Biota Scientific Management Pty Ltd & Anor v Glaxo Group Ltd & Ors

Do Not Send for Reporting
IN THE SUPREME COURT OF VICTORIA		Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION
COMMERCIAL LIST

No. 2018 of 2004
F 5670

BIOTA SCIENTIFIC MANAGEMENT PTY LTD & ANOR	Plaintiffs
v
GLAXO GROUP LTD & ORS	Defendants

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JUDGE:	WHELAN J
WHERE HELD:	Melbourne
DATE OF HEARING:	29 February 2008, 4, 18 March 2008, 2, 3 April 2008
DATE OF JUDGMENT:	10 April 2008
CASE MAY BE CITED AS:	Biota Scientific Management Pty Ltd & Anor v Glaxo Group Ltd & Ors
MEDIUM NEUTRAL CITATION:	[2008] VSC 110	First Revision: 15/4/08

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PRACTICE AND PROCEDURE – Witness statements dealing with significant matters outside the pleadings – Witness statements cannot be relied upon in current form.

PRACTICE AND PROCEDURE – Application to amend reply – Refused as allegations ought to be in Statement of Claim.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	S. Anderson QC P. Booth A. Nash	Maurice Blackburn Commercial
For the Defendants	J. Karkar QC M. Wheelahan SC A.T. Strahan	Deacons

HIS HONOUR:

The plaintiffs in this proceeding seek damages against the defendants alleging that the defendants breached contractual obligations they had to develop and market a chemical compound known by the trade name “Relenza”.[1] The development and marketing of Relenza involved activities which, for these purposes, I will characterise as being in the “pre-launch” phase, the “launch” phase, and the “post-launch” phase.
[1]For the purposes of these reasons I will ignore the different entities which are respectively part of the plaintiff group and the defendant group.

Relenza is a compound which acts as an inhibitor to block the active sites of influenza virus. As influenza is a seasonal disease, activities concerning development and marketing occur by reference to seasons which, in this proceeding are referred to as the “first season”, the “second season”, and so on in the particular markets which are relevant. Relenza is marketed throughout the world. The “launch” is the first season in a particular market.

The proceeding is fixed for trial on 4 August 2008. The plaintiffs have been filing witness statements for some time. The defendants are subject to a timetable for the filing of their witness statements.

The proceeding was issued with a generally indorsed writ in the Commercial List on 5 May 2004. I have been the judge responsible for management of the proceeding since then. The current statement of claim is the third further amended statement of claim dated 10 September 2007. The current defence is the defence to the third further amended statement of claim dated 11 October 2007.

In February 2008 the defendants sought to have the matter listed urgently in order to address a concern they had in relation to certain expert witness statements filed by the plaintiffs. The statements in question are the following:

·Dr Janet Arrowsmith-Lowe, said by the defendants to have been served on them on 30 January 2008.
·Dr W Shannon McCool, said by the defendants to have been served on them on 27 January 2008.
·Mr Toshio Nagae, said by the defendants to have been served on them on 30 January 2008.
·Mr Nicholas Williams, said by the defendants to have been served on them on 30 January 2008.
·Dr Klaus H Nagels, said by the defendants to have been served on them on 29 January 2008.
·Dr Adam Fein, said by the defendants to have been served on them on 26 October 2007.

The concern raised by the defendants is that the statements referred to address matters which are outside the ambit of the issues raised by the pleadings. The defendants took the view that it would not be appropriate to simply notify the plaintiffs of their objection and then to have the matter dealt with at trial. Having heard argument, in my view the defendants were correct to take this course.

The issue for me to determine is whether the defendants’ concern is well founded and, if so, what course should now be taken in order to address it.

The proceeding is a complex one. The current statement of claim is 250 pages long (excluding schedules) and contains 444 paragraphs. It is signed by six barristers, two of whom are senior counsel. The defence is 297 pages long and contains 445 paragraphs. It, and its immediate predecessor, are signed by 10 barristers, two of whom are members of senior counsel. The size of the pleadings is not a result of prolixity, but is rather a consequence of the complexity of the dealings between the parties and the consequent complexity of the dispute which has now arisen.

Before turning to the specific matters now in issue, it is necessary to say something about the nature of the allegations made by the plaintiffs and the history of those allegations.

Broad history of plaintiffs’ allegations and complaint now made

The plaintiffs’ amended statement of claim dated 21 December 2004 made allegations which were, in certain key respects, considerably broader than the allegations now made in the third further amended statement of claim.

