Bla­tant abuse of Chap­ter 11? J&J says its use of 'Texas two-step' is all about fair­ness

As a five-day tri­al over John­son & John­son’s con­tro­ver­sial talc bank­rupt­cy wrapped up last week, the phar­ma gi­ant had a fi­nal ar­gu­ment to make: That plain­tiffs’ at­tor­neys have a “per­verse in­cen­tive” be­hind their re­jec­tion of the phar­ma gi­ant’s bank­rupt­cy strat­e­gy.

The case stems from 38,000 law­suits claim­ing J&J’s wide­ly used ba­by pow­der and oth­er talc prod­ucts con­tained as­bestos and caused mesothe­lioma and ovar­i­an can­cer. As cas­es mount­ed, J&J at­tempt­ed to dig it­self out by spin­ning the talc-re­lat­ed li­a­bil­i­ties in­to a new com­pa­ny called LTL Man­age­ment, which then filed for bank­rupt­cy.

To do so, the com­pa­ny in­voked a Texas law that al­lows li­a­bil­i­ties to be sep­a­rat­ed from as­sets in­to a new en­ti­ty, a process for­mal­ly known as a di­vi­sion­al merg­er but col­lo­qui­al­ly called a “Texas two-step” bank­rupt­cy. But while J&J ar­gues the bank­rupt­cy fil­ing was nec­es­sary to deal with un­ten­able court costs, oth­ers ar­gue the move is a bla­tant mis­use of the Chap­ter 11 sys­tem.

A com­mit­tee rep­re­sent­ing the talc claimants filed a mo­tion to dis­miss the case, re­sult­ing in a five-day tri­al that oc­curred last week. US bank­rupt­cy judge Michael Ka­plan of New Jer­sey said a de­ci­sion is ex­pect­ed by Feb. 28, ac­cord­ing to a source with knowl­edge of the mat­ter.

Dur­ing the tri­al, LTL’s lawyers ar­gued that plain­tiffs’ at­tor­neys have their own in­cen­tive to re­ject the bank­rupt­cy case, as they could po­ten­tial­ly pock­et more mon­ey from fil­ing law­suits than by ne­go­ti­at­ing a deal, ac­cord­ing to Bloomberg, which first re­port­ed the news. J&J said in Oc­to­ber that it had racked up near­ly $1 bil­lion in de­fense costs and about $3.5 bil­lion in pay­ments for set­tle­ments and ver­dicts.

“Af­ter a week-long tri­al, undis­put­ed ev­i­dence from more than 10 wit­ness­es demon­strat­ed the ob­jec­tive fact that a bank­rupt­cy res­o­lu­tion will be more fair to more claimants and pro­vide eq­ui­table com­pen­sa­tion in the short­est amount of time,” Al­li­son Brown, a Skad­den Arps part­ner rep­re­sent­ing LTL, told End­points News. “The fierce op­po­si­tion to such a res­o­lu­tion mount­ed by plain­tiffs’ lawyers rais­es se­ri­ous ques­tions about a per­verse in­cen­tive of the mass tort sys­tem, which re­wards plain­tiffs’ lawyers with con­tin­gency fees of up to 45% of ju­ry ver­dicts.”

Mean­while, those on the claimants’ side — in­clud­ing a group of law pro­fes­sors who filed a “friend of the court” brief — ar­gue that the Texas two-step move is a “di­rect at­tack on the fun­da­men­tal in­tegri­ty of the Chap­ter 11 sys­tem,” that would “de­prive in­no­cent talc vic­tims of their day in court.”

On­ly a hand­ful of talc-re­lat­ed suits have made it to tri­al and been re­solved over the last decade — and though the com­pa­ny says it has pre­vailed in a ma­jor­i­ty of cas­es, it’s al­so had its share of loss­es, in­clud­ing a Mis­souri case in 2018 when a ju­ry award­ed plain­tiffs more than $4.7 bil­lion in dam­ages.

