Ixchel Pharma, LLC. v. Biogen Inc.

Filing 25

MEMORANDUM and ORDER re 20 Defendant's Motion to Dismiss signed by Senior Judge William B. Shubb on 9/12/2017: IT IS ORDERED that 20 Defendant's Motion to Dismiss be, and the same hereby is, GRANTED. Plaintiff has twenty days from the date this Order is signed to file a Second Amended Complaint, if it can do so consistent with this Order. (Kirksey Smith, K)

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF CALIFORNIA

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IXCHEL PHARMA, LLC,

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CIV. NO.: 2:17-00715 WBS EFB

Plaintiff,

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v.

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BIOGEN INC.,

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MEMORANDUM AND ORDER RE: MOTION
TO DISMISS
Defendant.

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Plaintiff Ixchel Pharma, LLC brought this action

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against defendant Biogen Inc. asserting federal and state

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antitrust and state tort claims arising from an agreement that

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plaintiff entered into with non-party Forward Pharma FA ApS

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regarding the development of a pharmaceutical drug and a

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settlement agreement defendant entered into with Forward.

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the court is defendant’s motion to dismiss pursuant to Federal

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Rule of Civil Procedure 12(b)(1) and 12(b)(6).

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I.

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Before

(Docket No. 20.)

Factual and Procedural History
Plaintiff is a biotechnology company allegedly working
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to develop a drug to treat the neurological disorder Friedreich’s

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ataxia, using the active pharmaceutical ingredient dimethyl

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fumarate (“DMF”).

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17).)

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a partner.

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(First Am. Compl. (“FAC”) ¶¶ 8, 10 (Docket No.

Plaintiff lacks the resources to develop this drug without
(FAC ¶ 20.)

In January 2016, plaintiff and Forward, a biotech company,

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entered into a Collaboration Agreement (“Ixchel-Forward

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Agreement”) to develop a DMF drug for the treatment of

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Friedreich’s ataxia.

(FAC ¶¶ 13, 22; Tsai Decl., Ex. E (“Ixchel-

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Forward Agreement”) (Docket No. 22-1)1.)

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agreement, Forward first would investigate the feasibility of

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conducting clinical trials for the drug and then, if clinical

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trials were feasible, conduct and pay for clinical trials.

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¶ 23; Ixchel-Forward Agreement § 4.1.)

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trials, Forward would have the sole discretion to seek FDA

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approval.

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Forward would manage and pay for the manufacturing and

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commercialization of the DMF drug with plaintiff’s assistance,

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and plaintiff would be entitled to royalties from the sale of the

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new drug.

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feasibility of conducting clinical trials for the DMF drug, and

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plaintiff and Forward began working to set up clinical trials for

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the new DMF drug.

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Pursuant to this

Following clinical

(Ixchel-Forward Agreement § 4.3.)

(FAC ¶ 24.)

(FAC

Upon FDA approval,

In October 2016, Forward confirmed the

(FAC ¶ 25.)

Defendant currently markets the drug Tecfidera, which also

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The court takes judicial notice of the Ixchel-Forward
Agreement because the First Amended Complaint repeatedly
references it. See United States v. Ritchie, 342 F.3d 903, 908
(9th Cir. 2003).
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has DMF as the active pharmaceutical ingredient, to treat the

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neurological disorder multiple sclerosis.

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allegedly is the only FDA-approved drug containing DMF for the

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treatment of neurological disorders in the United States.

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17.)

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(FAC ¶ 14.)

Tecfidera

(FAC ¶

In January 2017, defendant and Forward entered into a

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settlement of a dispute between them in which Forward agreed,

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among other things, to terminate all existing, and not enter any

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new, contracts with plaintiff regarding the development of DMF

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drugs.2

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Agreement”) (Docket No. 26-3)3.)

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(FAC ¶¶ 29, 31-32; Tsai Decl., Ex A (“Biogen-Forward

Pursuant to the Biogen-Forward Agreement, Forward

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subsequently terminated the Ixchel-Forward agreement and ceased

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working with plaintiff on clinical trials for the new DMF drug.

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(FAC ¶ 34.)

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Agreement, plaintiff has been unable to find a new partner to

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develop the DMF drug.

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Since the termination of the Ixchel-Forward

(FAC ¶ 35.)