One activity which the defendants undertook in the pre-launch period was obtaining regulatory approvals in various countries throughout the world. This process involved the conduct of clinic trials. Amongst the trials undertaken were trials that are referred to as “Phase III” trials. In the amended statement of claim of December 2004 the plaintiffs alleged breaches of relevant contractual obligations in relation to the manner in which the defendants conducted these Phase III trials. Amongst other things, it was alleged that there was a failure to establish the safety and efficacy of Relenza in relation to high risk patients; a failure to obtain relevant regulatory approvals, and in particular approval for use as a prophylactic agent; and a failure to obtain labelling approval without undesirable restrictions.

It was also alleged at that time that there was a failure to properly promote Relenza and to develop the product. These allegations were made in broad terms encompassing the pre-launch, launch, and post-launch periods.

Another allegation made at that time was of stock shortages, which again was made in terms encompassing the pre-launch, launch, and post-launch periods.

It was also alleged at that time that the relevant contractual obligations had been breached by the selection prior to launch of what was described as a “sub-optimal device by which to administer Relenza”. The device in question is known as the “diskhaler”. The nature of Relenza is such that it needs to be taken in an inhaled manner rather than being ingested by a tablet. Relenza‘s most significant competitor, Tamiflu, is a tablet.

Thus, as matters stood in December 2004 the defendants faced a case in which their conduct was the subject of criticism pre-launch, at launch, and post-launch.

In 2007 a significant refinement in the plaintiffs’ case occurred. This refinement first occurred in amendments introduced in March 2007 and is currently embodied in the third further amended statement of claim.

Without in any sense seeking to comprehensively summarise the claims made, in substance the refined claim is as follows. The defendants developed the product and obtained certain regulatory approvals during the pre-launch period. The defendants were aware that there were disadvantages in the use of the diskhaler but decided to proceed with it. The defendants launched the product in various markets throughout the world in 1999/2000. Sales in the various first seasons were significant and in the USA, which was the most important market, were over budget. For reasons related to a merger involving the defendants, from May 2000 at the earliest the defendants devised and implemented an “exit strategy” as a consequence of which steps were taken which had significant adverse effects on Relenza’s sales and which constituted breaches of the defendants’ contractual obligations owed to the plaintiffs. In substance, the breaches are alleged to be a failure to use their best endeavours to promote and market Relenza.

When I turn to the specific complaints it will be necessary to address some aspects of the detail of these claims.

The complaint which the defendants make is that the expert reports which have been served upon them set out a case against them which reflects the allegations made prior to the refinement of the plaintiffs’ case in 2007. The particular issues in relation to which this complaint is made can be categorised in a number of ways. My own categorisation of the areas in which it is said that this has occurred is the following:

ØConduct of the clinical trials (which overlaps with issues concerning the failure to obtain a prophylaxis indication and the failure to obtain reimbursement status).
ØMarketing and promotion in the pre-launch and launch phases.
ØSelection of the diskhaler.
ØSupply shortages.

It is necessary to address these areas, and the portions of the expert witness statements which have been filed by the plaintiffs which address them, separately.

Conduct of the clinical trials

The third further amended statement of claim has a section, Section C.4, dealing with clinical trials and regulatory matters. An overview of the various trials which were conducted is set out and the use of the results prior to the launch of the product in various markets is alleged. Reference is made to the fact that the results of the trials in 1999 lacked clinically or statistically significant data demonstrating the efficacy and safety of Relenza in high risk patients (para 57(1) and 68(2)). It is also alleged that the results of the trials did not adequately support prophylaxis or prevention applications (para 60(1) and para 73-74). The third further amended statement of claim contains no criticism of the defendants’ conduct and no allegation of breach in relation to these circumstances.

Where the defendants’ conduct in relation to the clinical trials is criticised is in Section G.7.2 of the third further amended statement of claim. There, it is alleged (again) that the clinical trials which had been conducted before launch did not demonstrate what was required in relation to high risk patients (para 328). It is then alleged that two further trials were commenced in 1998 and 1999, and that one of them was completed in April 2000 (paras 329-331). It is then said that the use of data from this completed trial led to favourable regulatory changes in markets other than the USA in 2000 and 2001 (paras 332-333). The allegation is then made that there was a failure to seek similar changes in the USA (para 334) and that this constituted a breach of the contractual obligations (para 335). Allegations are then made that the second trial, which was not complete, was put on hold in March 2001 (para 336) and was terminated in September 2001 (para 337). As a consequence it is said that there was a failure to obtain data concerning high risk patients and as a consequence favourable regulatory changes were not achieved (paras 338-340). It is alleged that this also constituted a breach of the contractual obligations. These breaches are all said to have occurred in furtherance of the exit strategy to which I have referred.

Allegations are also made concerning the failure to obtain a prophylaxis indication (see paragraphs 53, 57, 71, 73, 74, 207-213, 240-242, 277-279, 282, 313, 314 and Section I.5). I will not go through those allegations in detail; but they follow a similar pattern. The inability or failure to obtain a prevention indication prior to launch is set out, without criticism of the defendants in that regard. Breaches are alleged to have occurred in 2001 as a consequence of the abandonment or cessation of activities directed towards obtaining a prophylaxis or prevention indication.