An at­tor­ney rep­re­sent­ing the claimants de­clined to com­ment.

Though ques­tions about whether J&J’s ba­by pow­der con­tained as­bestos first sur­faced back in the 1970s, J&J main­tains that it has “nev­er man­u­fac­tured a prod­uct that con­tained as­bestos,” and that its talc prod­ucts are safe. The phar­ma gi­ant stopped man­u­fac­tur­ing the talc-based pow­der in May 2020, but cit­ed de­clin­ing sales as its rea­son­ing.

The com­pa­ny said in a state­ment to End­points on Tues­day:

John­son & John­son has long-stat­ed that we have been con­sid­er­ing all op­tions with re­gard to man­ag­ing the talc lit­i­ga­tion. The plain­tiffs’ lawyers have failed to pro­vide any al­ter­na­tive so­lu­tion to re­solve these cas­es while LTL stands ready to move for­ward, me­di­ate and find a fair and eq­ui­table res­o­lu­tion.

2023 Spot­light on the Fu­ture of Drug De­vel­op­ment for Small and Mid-Sized Biotechs

In the context of today’s global economic environment, there is an increasing need to work smarter, faster and leaner across all facets of the life sciences industry.  This is particularly true for small and mid-sized biotech companies, many of which are facing declining valuations and competing for increasingly limited funding to propel their science forward.  It is important to recognize that within this framework, many of these smaller companies already find themselves resource-challenged to design and manage clinical studies themselves because they don’t have large teams or in-house experts in navigating the various aspects of the drug development journey. This can be particularly challenging for the most complex and difficult to treat diseases where no previous pathway exists and patients are urgently awaiting breakthroughs.

Albert Bourla, Pfizer CEO (Efren Landaos/Sipa USA/Sipa via AP Images)

Pfiz­er makes an­oth­er bil­lion-dol­lar in­vest­ment in Eu­rope and ex­pands again in Michi­gan

Pfizer is continuing its run of manufacturing site expansions with two new large investments in the US and Europe.

The New York-based pharma giant’s site in Kalamazoo, MI, has seen a lot of attention over the past year. As a major piece of the manufacturing network for Covid-19 vaccines and antivirals, Pfizer is gearing up to place more money into the site. Pfizer announced it will place $750 million into the facility, mainly to establish “modular aseptic processing” (MAP) production and create around 300 jobs at the site.

Endpoints News

Keep reading Endpoints with a free subscription

Unlock this story instantly and join 154,000+ biopharma pros reading Endpoints daily — and it's free.

Vas Narasimhan, Novartis CEO (Thibault Camus/AP Images, Pool)

No­var­tis bol­sters Plu­vic­to's case in prostate can­cer with PhI­II re­sults

The prognosis is poor for metastatic castration-resistant prostate cancer (mCRPC) patients. Novartis wants to change that by making its recently approved Pluvicto available to patients earlier in their course of treatment.

The Swiss pharma giant unveiled Phase III results Monday suggesting that Pluvicto was able to halt disease progression in certain prostate cancer patients when administered after androgen-receptor pathway inhibitor (ARPI) therapy, but without prior taxane-based chemotherapy. The drug is currently approved for patients after they’ve received both ARPI and chemo.

Endpoints News

Keep reading Endpoints with a free subscription

Unlock this story instantly and join 154,000+ biopharma pros reading Endpoints daily — and it's free.

Up­dat­ed: FDA re­mains silent on or­phan drug ex­clu­siv­i­ty af­ter last year's court loss

Since losing a controversial court case over orphan drug exclusivity last year, the FDA’s Office of Orphan Products Development has remained entirely silent on orphan exclusivity for any product approved since last November, leaving many sponsors in limbo on what to expect.

That silence means that for more than 70 orphan-designated indications for more than 60 products, OOPD has issued no public determination on the seven-year orphan exclusivity in the Orange Book, and no new listings of orphan exclusivity appear in OOPD’s searchable database, as highlighted recently by George O’Brien, a partner in Mayer Brown’s Washington, DC office.