Based on the termination of Forward’s agreement with

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plaintiff, plaintiff initiated this action against defendant,

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alleging: (1) violation of the Sherman Act; (2) tortious

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interference with contract; (3) intentional and negligent

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interference with prospective economic advantage; (4) violation

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Plaintiff alleges that Biogen viewed the new DMF drug
as a competitive threat to its sales of Tecfidera and control
over the market for DMF drugs for treating neurological diseases.
(FAC ¶ 28.)
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The court takes judicial notice of the Biogen-Forward
Agreement because it is a document “referred to in the
complaint.” Dreiling v. Am. Express Co., 458 F.3d 942, 946 n.2
(9th Cir. 2006).
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of the California Cartwright Act; and (5) violation of

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California’s Unfair Competition Law (“UCL”).

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First Amended Complaint on June 14, 2017.

Ixchel filed a

(Docket No. 17.)

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Discussion

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On a motion to dismiss under Rule 12(b)(6), the court

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must accept the allegations in the complaint as true and draw all

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reasonable inferences in favor of the plaintiff.

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Rhodes, 416 U.S. 232, 236 (1974), overruled on other grounds by

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Davis v. Scherer, 468 U.S. 183 (1984); Cruz v. Beto, 405 U.S.

Scheuer v.

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319, 322 (1972).

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must plead “only enough facts to state a claim to relief that is

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plausible on its face.”

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544, 570 (2007).

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‘probability requirement,’ but it asks for more than a sheer

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possibility that a defendant has acted unlawfully.”

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Iqbal, 556 U.S. 662, 678 (2009).

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plausibility when the plaintiff pleads factual content that

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allows the court to draw the reasonable inference that the

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defendant is liable for the misconduct alleged.”

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A.

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To survive a motion to dismiss, a plaintiff

Bell Atl. Corp. v. Twombly, 550 U.S.

“The plausibility standard is not akin to a

Ashcroft v.

“A claim has facial

Id.

Sherman Act and Cartwright Act
Plaintiff’s first cause of action is for violation of

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section 1 of the Sherman Act, 15 U.S.C. § 1, and its fifth cause

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of action is for violation of the Cartwright Act, Cal. Bus. &

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Prof. Code § 16700, et seq.

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Biogen and Forward entered into unlawful agreements to restrict

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the development of any drugs containing DMF as an active

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pharmaceutical ingredient for the treatment of neurological

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diseases.

(FAC ¶¶ 41-42.)

These causes of action allege that

To bring a Sherman Act or Cartwright
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Act claim, a plaintiff must establish antitrust standing.4

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Associated Gen. Contractors of Cal., Inc. v. Cal. State Council

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of Carpenters, 459 U.S. 519, 535 n.31 (1983); Dang v. S.F. Forty

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Niners, 964 F. Supp. 2d 1097, 1110 (N.D. Cal. 2013).

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determining whether a plaintiff has antitrust standing, the court

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evaluates five factors.

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Cal., 190 F.3d 1051, 1054-55 (9th Cir. 1999) (citing Amarel v.

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Connell, 102 F.3d 1494, 1507 (9th Cir. 1997)).

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factors, antitrust injury, “is necessary . . . to establish

See

In

Am. Ad Mgmt., Inc. v. Gen. Tel. Co. of

One of these

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standing.”

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104, 110 n.5 (1986); see Am. Ad Mgmt., 190 F.3d at 1055.

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Cargill, Inc. v. Monfort of Colo., Inc., 479 U.S.

To establish antitrust injury, a plaintiff must be “a

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participant in the same market as the alleged malefactors.”

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v. NME Hospitals, Inc., 772 F.2d 1467, 1470 n.3 (9th Cir. 1985).

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In analyzing whether parties participate in the same market, “the

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focus is upon the reasonable interchangeability of use or the

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cross-elasticity of demand between the services provided by” each

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party.