Dr Janet Arrowsmith-Lowe, is a medical practitioner in the United States of America. She has held positions with the US Food and Drug Administration, referred to as the FDA. Her witness statement deals with issues concerning regulatory approval in the United States of America.

The defendants complain about a number of sections of Dr Arrowsmith-Lowe’s witness statement. They are: paras 4.2, 4.3(iii)(t), 12.5-12.8, 14.4(f) and (g), 16.11, 16.13-16.20, 17, 18.1-18.10, 20.4, 23.2, 30.9-30.11, 30.12-30.17.

The sections of Dr Arrowsmith-Lowe’s witness statement about which the defendants complain contain criticisms of the defendants’ conduct in relation to the clinical trials and their dealings with the FDA during the pre-launch period. These criticism are outside the ambit of the allegations made in the third further amended statement of claim.

In my view the defendants rightly take the position that they cannot simply ignore what is said in the expectation that it will in due course be edited out on the basis that it is not relevant. This is because of the nature of the opinions expressed, and because of the fact that these opinions are intertwined with material which may not be inadmissible. Paragraphs in the passages complained about which seem to me to well illustrate the concern are the following: 17.22, 17.23, 17.27, 17.31, 18.3, 18.6, 18.9, 18.10, 20.4, 23.2, 30.9, and 30.14. To that list might also be added 18.12, 23.1, and 23.3.

The concern about the manner in which the conduct of the clinical trials is dealt with by the plaintiffs’ experts also arises in relation to Mr Nicholas Williams. Mr Williams gives evidence concerning the marketing of Relenza in Australia. Whilst he does not profess to be an expert on medical issues, in many places in his report what he says about marketing in Australia is premised on a conclusion he reaches as to what he characterises as “a cost efficient Phase 3 development proposal and the trials”. (See para 404, 537, 718, 728 and 735). It seems to me that in order to meet Mr Williams’ evidence as it currently stands the defendants would, in effect, have to defend the Phase III trials. Mr Williams does not profess to be an expert in this area. If Mr Williams’ evidence stood alone in this respect, it might be able to be accommodated and dealt with in the course of the trial in the ordinary way. However, in the context of the criticisms made by Dr Arrowsmith-Lowe, who does profess to be an expert in this area, it seems to me that it is a significant problem that needs to be addressed before then.

Marketing and promotion in the pre-launch and launch phases

The third further amended statement of claim sets out facts relating to pre-launch planning in Section C.7. The launch is dealt with in Section C.8. In relation to both Australia and the USA the allegation is made that the launch was accompanied by an “extensive promotional campaign”.[2]
[2]One of the important markets, Japan, is in a category of its own in this respect as it was launched later than the other relevant markets. The launch in Japan is dealt with in Section G4.

The third further amended statement of claim does not allege any breach, or make any allegation against the defendants which could be characterised as criticism, in relation to the marketing and promotion of Relenza in the pre-launch and launch phases. The allegations in this area which contain criticism and which are alleged to constitute breaches of the contractual obligations begin in Section E, which deals with the second season in the various markets. These activities are again characterised as breaches occurring as the defendants pursued the exit strategy.

Dr W. Shannon McCool’s statement sets out qualifications which he has in relation to the marketing of drugs in the USA. The defendants’ concern is that Dr McCool’s witness statement contains criticisms of the defendants’ marketing in the pre-launch and launch phases which are outside the ambit of the issues raised in the third further amended statement of claim. The passages of which they complain appear on pages 65, 66, 68, 69, 75, 76, 77, 80, 105 and 106.

In my view the defendants are correct in categorising portions of Dr McCool’s statement as constituting criticism of the defendants’ marketing in the first season in the USA (the launch period) and in the pre-launch period. Amongst other things, Dr McCool sets out what he describes as four “critical failures” by the defendants. He says the defendants “did not have a proper comprehensive marketing opportunity assessment – strategic commercialisation plan” (para 153). This was the first critical failure. He says there was a relatively heavy reliance on direct to the consumer marketing (para 154). He says this was the second critical failure. He says the sales force was too small and was not properly supported (para 162). This was the third critical marketing failure. The fourth critical marketing failure concerned the diskhaler, to which I will return in that context. In my view the defendants correctly contend that these portions of Dr McCool’s witness statement stand in contrast to the allegations in the third further amended statement of claim concerning the launch in the USA in paragraphs 115 to 123.

The Japanese marketing expert, Mr Nagae, also makes criticisms of the Japanese launch, expressed in milder terms.

