Apotex Inc. v. Nordion (Canada) Inc., 2019 ONCA 23

Apotex Inc. successfully defended the Nordion appeal of a Limitations Act defence; the cross-appeal on damages was dismissed.

MDS Inc., a life science company, had performed bioequivalence studies for Apotex to be submitted with applications for approval from the US Food and Drug Administration (FDA) to market generic pharmaceutical products in the US market. The relationship between Apotex and MDS was governed by a Master Laboratory Services Agreement (MLSA). During the 2003 and 2004 the FDA conducted inspections of MDS’s Montréal-area laboratory and identified serious concerns about the operation of the laboratory. This led the FDA, in December 2004, to instruct MDS to perform a review of all studies it had performed at its Montreal laboratory between 2000 and 2004.

Apotex was formally informed by the FDA in January 2007 that the FDA’s concerns about the Montréal-area facility had not been resolved by MDS, and that Apotex was required to repeat the studies or have them certified, or have the study samples re-analyzed by a third-party provider.

The FDA’s unwillingness to accept bioequivalence studies from MDS’s Montréal laboratory caused delays in the launch of two pharmaceutical products that Apotex was seeking approval to market in the US: Amoxi Clav and Levo-Carb IR. In November 2008 Apotex brought an action against MDS for breach of contract and negligence claiming damages for the repeat study and certification costs, as well as lost profits for the delay in the approval of Amoxi Clav and Levo-Carb IR caused by the problems with the MDS facility.

The Trial Decision

After a 17-day trial, Justice Laurence Pattillo of Ontario’s Superior Court of Justice released his decision in Apotex v. Nordion, 2017 ONSC 1323 on December 22, 2017. He found that MDS’s failure to meet US regulatory requirements was both a breach of the MLSA and negligent, entitling Apotex to recovery of repeat study costs and lost profits from the delay in bringing Amoxi Clav and Levo-Carb IR to market. The trial judge found that the obligations under the MLSA were continuing, and had been breached by MDS in its negligent running of the Montreal facility as a whole.

Two of the main battlegrounds at trial and on appeal were MDS’s Limitations Act defence and the quantification of loss-of-profit damages. The trial judge held, contrary to the submissions of Apotex, that by May 2006 Apotex knew its applications to the FDA were at risk and therefore the factors at s. 5(1)(a) (i)-(iii) of the Limitations Act, 2002 (“LA 2002”) were met. However, Justice Pattillo further concluded that it would not have been appropriate for Apotex to have commenced a proceeding against MDS at that time, relying on the “appropriateness” criterion in s. 5(1)(a)(iv) of the LA 2002, because Apotex did not know until December 11, 2006, that it would be required to remediate the studies. The trial judge found that, prior to that date, Apotex was “never in a position to assess whether the FDA’s concerns involving the Montreal Facility directly impacted the Studies such that they would not be accepted by the FDA.”

The trial judge accepted Nordion’s expert witness on loss of profit damages and awarded Apotex only 33% of its loss-of-profit damages claimed (based on estimated market share). He preferred Nordion’s expert witness’ use of actual data from the time period Apotex marketed Amoxi Clav and Levo-Carb IR in the US market: “By using the actual market share that Apotex achieved during the periods it sold Levo-Carb IR and Amoxi-Clav in the U.S., it is based on actual results.”

The Appeal Decision

MDS appealed the trial judgment, in particular the judge’s finding that Apotex’s action was not barred by an expired limitation period. Apotex cross-appealed the damages award. The Ontario Court of Appeal (Strathy C.J.O., Benotto and Roberts JJ.A.) dismissed the appeal and cross-appeal in a decision released on January 16, 2019, in Apotex v. Nordion, 2018 ONCA 23.

On appeal, Apotex maintained the position, as it had at trial, that the limitation period did not begin to run until December 2006 because it did not know that an injury, loss or damage had occurred, as required by s. 5.1(a)(i) of the LA 2002, until the FDA required it to remediate the bioequivalence studies in December 2006. The Court accepted this argument and found that the trial judge did not need to resort to the appropriateness criterion in s. 5(1)(a)(iv) of the LA 2002.

The Court dismissed the cross-appeal on damages.

Daniel Murdoch, Jordan Moss and Elizabeth Nixon of Stikeman Elliott LLP represented Apotex Inc.

John Campion of Gardiner Roberts LLP, Antonio Di Domenico of Fasken Martineau DuMoulin LLP and Stephanie Clark of Gardiner Roberts LLP acted for MDS/Nordion.