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Bhan

Id. at 1470-71.
Even assuming that the relevant market is defined as

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Antitrust standing is distinct from Article III
standing. Plaintiff also does not appear to have Article III
standing because it has not allegedly suffered an actual or
imminent injury in fact, and this alone would be enough to
dismiss the First Amended Complaint. See Clapper v. Amnesty
Int’l USA, 568 U.S. 398, 409 (2013); Maya v. Centex Corp., 658
F.3d 1060, 1067 (9th Cir. 2011) (injury in fact must be “actual
or imminent, not conjectural or hypothetical”); cf. Brotech Corp.
v. White Eagle Int’l Techs. Grp., Inc., No. Civ.A.03-232, 2004 WL
1427136, at *6 (E.D. Pa. June 21, 2004) (antitrust injury too
speculative where there were insufficient allegations regarding
how far plaintiff has gone in seeking “FDA approval, when such
approval may be anticipated, or whether it will be prepared to
enter to product market” upon FDA approval).
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“drugs containing DMF as an [active pharmaceutical ingredient]

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for the treatment of neurological diseases in the United States,”

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(FAC ¶ 37), plaintiff fails to sufficiently allege that it is

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either a current or potential competitor.

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not a current competitor because it concedes that “Biogen is

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currently the only company in the world selling any drug in that

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market.”

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First, plaintiff is

(Id.)
Second, plaintiff is not a potential competitor because

it granted Forward the exclusive right to obtain FDA approval

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for, market, produce, and sell the DMF drug.

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Ixchel-Forward Agreement §§ 4.1, 4.3.)

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plaintiff does not seek to enter the market for DMF drugs for the

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treatment of neurological diseases because it is not the party

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who will seek FDA approval.

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355(a) (requiring companies obtain FDA approval before marketing

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pharmaceutical drugs).

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Circuit held that a plaintiff and defendant were not competitors

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in a particular drug market where the plaintiff gave a drug’s

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manufacturing and development rights to a third party and the

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third party bore the risk and expense of seeking FDA approval.

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See Ethypharm S.A. Fr. v. Abbott Labs., 707 F.3d 223, 235-37 (3d

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Cir. 2013).

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risk of competing in the U.S. DMF drug market while

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simultaneously seeking to avail itself of the U.S.’s antitrust

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laws when that arrangement fails.

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plaintiff is neither a current nor potential competitor in the

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alleged market, plaintiff does not have antitrust injury.

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(See FAC ¶¶ 23-24;

Plaintiff concedes that

(See FAC ¶¶ 23-24); cf. 21 U.S.C. §

In a factually similar case, the Third

Ixchel cannot pass on to Forward the expense and

See id. at 236.

Because

Plaintiff also argues that even if it is not a
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competitor, it suffered antitrust injury because “the injury

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[plaintiff] suffered was inextricably intertwined with the injury

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the conspirators sought to inflict” and the harm “was a necessary

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step in effecting the ends of the alleged illegal conspiracy.”

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Blue Shield of Va. v. McCready, 457 U.S. 465, 479, 484 (1982).

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This narrow inextricably intertwined doctrine applies where

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denying standing to the plaintiff is likely to leave a

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significant antitrust violation undetected or unremedied.

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Ostrofe v. H.S. Crocker Co., Inc., 740 F.2d 739, 747 (9th Cir.

See

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1984).

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doctrine to this scenario.

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at 237, explicitly rejected this doctrine in a similar scenario

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because the Ethypharm plaintiff had willfully chosen not to enter

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the U.S. market for a specific drug and this exception is largely

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limited to instances where plaintiff and defendant are in the

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business of selling goods in the same relevant market.

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discussed above, plaintiff is not in the business of selling DMF

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drugs, and has agreed that Forward would manufacture and

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commercialize the alleged drug.

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inextricably intertwined doctrine is not applicable.

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Plaintiff provides no precedent that extends this
To the contrary, Ethypharm, 707 F.3d

(FAC ¶¶ 23-24.)

As

Thus, the

Because plaintiff has not alleged that it is a current

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or potential competitor in the relevant market, plaintiff has not

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suffered antitrust injury and does not have antitrust standing.

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Accordingly, the court will dismiss plaintiff’s first and fifth

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causes of action.

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B.

Tortious Interference with Contract
Plaintiff’s second cause of action alleges defendant

intentionally and tortiously interfered with plaintiff’s
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agreement with Forward by causing Forward to breach the Ixchel-

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Forward Agreement.

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interference with a contract requires the plaintiff allege: “(1)

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a valid contract between plaintiff and a third party; (2)

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defendant’s knowledge of this contract; (3) defendant’s

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intentional acts designed to induce a breach or disruption of the

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contractual relationship; (4) actual breach or disruption of the

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contractual relationship and (5) resulting damage.”