The Australian marketing expert is Mr Williams, to whom I have already referred. The defendants make similar complaints in relation to portions of his witness statement. Those portions appear at pages 38, 54, 57-8, 59, 61-2, 73, 79, 81, 83, 120, 126, 127-8, 134, 177-9, 180-2, 193, 195-6, 230, 242-3, 248.

In my view Mr Williams in his witness statement sets out critical opinions of the defendants in relation to their activities in the pre-launch and launch phases. In this respect I particularly refer to the following paragraphs: 369-373, 386-390, 404, 537-559, 598-600.

The plaintiffs’ European marketing expert is Dr Nagels. The defendants complain about portions of his witness statement appearing at pages 241, 250, 254, 281, 283, 288, and 293.

Again, in my view Dr Nagels sets out opinions which are critical of the defendants’ conduct pre-launch and at launch. In this respect I particularly refer to paragraphs 468, 484-488, 492-494, 542-545, 546-550, 566-570, and 579.

The material to which I have referred, where the plaintiffs’ experts are critical of the defendants’ conduct in relation to marketing and promotion pre-launch and at launch, is not reflected in, and in my view stands in contrast to, the allegations made in the third further amended statement of claim.

Selection of the diskhaler

The position in relation to the diskhaler is less clear cut. The plaintiffs have always alleged that there were known problems with the diskhaler pre-launch. The third further amended statement of claim makes allegations concerning the diskhaler at paragraphs 78-80, 84-91 and 342-345. However, in the third further amended statement of claim it is not alleged that any decisions or activities of the defendants referrable to the diskhaler constitute a breach of their contractual obligations until the middle of 2000. What is alleged is that the defendants’ failure to modify or replace the diskhaler from the middle of 2000 constitutes a breach of their contractual obligations (see particularly para 343).

The expert witness statements in relation to this issue again contain criticisms of the defendants which go beyond the allegations made in the third further amended statement of claim, although they do so in a less stark manner than has occurred in relation to the other issues.

Dr Arrowsmith-Lowe expresses the opinion that the inadequacies of the diskhaler were one of the factors which meant that sufficient data was not obtained in the Phase III trials (para 17). Dr McCool says the defendants’ “failure to either go to market with an optimal delivery device, or its failure to introduce one as soon as practically possible following market introduction” was their fourth critical marketing failure (para 164). Mr Nagae criticises the diskhaler and says that an alternative should have been determined upon before the clinical studies were undertaken (para 43.1). Mr Williams says that going to the market using the diskhaler was a “very costly decision” (para 386).

If the concern about the evidence relating to the diskhaler was the only issue, in my view that could have been appropriately dealt with at the trial. But as other issues have been raised, and particularly as Dr Arrowsmith-Lowe relates the diskhaler issues to her Phase III trial criticisms, it is a matter which in my view ought to be dealt with now.

Supply shortages

The third further amended statement of claim deals with the establishment of manufacture and supply arrangements in Section C.6. There are allegations concerning the downsizing of manufacturing capacity in paragraphs 214 to 216, although on my reading of the third further amended statement of claim it is not alleged that those matters constituted a breach of the contractual obligations. The breaches of contractual obligations which concern supply arrangements seem to me to be dealt with in paragraphs 346 to 354. They begin in the year 2001.

Mr Nagae in his witness statement addresses stock shortages which he says occurred in Japan in 2004-2005 and 2006-2007. Stock shortages in Japan are pleaded in the third further amended statement of claim, although not in relation to the period to which Mr Nagae refers (see para 349).

Dr Adam Fein’s witness statement concerns supply chain issues. The defendants raise concerns about passages appearing at pages 20, 27 and 34 on the basis that Dr Fein sets out criticisms of the defendants in relation to stock shortages which he says occurred in the USA in the first season.

It seems to me that Dr Fein is critical of the defendants’ supply arrangements in the first season in the USA. He also says that the shortcomings in this respect were very significant and that they had long term effects on the success of the product. In this respect I particularly refer to paras 50, 58 and 66.

Dr Fein’s evidence on these issues goes beyond what is alleged in the third further amended statement of claim.

The proposed amended reply

Due to other commitments, it was necessary for me to hear argument in relation to these matters on a number of separate occasions. For the reasons which I have now set out, I observed to senior counsel for the plaintiffs during argument that it seemed to me to be clear that the plaintiffs’ expert witness statements went beyond the allegations made in the third further amended statement of claim and that either the statements would have to be brought into line with the pleadings or the pleadings would have to be brought into line with the statements.

Amongst other things, the plaintiffs contended before me that the passages complained of were relevant as they formed part of the plaintiffs’ answer to matters raised by the defendants in their defence.

