Two weeks after scuttling the lead drug candidate it bought along with a biotech earlier this year, alleging that clinical data had been falsified, Hyperion Therapeutics has been sued for $200 million by the parent of the startup.
Clal Biotechnology Industries disclosed its filing of the lawsuit yesterday in Delaware state court, accusing Hyperion in a statement of actions that were “commercially unreasonable, rash and ill-considered, and were not based on careful analysis of the alternatives.”
Hyperion's decision to halt development of the type 1 diabetes drug was unreasonable “even if there is a basis for Hyperion’s allegations concerning the alleged misconduct by certain Andromeda employees and its external research advisor,” according to a statement of claim by Clal Biotechnology Industries, parent of Andromeda Biotech, that was reported by the Israeli news outlet Globes.
At issue is the the experimental drug DiaPep277®, acquired by Hyperion when it bought Andromedafrom Clal Biotech in June for up-to-$570 million. While results for the drug candidate in the DIA-AID 1 trial were reported to be successful, Donald J. Santel, Hyperion’s president and CEO, said the trumpeted results left out data from 34 patients excluded in violation of study entry criteria.
When their data was added back during a final primary efficacy analysis after the close of its acquisition of Andromeda, “the apparent treatment effect of DiaPep was lost,” Santel said during a conference call.
Hyperion canceled its acquisition of Andromeda from Clal Biotech. Hyperion had agreed to pay Clal Biotech $20 million cash upfront—$12.5 million in cash and nearly $7.85 million in stock—as well as up-to-$550 million in payments tied to milestones.
Because the deal involved a relatively low upfront payment and was heavy on contingent payments, Clal Biotechnology stated in its claim that “Hyperion’s breach of the share purchase agreement and conduct have caused substantial damage to CBI (which was reflected by a sharp drop in its market capitalization), other stakeholders and the future of the drug.”
A key attraction of the deal was DiaPep277, a peptide derived from the human heat shock protein 60 that modulates the immune system to prevent the destruction of insulin producing cells in the pancreas. DiaPep277 is designed to protect the internal production of insulin in patients newly diagnosed with type 1 diabetes, by stopping the immune destruction of insulin-producing beta-cells in the pancreas through stimulation of regulatory responses, without causing immunological suppression.
After the announcement, the share price of Clal Biotech fell, and the company said it would write down NIS 506 million ($138.2 million) in connection with the canceled sale. Clal Biotech said in a Sept. 21 statement that representatives of both companies had met in the U.S. to discuss the dispute after it contacted Hyperion in order to obtain documents and information backing up its allegation of falsified data.
Hyperion has said publicly that some Andromeda employees “engaged in serious misconduct, including collusion with a third-party biostatistics firm in