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Co. v. Stewart Title Guaranty Co., 19 Cal. 4th 26, 55 (1998).

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(FAC ¶¶ 50-52.)

A claim for tortious

Quelimane

As plaintiff correctly points out, tortious

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interference with a contract does not generally require

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independent wrongfulness.

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at-will contract has been viewed as functionally equivalent to

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interference with a prospective economic advantage, which does

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require a pleading of wrongful means.

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1152 (finding “economic relationship between parties to contracts

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that are terminable at will is distinguishable from the

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relationship between parties to other legally binding

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contracts”).

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will contract, such as the type alleged in this case, a plaintiff

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must also allege “that the defendant engaged in an independently

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wrongful act.”

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wrongful beyond its interfering character, meaning “it is

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proscribed by some constitutional, statutory, regulatory, common

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law, or other determinable legal standard.”

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Andersen LLP, 44 Cal. 4th 937, 944 (2008) (citations omitted).

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“An act is not independently wrongful merely because defendant

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acted with an improper motive.”

See id.

However, interference with an

See Reeves 33 Cal. 4th at

Thus, to prove tortious interference with an at-

Id. The interference must be independently

Edwards v. Arthur

Korea Supply Co. v. Lockheed
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Martin Corp., 29 Cal. 4th 1134, 1158 (2003).

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Plaintiff argues there is no independently wrongful act

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requirement in this case because plaintiff takes the position

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that the requirement is limited to the employment context.

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Popescu v. Apple Inc., 1 Cal. App. 5th 39, 62 (Ct. App. 2016),

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the court declined to extend Reeves to the facts of that case,

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but did not hold more generally that Reeves could never apply

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outside the employment context.

In

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In Freeman Expositions, Inc. v. Global Experience

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Specialists, Inc., Case No. 2:17-cv-00364-CJC-JDEx, 2017 WL

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1488269,*8 (C.D. Cal. Apr. 24, 2017), the court held that the

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plaintiff did not need to “allege an independently wrongful act

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to sufficiently plead intentional interference with contractual

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relations” because the interference at issue was not analogous to

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that in Reeves.

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contrary to Freeman and supports the defendant’s position that

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Reeves does apply outside of the employment context. See, e.g.,

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Hip Hop Beverage Corp. v. Monster Energy Co., Case No. 2:16-cv-

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01421-SVW-FFM, 2016 WL 7479402, at *4 n.7 (C.D. Cal. July 7,

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2016) (applying Reeves to a commissary broker contract); Maritz

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Inc. v. Carlson Mktg. Grp., Inc., Case No. C. 07-05585 JSW, 2009

However, the great weight of authority is

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Plaintiff also points to First Financial Security,
Inc., v. Freedom Equity Group, LLC, Case No. 15-cv-01893-HRL,
2017 WL 3593369 (N.D. Cal. Aug. 21, 2017) as evidence that Reeves
is limited to at-will employment contracts. However, the First
Financial court declined to state whether the application of
Reeves is necessarily limited to such a narrow set of facts and
chose to leave the question open, commenting that the Reeves
court did not express an opinion, and it remains unclear, whether
“a plaintiff must prove an independently wrongful act” for an
interference that differed from the type in Reeves. Id. at 7.
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WL 3561521, at *4 (N.D. Cal. Oct. 30, 2009) (explaining that “one

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cannot maintain a claim for intentional interference with an at-

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will contract, even in the non-employment context”); Lenhoff

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Enters. V. United Talent Agency, Inc., Case No. CV 15-01086-BRO-

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FFMX, 2015 WL 7008185, at *5 (C.D. Cal. Sept. 18, 2015) (applying

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Reeves to a contract between agency and clients).

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the court holds that Reeves applies to at-will contracts in the

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non-employment context.

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Accordingly,

Here, the Ixchel-Forward Agreement was an at-will

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contract because Forward could terminate it at any time.

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Ixchel-Forward Agreement § 12.4.)

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allege any independently wrongful act by defendant and defendant

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should not be held liable for seeking to enforce its own

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intellectual property rights and settling a dispute with Forward.

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Plaintiff suggests that defendant’s independently wrongful act

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was inducing Forward to not pay for the clinical trials after

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Forward terminated the agreement.

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to, and the court is unaware of, any such provision in the

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Ixchel-Forward Agreement.