As I indicated previously, the substance of the plaintiffs’ case is that a decision or series of decisions were made which they describe as an exit strategy, and in pursuance of which it is said that the defendants embarked upon a course of conduct which breached their contractual obligations in relation to the promotion and marketing of Relenza. The defendants deny that there ever was an exit strategy as alleged by the plaintiffs. Broadly, they say that whilst decisions were made which led to a reduction in promotional and marketing expenditure, the extent of their promotion and marketing was an appropriate response to the prospects of achieving profitable sales. In relation to the launch the defendants say that global sales in the first season were below budget.

In paragraph 152(e) of the defence to the third further amended statement of claim the defendants set out a number of factors which they allege “frustrated” … “the prospects of achieving profitable sales of Relenza”. The factors include inherent characteristics of Relenza (particularly the fact it has to be inhaled), inherent characteristics of influenza, and a number of other factors including what is said to be the “limited efficacy” of Relenza as confirmed in the Phase III clinical trials, and various regulatory obstacles, including the absence of an indication for prophylaxis and the absence of reimbursement status. The defendants also allege that the prospects of achieving profitable sales of Relenza were frustrated by the existence of its principal competitor, Tamiflu, and certain advantages which Tamiflu had over Relenza.

The allegations made by the defendants to which I have referred, and which are set out in paragraph 152(e), appear at a number of places throughout the defence.

In the course of argument senior counsel for the plaintiffs submitted (in effect) that it was the defendants who had opened up the pre-launch and launch issues. The amended reply, however, which is dated 24 October 2007, does not contend that any of the “frustrating” factors arose as a result of conduct of the defendants for which they might be criticised but rather says that they were either not frustrating factors at all or were factors which could and should have been addressed and overcome.

In the course of argument these matters were canvassed. As a consequence, prior to a resumed hearing the plaintiffs filed and served proposed amendments to the reply.

The proposed amendments begin by amending a series of notes which appear at the commencement of the reply. The new proposed note C reads as follows:

“The plaintiffs do not allege any breach of the Main Agreement by, nor make any complaint about —
(1)the design and conduct of Phase II clinical trials with respect to Relenza including the steps taken to enrol patients in those trials; and
(2)the design and conduct of Phase III clinical trials with respect to Relenza, including the steps taken to enrol patients in those trials.”

After hearing submissions on behalf of the defendants in relation to this proposed amendment, senior counsel for the plaintiffs indicated that they wished to vary that proposed amendment so that it is introduced by the words “Subject to notes D, E, F, and G”. Notes D,E, F and G, amongst other things, incorporate matters set out in proposed new paragraphs 12A, 12B and 12C and the existing allegations of breach in the third further amended statement of claim.

There are a number of important amendments which are proposed and the defendants object to many of them. Counsel for the plaintiffs indicated that the amendments are a “package” and that they do not wish to make any of the amendments if some are allowed and some were not. I heard extensive argument in relation to the amendments and was taken to a number of authorities concerning pleadings. The two issues of most significance are whether the proposed amendments in truth constituted an answer to what is in the defence, and whether the proposed amendments introduce matters which ought properly to be in the statement of claim rather than in the reply.

The key amendment in my view is the proposed amendment introducing paragraph 12A. I set out in the Annexure to these reasons that paragraph in full.

What proposed paragraph 12A does is to say that, if the defendants are correct that performance in the first season was below expectations, then a number of factors which the defendants anticipated and ought to have been able to address and overcome or mitigate had “adversely affected” that performance. The proposed paragraph then particularises the factors. They are all events and circumstances “occurring prior to the launch of Relenza or during its first season”. These events and circumstances cover the subject matters dealt with by the experts to which I have referred and which I have found are outside the ambit of the allegations made in the third further amended statement of claim, but they are expressed without direct criticism of the defendants, with the exception of the allegations concerning marketing.

Having set out the events and circumstances dealt with by the experts in the particulars in proposed paragraph 12A, the plaintiffs then seek to say three things. They are:

(1)Notwithstanding the factors referred to, Relenza achieved “significant sales” in the first season: 12A(b).
(2)It was the defendants’ contractual obligation to take appropriate steps to address, mitigate or overcome any adverse impact of the factors referred to, but instead of that the defendants proceeded to breach their contractual obligations in the manner already alleged in the third further amended statement of claim (the exit strategy): 12A(c) and (d).
(3)None of the matters referred to justified the defendants’ decisions which the plaintiffs characterise as the exit strategy: 12A(e).

