Eli Lilly & Company Ltd v 1) Neopharma Ltd 2) Neolab Ltd

JurisdictionEngland & Wales
Judgment Date06 March 2008
Neutral Citation[2008] EWHC 415 (Ch)
Date06 March 2008
CourtChancery Division
Docket NumberCase No: HC08COO433

[2008] EWHC 415 (Ch)




Royal Courts of Justice

Strand, London, WC2A 2LL


Mr Roger Wyand Qc

Sitting As A Deputy High Court Judge

Case No: HC08COO433

Eli Lilly And Company Limited
(1) Neopharma Limited
(2) Neolab Limited

Mr Andrew Waugh QC and Mr Miles Copeland (instructed by Howrey LLP) for the Claimant

Mr Richard Miller QC and Mr Dominic Hughes (instructed by Milbank, Tweed, Hadley &McCloy LLP) for the Defendant

Hearing date: 28 th February 2008 1

Approved Judgment

I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.


The Claimant, Eli Lilly and Company (“Eli Lilly”), is the registered proprietor of European Patent (UK) No 0 454 436 B1 (the Patent) covering the compound olanzapine which Eli Lilly manufactures and markets throughout the United Kingdom and the rest of Europe as ZYPREXA. By an Application Notice dated 18 th February 2008 Eli Lilly sought an interim injunction to restrain the First Defendant, at that time the only defendant to the action, from infringing the Patent and also sought an order that the Defendant disclose the names and addresses of all persons to whom it has supplied “Olanzapine Neopharma” and any other products containing olanzapine and the dates and quantities of each supply.


The application came before Floyd J on 20 th February. The Defendant consented to the addition of the Second Defendant to the action and the two defendants gave undertakings substantially in the form requested for the injunctive relief with the Claimant giving the usual cross-undertaking in damages. The Defendants (hereafter “Neolab”) resisted the disclosure application which was adjourned with a very tight timetable for evidence and came on before me on the 28 th February.


The evidence on this application consists of two witness statements from Mr Hiscock of Eli Lilly, the second in reply to the Neopharma/Neolab evidence, and a witness statement of Mr Hopkins of Neolab and a witness statement of Mr Wain, a chartered patent attorney, on behalf of Neolab.

The Facts


Olanzapine is an anti-psychotic drug used for the treatment of schizophrenia, bipolar disorder and acute mania. Eli Lilly obtained a European marketing authorisation for ZYPREXA on 27 th September 1996. ZYPREXA has enjoyed tremendous worldwide commercial success since its launch. By 2006, annual worldwide sales for ZYPREXA were approximately £2.2 billion. The revenue generated by sales of ZYPREXA for Eli Lilly in the UK was £140 million, which accounts for approximately 50% of Eli Lilly's revenue in the UK.


Mr Hopkins' evidence is that the First Defendant, Neopharma, is a non-trading company based in the UK and is the holder of a variety of EU marketing authorisations. The major marketing authorisation held by Neopharma is the Olanzapine Neopharma authorisation. The exclusive distributor of the product in the UK is the Second Defendant, Neolab. Although Neolab and Neopharma have the same address and have a commercial relationship, they have different ownership.


Neolab is a privately owned, UK based company that markets generic pharmaceuticals in the domestic market through its own distribution outlets and in major EU markets (France, Germany etc.) through selected, major national generic companies. In the UK the sales and marketing strategy of Neolab has been to focus on the leading multiple/key accounts.


Neolab also enjoys a strategic alliance with Cipla Limited of Mumbai, India. Cipla is the largest pharmaceutical company on the domestic Indian market, a major developer of active product ingredients and the operator of numerous approved Medicines and Healthcare products Regulatory Agency (MHRA) manufacturing facilities in India. Neolab is the exclusive distributor of finished dosage forms for Cipla in the UK market.


Neolab now has over 90 marketing authorisations for 37 different molecules in its current portfolio. The audit of the accounts to 30 th June 2007 has not yet been finalised but the earnings before interest, taxes, depreciation and amortisation (EBITDA) are expected to be £1.1 million. Ignoring sales of Olanzapine Neopharma, sales for Neolab's financial year to 30 th June 2008 based on the current rate of performance are anticipated to exceed £20 million with EBITDA of between £3 million and £4 million. A large number of new product introductions are planned in the UK from 2008 onwards (over 40 in all) and the sales forecasts for the financial year to 30 th June 2009 are circa £45 million. I would note that Neolab achieved rapid growth from its start in 2000 with a turnover of £1.3 million rising to £13.8 million in 2004, from 2004 to 2007 the turnover has not increased significantly, being only £14.1 million in 2007.