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to exist, defendant cannot be liable for inducing Forward to

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breach this provision.

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Sherman Act, Cartwright Act, and UCL claims will be dismissed, so

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these also are not sufficient bases for independently wrongful

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conduct.

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(See

However, plaintiff fails to

But plaintiff does not point

Because the provision does not appear

As discussed above and below, plaintiff’s

Because the Ixchel-Forward Agreement is an at-will

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contract and plaintiff does not allege defendant engaged in

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independently wrongful conduct, plaintiff fails to state a claim

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for tortious interference with a contract.
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Accordingly, the

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court will dismiss plaintiff’s second cause of action.
C.

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Intentional Interference with Prospective Economic
Advantage

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Plaintiff’s third and fourth causes of action allege

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that defendant intentionally and negligently interfered with

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plaintiff’s economic relationship with Forward when defendant and

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Forward entered into the Biogen-Forward Agreement.

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intentional interference with a prospective economic advantage

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requires the plaintiff allege:

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“(1) an economic relationship between
plaintiff and a third party, with the
probability of future economic benefit to the
plaintiff; (2) defendant's knowledge of the
relationship; (3) an intentional act by the
defendant, designed to disrupt the
relationship; (4) actual disruption of the
relationship; and (5) economic harm to the
plaintiff proximately caused by the
defendant's wrongful act, including an
intentional act by the defendant that is
designed to disrupt the relationship between
the plaintiff and a third party.”

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A claim for

Edwards v. Arthur Andersen LLP, 44 Cal. 4th 937, 944 (2008).
As in plaintiff’s claim for intentional interference

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with a contract, plaintiff fails to allege independently wrongful

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conduct, a necessary requirement to sustain its claim for

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interference with prospective economic advantage.

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the court will dismiss plaintiff’s third and fourth causes of

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action for intentional and negligent interference with a

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prospective economic advantage.

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D.

Accordingly,

UCL
Plaintiff’s sixth cause of action is for violation of

the UCL, Cal. Bus. & Prof. Code § 17200, et seq.
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The UCL

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prohibits unfair competition, which is defined to include “any

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unlawful, unfair, or fraudulent business act or practice.”

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Bus. & Prof. Code § 17200.

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and distinct theory of liability . . . .”

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Co., 567 F.3d 1120, 1127 (9th Cir. 2009) (citing S. Bay Chevrolet

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v. Gen Motors Acceptance Corp., 72 Cal. App. 4th 861, 886 (4th

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Dist. 1999)).

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Cal.

“Each prong of the UCL is a separate
Kearns v. Ford Motor

Because the court would dismiss all of plaintiff’s
other claims, the unlawful prong of the UCL is not met.

See

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name.space, Inc. v. Internet Corp. for Assigned Names & Numbers,

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No. CV 12-8676 PA (PLAx), 2013 WL 2151478, at *9 (C.D. Cal. Mar.

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4, 2013); Berryman v. Merit Prop. Mgmt., Inc., 152 Cal. App. 4th

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1544, 1554 (4th Dist. 2007) (“[T]he UCL borrows violations of

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other laws . . . and makes those unlawful practices actionable

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under the UCL.”).

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requires conduct “that threatens an incipient violation of an

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antitrust law, or violates the policy or spirit of one of those

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laws because its effects are comparable to or the same as a

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violation of the law, or otherwise significantly threatens or

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harms competition.”

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Tel. Co., 20 Cal. 4th 163, 187 (1999).

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“tethered to some legislatively declared policy or proof of some

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actual or threatened impact on competition.”

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In the antitrust context, the unfairness prong

Cel-Tech Commc’ns, Inc. v. L.A. Cellular
Unfairness must be

Id. at 186-87.

Here, plaintiff fails to identify and sufficiently

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allege conduct tethered to actual or threatened impact on

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competition--Ixchel’s allegations are limited to speculative

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harms to competition, as discussed above.

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must dismiss plaintiff’s sixth cause of action for violation of
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Accordingly, the court

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the UCL.

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IT IS THEREFORE ORDERED that defendant’s motion to

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dismiss (Docket No. 20) be, and the same hereby is, GRANTED.

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Plaintiff has twenty days from the date this Order is

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signed to file a Second Amended Complaint, if it can do so

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consistent with this Order.

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Dated:

September 12, 2017

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