Having addressed the issue at length with senior counsel for the plaintiffs, it seems to me that the plaintiffs wish to put the following case at trial. The plaintiffs do not say that the selection of the diskhaler, the conduct of the Phase III trials, the dealings with the regulatory authorities, the supply chain arrangements, and the marketing plans and activities, pre-launch and at launch in the first season, themselves constitute contractual breaches. But the plaintiffs do say that all of those matters are relevant to, or “inform”, the assessment of the issue of whether the defendants performed their contractual obligations after the first season. In other words, the plaintiffs wish to say the matters particularised in proposed paragraph 12A(a) are, by virtue of paragraph 12A(c) and (d), part of the plaintiffs’ case establishing breach by the defendants of their contractual obligations, not on some new basis, but on the bases already alleged in the third further amended statement of claim. The other amendments broadly reflect this approach and have a similar rationale.

I have considered the existing paragraphs alleging breach in the third further amended statement of claim. I am unpersuaded that the allegations sought to be made concerning the pre-launch and launch periods in the proposed amendments to the reply are encompassed by them.

Whether I am right or not about that conclusion, it seems to me that on any view the proposed amendments introduce new features or components of the allegations of contractual breach. They ought to be in the statement of claim if they are to be relied upon. I do not consider that they represent an answer to the matters the defendants have raised, although I understand how, as a practical matter, the matters alleged in paragraph 152(e) of the defence (and the other paragraphs raising similar matters) may have prompted the plaintiffs to reconsider their analysis of what their case is concerning the pre-launch and launch periods. The result, most clearly embodied in proposed paragraphs 12A(c) and (d) of the proposed amendments, is a proposed expansion of the plaintiffs’ case on contractual breach so as to incorporate criticisms of the defendants’ conduct pre-launch and at launch. The whole of the case of breach should be in the statement of claim.

Given this conclusion it is unnecessary for me to deal with the individual amendments and the particular objections to them.

Conclusions

As to the witness statements, it seems to me that the appropriate course at this stage is to order that the plaintiffs cannot rely upon them in their current form. I do not consider it is appropriate for me to attempt to edit the statements. Apart from anything else, simply removing passages will alter the sense of what remains. There is time for them to be revised and that is the appropriate course, unless a further amendment application alters the analysis.

I will accordingly direct that the plaintiffs cannot rely on the witness statements of Dr Janet Arrowsmith-Lowe, Dr W. Shannon McCool, Dr Klaus H Nagels, Mr Toshio Nagae, Mr Nicholas Williams and Dr Adam J Fein which have been filed and served in their current form.

The application to amend the amended reply will be refused.

I will hear the parties on the appropriate orders and on directions dealing with any further application to amend and/or the provision of revised witness statements.

ANNEXURE
Alleged “poor performance” of Relenza in the First Season
12A.As to allegations in the paragraphs of the Defence contained in paragraph 5(f) above (as further particularised by the FBPD, and including the allegations contained in paragraphs 148 and 152(e) of the Defence incorporated by reference therein) to the effect that Relenza performed “poorly” or below expectations in the first influenza season in the various countries of the world in which Relenza was launched, they say –
(a)if Relenza performed poorly (which is denied) or otherwise did not perform as well as it might have performed in its first season, alternatively was forecast to perform in its first season (which is denied), then a variety of factors particularised below –
(i)that were anticipated by Glaxo or Glaxo sub-licensees;
(ii)that are encountered by large pharmaceutical companies in the ordinary course of developing and exploiting any of their pharmaceutical products;
(iii)with which Glaxo was at all relevant times experienced in addressing, mitigating or overcoming; or
(iv)that were and are able to be addressed, mitigated or overcome by reasonable and appropriate expenditure on development, marketing and promotion.

adversely affected that performance:

Particulars
The plaintiffs refer to the following events and circumstances occurring prior to the launch of Relenza or during its first season in the various countries of the world in which it was launched –
Impact of the Diskhaler
(A)Prior to the launch of Relenza, it had been recognised and predicted that the use of the Diskhaler as the delivery device for Relenza was a factor that would affect adversely the market share and sales of Relenza, particularly upon the introduction of a competing product able to be administered orally (such as Tamiflu). BSM and Biota refer to paragraphs 79, 80, 84 and 85 of the FASOC and paragraph 47 below. Upon the launch of Relenza and in its first season, Glaxo received market feedback that confirmed that the Diskhaler was affecting adversely prescribers’ perceptions of Relenza. BSM and Biota refer to paragraph 342 of the FASOC.