Mr Hiscock, on behalf of Eli Lilly, points out that according to the unaudited accounts for the year to 30 th June 2007 Neolab had total assets of £11 million and total liabilities of £14 million.


Neolab filed a revocation action against the corresponding patent in Germany in May 2006 and this resulted in the revocation of that patent. This decision is under appeal.


In the UK Dr Reddy Laboratories (UK) Ltd and Actavis Ltd both launched revocation actions against the Patent in 2007 and the hearing of those actions is scheduled to start on 7 th July 2008. Neither of the Defendants in this action is involved in those proceedings.


There have been various actions in respect of equivalent patents in various countries. There have been decisions for and against Eli Lilly, with more for than against.

Correspondence Between the Parties


On the 2 nd November 2007 Eli Lilly wrote to Neopharma noting that the Committee for Medicinal Products for Human Use had recommended the grant to Neopharma of marketing authorisations for Olanzapine Neopharma in a range of doses for the treatment of schizophrenia. The letter refers to Eli Lilly's portfolio of patents in Europe and particularly the Patent which it said in the large majority of European jurisdictions was enforceable and would serve to prevent any form of marketing of generic olanzapine. It asked for certain information including “full details of when (by individual country) you intend to launch Olanzapine Neopharma in Europe”. It asked for the provision of samples of each of the presentations of which regulatory approval has provisionally been granted and it asked for “your undertaking not to take any steps to market Olanzapine Neopharma in any European country where the '436 patent or a national equivalent thereof remains in force”. Finally, it stated “Pending our hearing from you all of our rights, to include the right to seek appropriate interim relief, are expressly reserved”.


This was replied to by solicitors acting for Neolab on 13 th November. That letter asked for information concerning the portfolio of patents in Europe. With regard to the request for an undertaking not to take any steps to market Olanzapine Neopharma it referred to the successful challenge to the validity of the Patent in Germany and the fact that it was subject to validity challenges in Spain and the UK and said “Therefore, so that we can properly consider your request for an undertaking, please confirm that you would in return provide a cross-undertaking to compensate our client for any and all consequential losses in any and all jurisdictions where the '436 patent or the national equivalent is ultimately revoked.”


On 26 th November Eli Lilly wrote back with a list of the relevant European patents. In response to the request for the cross-undertaking it said:

“The provision of some form of cross-undertaking to your client at some point is not ruled out but the request gives rise to various factors, including:-

(a) Will your client provide an undertaking not to market generic olanzapine in jurisdictions where the '436 patent (or a national equivalent) is in force?

(b) The validity of the '436 patent is not under challenge in the large majority of its designated jurisdictions so there is no question of possible revocation in those countries.

(c) Apart from the grant of regulatory approval on 14 November, what additional evidence can your client point to so as to establish that it has both the intention and readiness to market its generic olanzapine in all of the jurisdictions to which you refer?”


Following a chasing letter, Neolab's solicitors sent a substantive response on 21 st December. For present purposes the last three paragraphs are relevant:

“… we anticipate that Lilly will still press its requests for both samples of Neopharma Olanzapine and a Process Description. As regards the former, Neolab/Neopharma do not have samples but these have been requested and should be available in January.

“As to the cross-undertaking, this was in response to your request that Neolab/Neopharma undertake not to take steps to market olanzapine in any European country where the '436 EP or national equivalent remains in force. If the undertaking requested is to be provided it should be against the usual cross-undertaking from Eli Lilly, which should have the same territorial scope. Intention and readiness to market generic olanzapine are only material if, in due course, one or more of the '436 EPs or national equivalents is revoked (which may be the result of revocation proceedings which are brought in the future). At that time, Neolab/Neopharma would need to substantiate damage. The question you ask does not arise at this stage.

“As to the undertaking you request from Neolab/Neopharma, please provide a draft, together with a draft of the cross-undertakings you would offer in return.”


On 11 th January 2008 Eli Lilly replied sending a draft...

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