-SECOND COUNT (VIOLATION OF THE CONNECTICUT UNFAIR TRADE
PRACTICES ACT, CONN.GEN.STAT. $42-110a, et seq.)
L-26. Biodel repeats and realleges the allegations set forth in paragraphs 1 through26 of
the First Count as if fully set forth herein.
27. Unilife has engaged in a pattern of threats and deception aimed at concealing
from Biodel its true intention to abandon to the contract and at coercing Biodel to pay
unconscionable amounts to incentivize Unilife to continue to perform.
28. Unilife misrepresented the status of the development of the GEM device and
prevented Biodel from learning the truth about development activity at Unilife.
29. The acts and practices alleged in this count constituted unfair and deceptive acts
and practices in violation of Conn. Gen. Stat. $ 42-11Ob(a) of the Connecticut Unfair Trade
Practices Act. ("CUTPA").
30. The acts and practices alleged in paragraphs 12 through25 and27 of this Count
were unfair in that (a) they offended public policy as it has been established by the common law
or otherwise or were within at least the penumbra of some common law or established concept of
unfaimess, (b) were immoral, unethical, oppressive or unscrupulous, or (c) caused substantial
injury to Plaintiff in that the injury they caused was substantial, was not outweighed by any
countervailing benefits to consumers or competition that they produced and caused an injury that
Plaintiff itself could not reasonably have avoided.
31. The acts and practices alleged in paragraphs 21 through25,27 and 28 of this
Count were deceptive in that the representations or omissions were material and were likely to
mislead Plaintiff acting reasonably in the circumstances.
32. The acts and practices alleged in this Count were done in the conduct of Unilife's
primary trade or business of developing and marketing injectable drug delivery systems.
-7 -33. Unilife's unfair and deceptive acts and practices have caused Biodel to suffer
ascertainable loss of money or property and actual damages in that they have forced Biodel to
expend significant time, legal fees, and other resources. Unilife's actions have also caused a
significant delay in the development of the GEM program. Because the GEM program is a core
part of Biodel's business, the delay has significantly damaged the value of Biodel's business.
Shortly after the market was informed of the delay due to Unilife's actions in August 2015, the
market value of Biodel declined by over $ 18 million.
34. The acts and practices of Unilife alleged in this Count were done with a reckless
indifference to the rights of Biodel or were intentional and wanton violations of those rights.
CLAIM FOR RELIEF
WHEREFORE, Plaintiff respectfully request
judgment against Defendant for the
following relief:
1. As to the First Count:
a. The entry of a preliminary injunction, restraining Defendant from entering
into a transaction that will jeopardize its ability to perform its obligations
under Defendant's contract with Plaintiff pending a final ruling on the
merits in the contract arbitration.
2. As to the Second Count:
a.. a declaration that Defendant has committed the violations alleged herein;
b. a
judgment against Defendant pursuant to Conn. Gen. Stat. ç 42-l10g(a)
for the actual damages suffered by Plaintiff;
c. Punitive damages pursuant to Conn. Gen. Stat. ç42-110g(a);
-8-J
d. the costs of this suit, including reasonable attorneys' fees, expenses and
interest pursuant to Conn. Gen. Stat. 542-11Og(a); and
e. interest pursuant to Conn. Gen. Stat. $37-3a.
As to the First and Second Counts:
a. such other and further relief as this Court deems appropriate.
PLAINTIFF,
BIODEL INC
BY:
David A
David L. Belt
Jeffrey P. Nichols
HURWITZ SAGARIN SLOSSBERG
& KNUFF LLC
147 North Broad Street, P,O. Box 112
Milford, Connecticut 06460
Juris No. 26616
Tel: (203) 877-8000
Fax: (203) 878-9800
Email : [email protected]
D S lossberg@hssklaw. com
[email protected]
OF COUNSEL:
Michael P. Canoll
Davis Polk & Wardwell LLP
450 Lexington Avenue
New York, NY 10017
Telephone: (212) 450-4500
Fax: (212)701-6693
Email : [email protected]
Its Attorneys
-9 -RETURN DATE:
BIODEL INC.,
Plaintifl
V
LINILIFE MEDICAL SOLUTIONS, INC.,
Defendant.
SUPERIOR COURT
JUDICIAL DISTRICT OF
DANBURY
SEPTEMBER 11
,2015
STATEMENT OF AMOIINT IN DEMAND
The amount, legal interest or property in demand is greater than $15,000, exclusive of
interest and costs.
PLAINTIFF,
BIODEL INC.
BY t
David A. Slossberg
David L. Belt
Jeffrey P. Nichols
HURWITZ SAGARIN SLOSSBERG
& KNUFF LLC
147 North Broad Street, P.O. Box 112
Milford, Connecticut 06460
Juris No. 26616
Tel: (203) 877-8000
Fax: (203) 878-9800
Email: [email protected]
[email protected]
[email protected]
OF COUNSEL
Michael P. Carroll
Davis Polk & Wardwell LLP
450 Lexington Avenue
New York, NY 10017
Telephone: (212) 450-4500
Fax: (212) 701-6693
Email : [email protected]
Its Attorneys
-10-CERTIFICATION
I hereby certify that, as required by Conn. Gen. Stat, $42-11Og(a),
a copy of the
Complaint was sent to the Attorney General of the State of Connecticut as the Commissioner of
Consumer Protection by emailing a copy addressed to [email protected].
David L
- 11-