Lack of statistically significant data from Phase III trial NAIA3002
(B)Phase III trial NAIA3002, intended as one of the three pivotal clinical trials, was conducted in Canada and the USA. In contrast to the two comparable Phase III studies NAIB3001 (Australia, New Zealand and South Africa) and NAIB3002 (Europe), the results of NAIA3002 did not demonstrate a statistically significant treatment effect of Relenza in the subjects of the trial. For that reason (among others) around February 1999, the FDA Advisory Committee made the adverse recommendation referred to in paragraph 152(e)(x) of the Defence and sub-paragraph 60(o) below;
Lack of high risk patient data
(C)BSM and Biota refer to the matters alleged in paragraph 328 of the FASOC and the mattes alleged in sub-paragraphs 328(a) and (b) of the Defence.
(D)Prior to the FDA approving the use and marketing of Relenza as a treatment for influenza, discussions between Glaxo (alternatively GWI) and the FDA indicated that the FDA was interested in having available to it “high risk” patient data and might, if it had such data, grant approval for the marketing of Relenza for use by a broad population, not just “high risk” patients.
(E)Prior to the date on which the use and marketing of Relenza as a treatment for influenza was approved and before the first influenza season, Glaxo did not obtain high risk patient data sufficient to satisfy the FDA and regulators in other countries (including Australia, Japan and Sweden) as to the efficacy of Relenza in treating or preventing influenza in high risk patients.
(F)For the reasons alleged in (B) to (E) above –
(i)around February 1999, the FDA Advisory Committee made the adverse recommendation referred to in paragraph 152(e)(x) of the Defence and sub-paragraph 60(o) below;
(ii)around February 1999, the MPA rejected the first MPA prevention application;
(iii)the label approved by the FDA in July 1999 for Relenza upon approving Relenza’s initial treatment indications contained statements to the effect that Relenza’s efficacy had not been shown in high risk patients, and this limited the representations that could be made in the USA with respect to the efficacy of Relenza;
(iv)the label approved for Relenza upon approving Relenza’s initial treatment indications in other countries (including Australia, Japan and Sweden) contained statements to the effect that Relenza’s efficacy had not been shown in high risk patients, and this limited the representations that could be made in those countries with respect to the efficacy of Relenza;
(iii)the FDA imposed the Phase IV commitments (including the requirement that Glaxo (alternatively GWI) conduct the post-marketing high risk clinical trial);
(iv)around September 1999 the FDA informed Glaxo, alternatively GWI that the FDA would not accept a prevention indication based on the clinical trial data then available to it;
(v)Glaxo and GSK’s ability to conduct and present health economic assessments in Europe (as to which see (K) below) was impaired;
(vi)the prospects for Relenza obtaining reimbursement were impaired in those countries in which reimbursement relied upon demonstrating that a product has a positive cost/benefit profile based upon, among other things, relevant and significant clinical trial data (including, in the case of Relenza, high risk patient data).

Lack of, or a limited, prophylaxis indication for Relenza
(G)Before launch of Relenza and its first influenza season in major markets including the USA, the EU Big Five and Japan, Glaxo did not obtain a prophylaxis indication for Relenza. BSM and Biota refer to paragraphs 57, 71, 73 and 74 of the FASOC and the absence of prophylaxis approvals in most countries in the table set out in paragraph 76 to the Defence. BSM and Biota also refer to 207 to 213, 240 to 242, 277 to 279, 282, 313, 314 and 420 to 434 of the FASOC and sub-paragraph 60(m) below.
Glaxo’s manufacturing and supply chain strategy
(H)In the latter half of 1999 and the early part of 2000, Glaxo experienced trade distribution problems attributable to the manufacturing and trade strategy that had been put in place with respect to Relenza. This resulted in stock shortages of Relenza at times in key markets such as USA and Europe in the first influenza season and resulted in a situation that, if not rectified, would have adverse effects in subsequent seasons.
First USA Season
(I)Further to the matters alleged above, in relation to USA –
(i)The pre-launch planning for Relenza in the USA by Glaxo, alternatively GWI, did not have a comprehensive marketing plan incorporating a market opportunity assessment or strategic commercialisation plan specific to the USA market.
(ii)During the First USA Season, the marketing efforts of GWI were impaired by a lack of a campaign to educate KOLs and high volume prescribers as to the merits of Relenza. Such a campaign would have been a productive complement to the DTC campaign that was pursued by GWI (as to which, refer to paragraph 115 of the FASOC).
(iii)During the First USA Season, the marketing efforts of GWI were further impaired by a lack of promotional spending relative to Roche with respect to Tamiflu.

First Australian Season
(J)Further to the matters alleged above, in relation to Australia –
(i)The lack of high risk patient data and data supportive of a broad preventing indication for Relenza (as alleged in paragraphs (B) to (E) above, and the treatment of the data that was, in fact, relied upon in the application for listing of Relenza for reimbursement under the Pharmaceutical Benefits Scheme (PBS) impaired GWA’s ability to obtain successfully PBS listing in Australia prior to and during the First Australian Season.

