Pfizer faces renewed bid for Xalkori royalties as appeals panel revives NYU lawsuit

Pfizer will face off against NYU in a lawsuit claiming the school is entitled to Xalkori royalties.

Pfizer thought it had escaped the prospect of paying tens of millions in royalties on its lung cancer drug Xalkori. But an appeals court resurrected New York University's claims for a share of the drug's sales, ruling that a lower court erred in tossing NYU’s lawsuit against the drugmaker. 

In a 3-2 decision released Tuesday, the appeals judges said they couldn’t determine whether NYU is actually entitled to royalties on Xalkori (crizotinib), only that the earlier dismissal was invalid. Writing in the prevailing opinion, Justice Richard T. Andrias argued that “to the extent Pfizer, on its own, discovered that crizotinib could treat” a specific lung cancer, “the discovery of crizotinib was still derived in part through NYU's research technology.”

NYU originally sued for 2.5% royalties on the med, which has brought in more than $2 billion in sales since its launch in 2011, and $561 million just last year.

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A Pfizer spokesperson said via email that the “decision merely reinstates the complaint for consideration by the lower court.” She added that Pfizer is “confident that the company has complied with the research agreement NYU entered into with Sugen, a company later acquired by Pfizer, and believe that the complaint lacks merit.”

Way back in 1991, Sugen partnered with NYU on tyrosine kinase inhibitor research, licensing the university’s technology in exchange for future royalties. The partners updated the terms in 1996 to account for potential ownership changes. Years later, Sugen was picked up by Pharmacia, which in turn was acquired by Pfizer. The New York drug giant continued developing the drug candidate until its 2011 FDA approval.

In the royalty case, the arguments center on whether Sugen and its future owners fulfilled the duties set out in that 1996 licensing agreement.

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Arguing that language in the contract is “ambiguous,” Andrias and the other judges stated in the opinion that “we cannot determine on this motion to dismiss that either party's interpretation of the agreement controls as a matter of law.”

In the dissenting argument, Justice Karla Moskowitz maintains that the language in the licensing agreement is “unambiguous.” She said “the motion court properly dismissed the complaint because NYU is not entitled to royalty payments on the sale of Xalkori.”

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Pharma often partners with academia on early-stage research, and royalties and other licensing payments can add up to hundreds of millions in some cases. Eli Lilly, for instance, had paid Princeton University so much in Alimta royalties—more than $500 million by 2013—that the university's tax-exempt status was challenged.

But their tie-ups can sometimes go awry when the work starts yielding sales. Back in 2013, after years of courtroom wrangling, Pfizer agreed to pay Brigham Young University $450 million to set aside allegations that it didn't fulfill its end of the agreement on the pain drug Celebrex.

NYU's renewed case with Pfizer comes as Gilead Sciences works to fend off claims from the University of Minnesota, which sued the California biotech for patent infringement last summer. In that case, the school is seeking “no less than a reasonable royalty” on Gilead’s crucial hep C meds Sovaldi, Harvoni and Epclusa. The university says one of its patents covers antiviral compounds and their uses to treat viral infections such as hep C.