A milestone for R&D agreements?
06 July 2017
R&D agreements can often cover commercially significant and highly technical subject areas. In Astex Therapeutics Limited v AstraZeneca AB  EWHC 1442 (Ch) the court has had to decide on the interpretation of an R&D agreement and whether certain “collaboration compounds” were within the scope of the agreement, triggering milestone payments or not.
AstraZeneca (AZ) entered into a Research and Development Agreement (RDA) with Astex to collaborate on the identification and development of biological compounds that may be useful in the treatment of Alzheimer’s disease. The RDA provided for Astex to receive certain milestone payments and future royalties from any compounds selected by AZ for further development. AZ selected two such compounds, named CD1 and CD2. The development of CD1 was discontinued after a phase 1 clinical trial and CD2 is currently undergoing testing in a large scale phase 3 clinical trial. AZ paid two $1 million dollar milestone payments to Astex.
AZ informed Astex that it had re-evaluated the RDA and decided that neither CD1 nor CD were subject to the RDA. Astex applied to court for a declaration that both compounds were within the scope of the RDA and AZ sought repayment of the milestone payments together with a declaration that the RDA would end when AZ ceased conducting further research on based on compounds covered by the RDA.
The judge was critical of the scatter-gun approach each side had taken to expert evidence. He criticised each side for failing to define the issues that the experts should provide their opinions on, as well as allowing the experts to provide opinions outside their scope of expertise. Nevertheless, in a lengthy judgment dealing with complex issues around the construction of the RDA against a very technical factual background, the judge found in favour of AZ and decided that both CD1 and CD2 were outside the scope of the RDA. Consequently, the court agreed that AZ should re reimbursement the milestone payments and granted a declaration that the RDA would end when AZ ceased to conduct further research based on compounds within the RDA.
This case highlights the importance of ensuring that parties entering into a carefully drafted research and development to avoid subsequent costly and time consuming disputes as to the interpretation of the agreement and the clarification of the parties’ obligations under the agreement. There are also salutary warnings for litigants to ensure that expert evidence is focused on the issues in dispute and the experts stay within their expertise.
A link to the judgment is here.