Dana-Farber and Bay-Area Startup File Responses in Lawsuit Over Rights to Cancer Molecule

Xconomy Boston — 

There’s a new round of interesting court filings in Boston-based Dana-Farber Cancer Institute’s lawsuit against a Bay Area biotech startup co-founded by Dana-Farber scientists. It’s the latest chapter in a case primarily concerning who has rights to a potential game-changing drug for lung cancer discovered at Dana-Farber.

Dana-Farber filed a lawsuit against Millbrae, CA-based Gatekeeper Pharmaceuticals in U.S. District Court in Boston on September 21. The lawsuit, as I explained last month, essentially asks the court to let Dana-Farber out of a previous agreement to license patent rights to the potential lung cancer drug, WZ4002, to Gatekeeper, a startup formed in March 2009 to commercialize the technology. Dana-Farber indicated in its complaint that the Swiss drug giant Novartis, a longtime supporter of the cancer institute, had come forward after the agreement was inked to claim it had rights to the molecule—and that Dana-Farber now believes that claim to be valid. Now the new round of court filings deal with the issue of whether Gatekeeper’s president, John Chant, should be allowed to intervene in the case.

At stake in the case is a potential drug for lung cancer—the most common cause of cancer deaths in the U.S—that could treat certain cases of non-small cell lung cancer that have built up resistance to existing drugs. Many patients today develop resistance to lung cancer drugs such as the blockbuster erlotinib (Tarceva) and the more infrequently prescribed Iressa (gefitinib), causing their cancer to relapse. The molecule in question in this case addresses the so-called T970M gene mutation, which is believed to be responsible for about half of cases of resistance. (The molecule’s discovery was described in a December 2009 article in Nature.)

In its response to Dana-Farber’s complaint, Gatekeeper asked the court, among other things, to order the cancer institute to license WZ4002 to the startup, and to order Novartis to pay damages for causing that license to be delayed. But the startup’s president, Chant, argued in a motion to intervene in the in lawsuit, filed last month, that the four members of his firm’s board of directors have not sought the types of damages from Dana-Farber and Novartis that Chant believes are in the startup’s best interest. In part, his argument is that the board members have conflicts of interest because three of them—Nathanael Gray, Pasi Janne, and Kwok-Kin Wong—are employees of Dana-Farber and one of them, Jeffrey Engelman, has served as a paid consultant to Novartis. If the court grants Chant’s motion, then he would have the legal standing to represent the company in this case.

On Monday, both Gatekeeper and Dana-Farber filed memoranda to oppose Chant’s motion to intervene in the case. Gatekeeper also filed an affidavit from its board members that exposes disagreements between Chant and the directors on a variety of issues related to its dispute with Dana-Farber and Novartis.

An early disagreement was over whether to file a lawsuit against Dana-Farber for breach of contract earlier this year, after the cancer institute informed the startup that it had determined that Novartis had rights to the technology that Dana-Farber had previously agreed to license to Gatekeeper. “[Chant] wanted to pursue a damage claim rather than to pursue product development based on the patent rights,” Gatekeeper’s affidavit says.

Gatekeeper’s affidavit also addresses Chant’s claim that the firm’s board members are conflicted in the case. Though three of the board members work for Dana-Farber and the fourth has done occasional consulting for Novartis, “neither Novartis nor Dana-Farber, directly or by implication, had used those relationships to put pressure on the board [of Gatekeeper] with respect to the license,” it says.

Gatekeeper’s board told Chant on September 8 of this year to hold off from any further talks with lawyers or making agreements on behalf of the startup without the board’s review, according to the affidavit. It says that the board later learned that Chant, despite its instructions, had secured a lawyer to work on the case on September 14 and had contacted Novartis on the same date. And after Dana-Farber filed its lawsuit against Gatekeeper, Chant told the board that any settlement with the cancer institute would need to include $750,000 in deferred and future compensation for him and $600,000 of the same type of payment for Chris Carthy, whom Chant had recruited to help the startup raise funds, according to the affidavit. “The Board concluded that Mr. Chant was primarily concerned for his claim for salary and benefits, rather than the interests of the stockholders,” the affidavit says.

A phone message was left with Chant on Tuesday afternoon but he did respond before the deadline for this article yesterday evening.

John Mirick, an attorney for Gatekeeper, declined to comment for this article. A message left with one of Dana-Farber’s attorneys at the Boston office of Mintz Levin yesterday afternoon was also not returned.

Time will tell whether the court will grant Chant’s motion to intervene in the case. It will be an interesting ruling to watch, in part because so many biotech startups seek licenses from the institutions where their founding scientists work. Should Chant prevail in his argument that such ties present conflicts of interest in legal disputes between such startups and their founders’ employers it could have implications far beyond the Dana-Farber/Gatekeeper case.