AbbVie Endocrine Inc. v. Takeda Pharmaceutical Co. Ltd., C.A. No. 2020-0953-SG (Del. Ch. Sept. 7, 2021) (Glasscock, V.C.)
In this memorandum opinion, the Court of Chancery denied plaintiff’s request for mandatory injunctive relief that would have required defendant to modify its production schedule. Following a four-day trial, the Court found that, even if plaintiff were able to demonstrate the required elements for a final injunction, the injunctive relief requested was unavailable because the requested relief was unworkable, would require extensive Court oversight of defendant’s operations, and would inevitably lead to contempt hearings when defendant could not comply with the requested injunction. Because equity does not permit the imposition of an order with which a litigant cannot comply, the Court denied plaintiff’s request for injunctive relief and determined that any relief for plaintiff would be limited to damages.
Plaintiff, AbbVie Endocrine Inc. (“AbbVie”), is a distributer of a drug named Lupron Depot (“Lupron”), a leuprolide acetate product. Defendant, Takeda Pharmaceutical Co. Ltd. (“Takeda”), is a large drug manufacturer and is the only source in the world for Lupron. AbbVie and Takeda entered into a Supply Agreement, pursuant to which Takeda was required to manufacture and supply AbbVie with Lupron for sale in the United States and Canada (the “Supply Agreement”). In late 2019, Takeda identified certain concerns with its manufacturing facility, and a subsequent inspection by the U.S. Food and Drug Administration (the “FDA”) identified similar issues. After its inspection, the FDA issued to Takeda an Official Action Indicated letter that indicated Takeda’s manufacturing facility was in an unacceptable state of compliance. Following the identification of these issues, Takeda took a number of remedial steps necessary to address any deficiencies at its manufacturing facility. Due to the remedial steps implemented by Takeda to comply with good manufacturing practices and FDA requirements, the production of Lupron now requires 25-30% more time than before, such that the complex manufacturing process and quality control testing of a batch of Lupron takes over 100 days to complete.
As a result of the remedial steps and increased production time, Takeda experienced significant disruption in the manufacturing of Lupron, which resulted in a shortage of Lupron. As Takeda is the only producer of Lupron, AbbVie also experienced shortages of Lupron. During this disruption, Takeda decided to allocate its remaining production capacity at the manufacturing facility between AbbVie, for distribution in the United States and Canada, and itself, for distribution in Japan and elsewhere in Asia.
AbbVie subsequently brought this action seeking specific performance of the Supply Agreement in full and an injunction enjoining Takeda from allocating the supply or production of Lupron to itself or to others, alleging that Takeda had breached the Supply Agreement in three ways: (1) Takeda was failing to fill contractual “firm orders”; (2) Takeda failed to maintain a “safety reserve” of product sufficient to prevent any supply disruptions; and (3) Takeda failed to operate its manufacturing facility in compliance with good manufacturing practices. However, AbbVie later modified its request to a more limited form of relief to modify the allocation schedule put in place by Takeda that would effectively provide AbbVie with a reliable, sufficient, and timely supply of Lupron.
To obtain final injunctive relief, a plaintiff must demonstrate a violation of a legal right, resulting irreparable harm, and that the balance of the equities invokes equitable relief. For purposes of this opinion, the Court assumed that Takeda breached the Supply Agreement, that AbbVie suffered irreparable harm, and that the balance of equities favored AbbVie. However, the Court determined that it could not provide the injunction sought by AbbVie because equity does not permit the imposition of an order that a litigant cannot comply with or that will require unworkable involvement by the Court. At trial, Takeda effectively demonstrated that the manufacturing process for Lupron was complex and subject to delay due to the remedial measures in place, including required third party review and approval before the Lupron could be shipped. As a result, the Court found that any order requiring Takeda to ship specific quantities of Lupron to AbbVie would require enforcement beyond the purview of the court system. The Court explained that equity will not impose a meaningless order or mandate impossible performance. Therefore, the Court denied AbbVie’s request for injunctive relief and found that, if it finds Takeda in breach of the Supply Agreement, AbbVie’s remedy rests in damages.