Astex Therapeutics Ltd v Astrazeneca AB
| Jurisdiction | England & Wales |
| Judge | Lord Justice Henderson,Lord Justice Floyd,Lord Justice Leggatt |
| Judgment Date | 06 November 2018 |
| Neutral Citation | [2018] EWCA Civ 2444 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: A3 2017 2134 |
| Date | 06 November 2018 |
[2018] EWCA Civ 2444
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
The Hon Mr Justice Arnold
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Floyd
Lord Justice Henderson
and
Lord Justice Leggatt
Case No: A3 2017 2134
Charles Hollander QC and Josephine Davies (instructed by Clifford Chance LLP) for the Appellant
James Mellor QC and James Whyte (instructed by Marks & Clerk Solicitors LLP) for the Respondent
Hearing dates: 3–4 October 2018
This appeal raises questions of interpretation of a drug discovery and development agreement entered into in February 2003 between the claimant and appellant Astex Therapeutics Limited (“Astex”) and the defendant and respondent Astrazeneca AB (“AstraZeneca”) (“the Agreement”). The Agreement provided for the parties to engage in a collaborative research program to discover and develop a drug for the treatment of Alzheimer's disease (“AD”). Under the Agreement, Astex was to receive payments from AstraZeneca dependent on the achievement of certain milestones, and royalty payments in the event that a pharmaceutical product was licensed and sold. Astex appeals from the decision of Arnold J dated 21 June 2017 and his consequent order by which he dismissed Astex's claim to be entitled to these payments, and ordered Astex to return certain sums which had already been paid by AstraZeneca. He also ordered Astex to pay AstraZeneca's costs in respect of the period after 6 December 2016 on the indemnity basis, in respect of which there is an independent appeal.
AD is a debilitating disease for which there is no known cure. The disease is associated with the development of plaques in the brain, thought to be caused by an enzyme referred to as BACE (also known as beta-secretase) which causes the breakdown of amyloid precursor protein. Thus it is hypothesised that if one could develop an inhibitor to BACE one could in turn prevent the breakdown of the protein, the development of the plaques, and arrest or prevent the onset or progression of AD.
At the relevant times Astex was a small drug discovery company reliant on collaborations with larger companies such as AstraZeneca, a substantial global pharmaceutical company. AstraZeneca had commenced a BACE inhibitor project in 1999 at its site in Wilmington in the USA. In 2002 Astex had also started work on a BACE inhibitor.
Drug discovery typically starts with screening known compounds for activity, or designing, testing and making new ones. By 2003, methods were available to detect binding or “affinity” between the compound being screened and the target. In addition there were virtual methods available using computational software which could enable a chemist to visualise the three-dimensional interlocking between the compound and the target. Compounds which demonstrate activity above a certain level in such screening are commonly referred to as “hits”. The next step is to seek to identify high quality “leads” for future optimisation, and ultimately the selection of a candidate drug for pre-clinical and clinical testing.
Before the collaboration with Astex, AstraZeneca had identified three validated hit series of compounds which interacted with BACE in a similar way. AstraZeneca did not, however, have all the relevant crystal structures for BACE, and had been using a different crystal, endothiapepsin, in its crystallography.
By contrast, Astex had succeeded in crystallising apo-BACE (that is to say the unbound structure of BACE) and was using it to identify hits. Astex had developed a technique (called Pyramid) for screening fragments against crystal structures of target proteins, and a software tool called AstexViewer which enabled the visualisation of chemical structures. By April 2002 Astex had synthesised some 150 compounds. It proceeded to identify three series of compounds which interacted with BACE in a similar way.
The judge found that AstraZeneca's main reason for entering into the collaboration with Astex was to obtain access to Astex's apo-BACE crystal, which would enable structure-based design to be carried out. A secondary reason was to gain access to Astex's Pyramid technology. For Astex, the collaboration gave it the chance to work with a larger and better resourced partner, provided some funding for the work, and held out the prospect of payments if defined goals were achieved, and of royalties in the event of sales of a licensed product.
