Bay Area Biotech Startup at Odds with Dana-Farber and Novartis Over Cancer Drug Rights

Xconomy Boston — 

[Updated and corrected, 12:24 pm Eastern time on 11/02/10.] There’s been some wrangling over a potential breakthrough lung cancer drug in U.S. District Court in Boston, according to court records. The legal battle has pitted a little-known biotech firm in Millbrae, CA, called Gatekeeper Pharmaceuticals against the prominent Dana-Farber Cancer Institute in Boston and the Swiss drug giant Novartis.

At the center of the dispute is an anti-cancer molecule discovered by researchers at Dana-Farber—and whether Novartis or Gatekeeper should get to develop it. The molecule could potentially combat cases of non small-cell lung cancer with specific gene mutations that make the deadly cancer resist Roche and OSI Pharmaceuticals’ blockbuster cancer pill erlotinib (Tarceva) and AstraZeneca’s gefitinib (Iressa), according to court documents filed by Gatekeeper’s president, John Chant, and its board of directors. If the anti-cancer molecule in dispute makes it through clinical trials, it could be worth a fortune to the company that brings it to market.

Dana-Farber scientists founded Gatekeeper in March 2009 to commercialize their discovery of the potential lung cancer drug and other similar molecules, according to Chant’s documents. Chant has served as president of the firm since its inception and led negotiations with Dana-Farber to secure an option to exclusively license the molecule in June 2009. This spring, Gatekeeper informed the cancer institute that it wanted to exercise the licensing option. But last month Dana-Farber filed a lawsuit in which it asks the court to let the cancer institute out of its agreement with the startup. The cancer institute’s complaint says that it initially decided last year that Gatekeeper was eligible for to license the drug candidate, but that Dana-Farber later reviewed the matter again and concluded this August that its long-time research supporter, Novartis, has rights to license the molecule. (Download the Dana-Farber complaint here.)

Gatekeeper’s board and its president have made separate filings that dispute Dana-Farber’s latest conclusion.

This case shines a light on the conflicts that can arise when academic groups enter into far-reaching deals with drug companies, which have become a major source of research funding for elite researchers in the Boston area and elsewhere. Unlike government agencies, drug companies often attach strings to their research awards to academics that give the firms the ability to acquire or license the breakthroughs made in the labs they support. [Editor’s note: An earlier version of this paragraph erroneously indicated that Dana-Farber had named some of its own scientists as defendants in the lawsuit. In fact, though three Dana-Farber employees serve on Gatekeeper’s board of directors, the only named defendant in the lawsuit is Gatekeeper. We regret the error.]

According to Dana-Farber’s suit against Gatekeeper, Novartis has provided research funding to the cancer institute under a 2005 agreement that gives Novartis the option to license discoveries that emerge from the funded research. But the parties in this lawsuit disagree about whether the molecules that were to be the foundation of Gatekeeper’s business are covered under the deal between Dana-Farber and Novartis. On October 15, an attorney for Gatekeeper’s board of directors filed a response to Dana-Farber’s original complaint, asking for the court to recognize the startup’s rights to the anti-cancer molecules covered in its option agreement with Dana-Farber. Also, the filing asks the court to rule that Novartis did not fund the research behind the technology. (Read the full text of Gatekeeper’s filing here.)

According to the cancer institute’s complaint, Novartis told Dana-Farber that the technology did fall under their research agreement in November 2009, months after Gatekeeper had secured an option to license the technology. That helped prompt the Dana-Farber internal review that ultimately sided with Novartis this August, according to court documents filed by both Dana-Farber’s attorneys and Chant’s lawyers.

In an October 18 motion to intervene in the case, Chant’s attorneys allege that Dana-Farber has already provided Novartis with details on the technology that Gatekeeper had agreed to license from Dana-Farber, in violation of an agreement between Gatekeeper and the cancer institute. The filing also claims that Dana-Farber had conducted three separate investigations that concluded Novartis did not have rights to the technology, prior to the investigation this summer that reached the opposite conclusion. And it alleges that Novartis’ “improper” claim on the intellectual property caused pharma companies and venture firms to withdraw from negotiations with Gatekeeper, causing the startup “significant damage.”

Chant, whose motion says he is a 13 percent shareholder in Gatekeeper, has also said in the filing that his own board of directors have “removed him from decision-making” with respect to the Dana-Farber lawsuit and have proceeded with their own personal counsel, rather than the counsel that Chant had chosen. He also alleges that Gatekeeper’s board members have a conflict of interest, in part because three of them work directly for Dana-Farber and the fourth has been a consultant for Novartis. And those conflicts have prevented Gatekeeper’s directors from seeking the types of damages from Dana-Farber and Novartis that Chant believes are in the startup’s best interest, according to his motion, which asks that Chant be allowed to intervene on behalf of Gatekeeper.

Chant’s motion, which you can read in its entirety here, also offers a damning analysis of the relationship between Dana-Farber and Novartis. It alleges that in addition to contributing more than $15 million a year to the cancer institute in exchange for certain licensing rights, “Novartis keeps many of the physicians and researchers at DFCI on its private payroll as consultants and advisors, many of whom receive more in consulting fees from Novartis than they receive in salary from DFCI. As a result of its funding, Novartis is able to dominate much of the decision-making at DFCI, particularly when such decision-making affects the interests of Novartis.” It also charges that Novartis’ claims of rights to the anti-cancer molecule, and Dana-Farber’s ultimate agreement with those claims, violate the Bayh-Dole act, which was crafted to promote commercialization of discoveries arising from federally funded research.

Dana-Farber biological chemist Nathanael Gray, a Gatekeeper co-founder and director, did not reply to a phone message or an e-mail regarding this issue. Gray is one of the lead researchers behind the discovery of the molecule in question. According to Chant’s motion to intervene, Gray and his colleagues discovered the anti-cancer molecule with funding from the National Institutes of Health, the National Cancer Institute, the Samuel Bellin Research Fund, and a Damon Runyon Foundation Cancer Innovation Award. They did not get funding for this research from Novartis, according to the claim.

Novartis spokesman Jeffrey Lockwood declined to comment on the dispute involving his company, Dana-Farber, and Gatekeeper. He also declined a request for an interview with William Sellers, Novartis’s global head of oncology research. Sellers took his current post at Novartis in 2005 after serving as an associate professor at Dana-Farber and Harvard Medical School, according to the company. Novartis, which has its global R&D headquarters in Cambridge, MA, has been funding research at Dana-Farber at least as far back as the 1990s.

Xconomy also contacted Dana-Farber spokesman Bill Schaller about this court dispute but he had not provided any comment as of our publication time.