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California-based drug manufacturer files breach of contract suit

A pharmaceutical company based in California recently filed a breach of contract claim against its licensee.
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    December 17, 2013 /24-7PressRelease/ -- The development and manufacturing of pharmaceuticals is a specialized and expensive field, in which companies often join together to successfully create and market a new product. Unfortunately, such partnerships do not always go as planned, occasionally leading to high-stakes lawsuits to unravel the problem.

Recently, Napo Pharmaceuticals -- a California-based company -- encountered such a situation with Salix Pharmaceuticals. Prior to 2008, Napo began development on a medication -- called Fulyzaq -- that it intended to be used to meet the needs of patients suffering from gastrointestinal issues caused by a variety of illnesses, including HIV/AIDS and irritable bowel syndrome, commonly referred to as IBS.

Napo estimates that the medication would be useful for approximately 90 percent of the total 33 million people who have HIV/AIDS around the world -- around 350,000 of whom live in the United States.

As there were no other products on the market targeted for such specific purposes, the Food and Drug Administration gave Napo "fast-track" status to produce the medication. Napo spent over $200 million on its own, developing and manufacturing the medication. The primary ingredient necessary for the manufacture of the medication was identified and harvested by Napo in the Amazon rainforest.

As is frequently the case in such situations, Napo then entered into a collaboration agreement with Salix to develop the medication. The agreement was initiated because Salix is a larger company, with greater financial resources to finish the development of the product and market the medication thereafter.

Since the two companies entered into the collaboration agreement in December 2008, however, Napo has not been satisfied with Salix's performance.

The Food and Drug Administration approved the use of the drug at the end of 2012. Napo contends that Salix failed to make reasonable efforts to both produce and sell the medication.

Consequently, Napo filed a breach of contract suit against Salix in May 2011 in New York. Napo is seeking significant financial damages and to end its partnership agreement with Salix. Napo has indicated it will then continue developing and manufacturing the medication.

A trial date for the breach of contract claim has been set for early 2014. Meanwhile, Salix Pharmaceuticals has claimed that it has set aside additional funds to market the medication. The company has also taken steps recently to expand its business, purchasing Santarus Inc. in November 2013. Following the purchase, Salix Pharmaceuticals is estimated to have over $1 billion in sales annually.

When one company fails to adhere to the terms of a contract, the other party can take steps to protect its rights. Seek the advice of a skilled business litigation attorney to prosecute a breach of contract action.

Article provided by Vukmanovic Law Group APC
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