The Agreement
The Agreement begins with these four recitals:
“WHEREAS, ASTRAZENECA currently performs an internal project aiming at the discovery and development of novel therapeutic pharmaceutical products active at the Target (as defined below) for treatment of Alzheimer's disease or senile dementia (the “Project”); and
WHEREAS, ASTEX is a structure-based drug discovery company with unique skills and proprietary screening methods in which protein crystal structures are used to detect binding of drug fragments; and
WHEREAS, the Parties independently of each other have generated certain knowledge and expertise on the Target; and
WHEREAS, the Parties wish to engage in a collaborative research program under the Project utilising ASTEX's proprietary Pyramid(tm) technology for discovery of novel chemical leads active against the Target and suitable for development for treatment of Alzheimer's disease or senile dementia (the “Program”).”
The concepts of “the Project”, that is to say AstraZeneca's pre-existing work on the Target (essentially BACE), and “the Program”, that is to say the collaborative research, are central to the disputes on this appeal. The Program is described in the fourth recital as being “under the Project”, but the recitals do not deal with what is to happen to the Project once the Program comes to an end.
Section 1 of the Agreement contains a list of defined terms. Importantly, the list includes the definition of “Program” which refers to the scheduled “Research Plan” to which it will be necessary to return. The list of terms includes definitions of categories of compounds to be created successively during the Program: “Affinity Hits” or “AFFITS”, “Hits”, “Lead Compounds” and “Candidate Drugs” or “CDs”. There are also definitions of the optimisation work involved in the transition from one category to another: “AFFIT Optimisation”, “Hit Optimisation” and “Lead Optimisation”. Hits, Lead Compounds, CDs and other substances or structures identified as a direct result of any of the three types of Optimisation are called Collaboration Compounds. There is also a definition of “Results” which is principally relevant to the provisions relating to the ownership of rights, and of “Materials” which includes the contents of certain Screening Libraries in existence at the date of the Agreement as well as “any other materials such as … used in the Program (other than Collaboration Compounds or Results).” AFFITS are Materials which show binding affinity to the Target.
I set out the relevant definitions from section 1 below:
“…
1.2 “Affinity Hit” or “AFFIT” means any Material that shows specific binding to the Target in the screens performed under the Program, meeting the criteria set forth in the Research Plan provided, however, that if any such Material is later selected as a Hit it ceases to be an AFFIT and shall for all purposes thereafter be regarded only as a Hit.
…
1.4 “AFFIT Optimisation” means chemical structure modification performed as part of the Program, starting from AFFITs and aiming to generate optimised AFFIT structures (“AFFIT Improvements”) that, together with AFFITs, form the bases for identification of Hits.
…
1.6 “Candidate Drug” or “CD” means a Collaboration Compound satisfying ASTRAZENECA's pharmacological and pharmaceutical criteria for clinical testing, as outlined in the Research Plan, and which compound has been selected for clinical testing by the JEC or ASTRAZENECA.
1.7 “Collaboration Compound” means all Hits, Lead Compounds, CDs and other substances and structures discovered or identified as a direct result of AFFIT Optimisation, Hit Optimisation or Lead Optimisation and any metabolites, prodrugs, isomers and enantiomers referable to any of the foregoing. In the event of a dispute between the Parties as to whether or not a given substance or structure was discovered as a direct result of Hit Optimisation or Lead Optimisation the Parties' internal laboratory books and records from the relevant process through which such substance or structure was discovered shall serve as exclusive evidence to resolve any such dispute. For the avoidance of doubt, AFFITs and AFFIT Improvements do not constitute Collaboration Compounds (but constitute Results).
…
1.9 “Collaboration Term” means the term during which ASTEX performs research activities under the Program as specified in Section 14.2 below
…
1.14 “Effective Date” means the date first written above in this Agreement.
…
1.17 “Hits” means all AFFITs and AFFIT Improvements selected by the JEC or by ASTRAZENECA as candidates for Hit Optimisation.
1.18 “Hit Optimisation” means chemical structure modification performed as part of the Program, starting from a Hit and aiming at the identification of compounds with properties meeting the Lead criteria (as defined in the Research Plan).
…
1.23 “Lead Compounds” or “Leads” means all Hits and all other substances and structures discovered or identified through Hit Optimisation meeting the Lead criteria (as defined in the Research Plan) of the Program, which have been selected by the JEC or, after the Collaboration Term, by ASTRAZENECA as candidates for Lead Optimisation.
1.24 “Lead Optimisation” means chemical structure modification performed as part of the Program, starting from a Lead...
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