(ii)The pre-launch planning for Relenza in Australia by Glaxo, alternatively, GWA, did not accommodate as a contingency the situation in which Relenza was not listed under the PBS (as proved to be the case), nor did it include price/volume sensitivity research.
(iii)GWA did not stage an affiliate launch nor a press conference publicity launch during the launch of Relenza in Australia.
(iv)During the First Australian Season, the marketing efforts of GWA were impaired by –
i.a low level of direct selling support and pharmacy sales support for Relenza;
ii.incomplete or delayed distribution of promotional support materials.
iii.a promotional budget being approved by Glaxo for Australia that was lower than the budget sought by GWA;
iv.a lack of promotion in certain channels, such as influenza alerts to medical practitioners.

First European Season
(K)Further to the matters alleged above, in relation to the EU Big Five –
(i)Prior to the launch of Relenza in Europe, Glaxo had recognised the need for and planned to conduct health economic assessments and studies demonstrating a positive cost/benefit profile of Relenza. By the First European Season, however, Glaxo had initiated but had not completed such health economic studies. This, in turn, impaired Glaxo’s ability to obtain reimbursement (as to which see paragraph 10A above) and contributed to the 1^st NICE decision (as to which see sub-paragraph 58(h) below).
(ii)During the First European Season, the marketing efforts of the Glaxo local operating companies in each of the EU Big Five countries were impaired by a lack of resources, including a directive issued to the general managers of those operating companies at the start of the First European Season to the effect that there should be a 50% “freeze” on the non-field force promotional budget for Relenza. The plaintiffs refer to GSK.9029.075.0046 in relation to that directive.
First Japanese Season
(L)Further to the matters alleged above, in relation to Japan –
(i)       GSK KK delayed the launch of Relenza by one year, and in so doing surrendered much of the advantage Relenza might otherwise have enjoyed by being the first neuraminidase inhibitor available on the Japanese market. Further, that delay meant that the pre-launch promotional activities referred to in paragraph 222 of the FASOC occurred in circumstances where Relenza was not, in fact, available.
(ii)      Further, when Relenza was launched in Japan, GSI KK had significantly reduced the resources allocated to the promotion of Relenza (including the level of detailing of Relenza) from that planned prior to the launch of Relenza.
(iii)     The Japanese Review also revealed that medical practitioners had been targeted inaccurately by GSK KK’s sales representatives in the First Japanese Season.

(b)notwithstanding any adverse impact of the factors referred to in sub-paragraph (a) above, Relenza achieved significant sales in the first influenza season in those countries in which it was launched;
(c)after the first influenza season, the Exploitation Obligation required that defendants, through Glaxo and GSK, apply in respect of Relenza appropriate and reasonable expenditure, development, marketing and promotional resources towards addressing, mitigating or overcoming any adverse impact arising from the factors referred to in sub-paragraph (a) above in the first influenza season in the various countries in which Relenza was launched.
(d)instead of applying in respect of Relenza appropriate and reasonable expenditure, development, marketing and promotional resources towards addressing, mitigating or overcoming any adverse impact arising from the factors referred to in sub-paragraph (a) above, after the first influenza season the defendants, Glaxo and GSK –
(i)made the determinations, decisions, recommendations, endorsements, approaches and strategies referred to in sub-paragraphs 4(b) and (c) above and in paragraphs 156 to 161 of the FASOC, including the “minimalist approach”;
(ii)engaged in the conduct referred to in paragraphs 163, 164, 170, 176, 182, 188, 194, 199, 204, and 267-270 of the FASOC with respect to the promotion of Relenza in the second influenza season;
(iii)engaged in the conduct referred to in paragraphs 214 to 216, 346 and 347 of the FASOC with respect to the manufacturing and supply chain for Relenza;
(iv)failed to take any steps, or any significant steps, to address, mitigate or overcome the shortcomings of the Diskhaler as soon as reasonably practicable after the launch of Relenza, as more particularly alleged in paragraph 343 of the FASOC; and
(v)failed to take steps, alternatively steps in a timely fashion, to expand the range and scope of approved indications for Relenza, as alleged in paragraphs 207-212, 241, 244-255, 278, 279, 281, 313, 334, 336-339 and 357-358 of the FASOC.

and thereby the defendants were and are in breach of the Main Agreement as alleged in paragraphs 363, 364, 366, 369 and 371 to 374 of the FASOC.
(e)none of the factors referred to in sub-paragraph (a) above or in paragraphs 148 and 152(e) of the Defence, whether alone or in combination, justified the determinations, decisions, recommendations, endorsements, strategies and conduct adopted by Glaxo and GSK with respect to Relenza, or reductions in marketing, promotion and investment in the product, after the first influenza season, as more particularly alleged in the paragraphs of the FASOC referred to in sub-paragraph (d) above.

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Biota Scientific Management Pty Ltd v Glaxo Group Ltd [2008] VSC 110

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[2008] VSC 110

10 April 2008