Yuling Li, Innoforce CEO

In­no­force opens new man­u­fac­tur­ing site in Chi­na

Innoforce is off to the races at its new site in the city of Hangzhou, China.

The Chinese CDMO announced last week that it has started manufacturing at the new facility, which was built to offer process development and manufacturing operations for RNA, plasmid DNA, viral vectors and other cell therapeutics. It will also serve as Innoforce’s corporate HQ.

The company said it’s investing more than $200 million in the 550,000-square-foot manufacturing base for advanced therapies. The GMP manufacturing facility features space for producing plasmids with three 30-liter bioreactors. For viral vector manufacturing, Innoforce also has 200- and 500-liter bioreactors at its disposal, along with eight suites to make cell therapies. The site also includes several labs and warehouse spaces.

FDA grants or­phan drug des­ig­na­tion to Al­ger­non's ifen­prodil, while ex­clu­siv­i­ty re­mains un­clear

As the FDA remains silent on orphan drug exclusivity in the wake of a controversial court case, the agency continues to hand out new designations. The latest: Algernon Pharmaceuticals’ experimental lung disease drug ifenprodil.

The Vancouver-based company announced on Monday that ifenprodil received orphan designation in idiopathic pulmonary fibrosis (IPF), a chronic lung condition that results in scarring of the lungs.  Most IPF patients suffer with a dry cough, and breathing can become difficult.

‘Catchy’ de­sign tops big ad buys on­line for grab­bing on­col­o­gists’ at­ten­tion — sur­vey

The cancer drug ads that get oncologists’ attention online are informative and use clear, eye-catching designs. That’s ZoomRx’s assessment in its most recent tracking survey, and while not necessarily surprising, the details in the research do break a few common misconceptions.

One of those is frequency, also known as the number of impressions an ad gets. No matter how many times oncologists saw a particular cancer drug ad, effectiveness prevailed in the survey across five drug brands. ZoomRx measured effectiveness as a combination of most attention-getting, relevant information and improved perception as reported by the doctors.

Endpoints News

Keep reading Endpoints with a free subscription

Unlock this story instantly and join 154,000+ biopharma pros reading Endpoints daily — and it's free.

Tim Walbert, Horizon Therapeutics CEO (via YouTube)

And then there were two: Janssen bows out of Hori­zon takeover ne­go­ti­a­tions

Horizon Therapeutics announced last week that it was in talks with three pharmaceutical giants that could take over the company. You can now remove one of them from the equation.

J&J’s Janssen, after Horizon reported its initial involvement in early discussions to acquire the rare disease biotech, issued a statement Saturday that said Janssen “does not intend to make an offer for Horizon,” and that Janssen is bound by restrictions set in Rule 2.8 of the Irish Takeover Rules. These rules are in place for any company interested in taking over Irish companies, with Horizon Therapeutics currently based in Dublin.

Endpoints News

Keep reading Endpoints with a free subscription

Unlock this story instantly and join 154,000+ biopharma pros reading Endpoints daily — and it's free.

Patrick Soon-Shiong (Evan Vucci/AP Images)

Up­dat­ed: Ar­bi­tra­tor awards $157M to Soon-Sh­iong's Im­mu­ni­ty­Bio in dis­pute with Sor­ren­to

Sorrento Therapeutics’ yearslong battle with NantCell and NANTibody has come to an arbitration award, but additional legal proceedings centered around a “catch-and-kill” scheme remain pending.

On Friday, the arbitrator in the dispute between Sorrento and NantCell and Immunotherapy NANTibody LLC issued an award that grants contractual damages and pre-award interest.

The arbitrator awarded NantCell (part of billionaire Patrick Soon-Shiong’s ImmunityBio) nearly $157 million and NANTibody close to $17 million. Post-award, prejudgment interest will accrue at 9% per annum, according to an SEC filing sent in by Sorrento.