Date: 20021220
Docket: T-1898-01
Neutral citation: 2002 FCT 1319
Ottawa, Ontario, this 20th day of December 2002
Present: THE HONOURABLE MR. JUSTICE SIMON NOËL
BETWEEN:
BRISTOL-MYERS SQUIBB COMPANY and
BRISTOL-MYERS SQUIBB CANADA INC.
Applicants
and
THE ATTORNEY GENERAL OF CANADA and
BIOLYSE PHARMA CORPORATION
Defendants
REASONS FOR ORDER AND AMENDED ORDER
[1] The respondent, Biolyse Pharma Corporation ("Biolyse"), moves, pursuant to Rule 398 (1)(a) of the Federal Court Rules, 1998, for an order that the decision of Blanchard J. of the Federal Court Trial Division dated November 22, 2002, be stayed pending the disposition of its appeal.
[2] Biolyse is a small pharmaceutical company based in St. Catherines, Ontario, which has developed a new way of making paclitaxel from a novel source, Taxis canadensis (yew bushes). Paclitaxel is a drug used in the treatment of cancer tumours. Biolyse's product is used by hospitals and cancer care centres.
[3] When Biolyse developed its product, the Minister of Health (the "Minister") advised it to file a New Drug Submission ("NDS") rather than an Abbreviated New Drug Submission ("ANDS").
[4] On September 20, 2001, the Minister issued a Notice of Compliance ("NOC") to Biolyse, in relation to 6mg/ml paclitaxel for injection. The Minister determined that s. 5 of Patented Medicines (NOC) Regulations (the "Regulations") was not engaged and as a result did not require Biolyse to send a Notice of Allegation ("NOA") to Bristol-Myers Squibb ("BMS"). The granting of the NOC permitted Biolyse to start selling and advertise its product.
[5] On November 22, 2002, Blanchard J. allowed BMS' application for review of the Minister's decision granting the NOC. He found that the respondent Minister had failed to require Biolyse to comply with section 5 of the Regulations, and as a result, quashed the NOC issued to Biolyse.
[6] The effects on Biolyse of the immediate quashing of the NOC are that Biolyse now must stop manufacturing and selling its product in Canada, submit an ANDS relating to its product to the Minister and serve a NOA to BMS.
[7] At paragraph 43 of RJR- MacDonald Inc. v. A.G. Canada, [1994] 1 S.C.R. 311, the Supreme Court of Canada set out the test for granting a stay:
Metropolitan Stores adopted a three-stage test for courts to apply when considering an application for either a stay or an interlocutory injunction. First, a preliminary assessment must be made of the merits of the case to ensure that there is a serious question to be tried. Secondly, it must be determined whether the applicant would suffer irreparable harm if the application were refused. Finally, an assessment must be made as to which of the parties would suffer greater harm from the granting or refusal of the remedy pending a decision on the merits. It may be helpful to consider each aspect of the test and then apply it to the facts presented in these cases.
[8] Having regard to the facts presented on this motion, I am satisfied that the criteria for a stay have been met (RJR McDonald Inc., supra). Having easily concluded that there is a serious question to be tried, I evaluated Biolyse's potential irreparable harm versus BMS's alleged potential damages and found the balance of convenience to be in favour of Biolyse.
SERIOUS ISSUE
[9] There is at least one serious issue to be dealt with on appeal, namely the proper interpretation of subsection 5(1.1) of the Regulations. Blanchard J.'s decision is the first judicial consideration of this subsection. In his decision, Blanchard J. held that subsection 5(1.1) of the Regulations is engaged even where there is no comparison between one drug and another drug as the basis for approval of the first drug. Although this might very well be the right interpretation, until appeal rights are not expired, parties will continue to debate the correct interpretation of this subsection.
[10] In the Regulatory Impact Analysis Statement, Canada Gazette, Part II, Vol. 133, No. 21, page 2359, it was acknowledged that "the amendments may lead to litigation as parties test the limits of the wording. Submissions filed with the Minister of Health that may be covered by subsection 5(1.1) may also entail litigation.". Therefore, when subsection 5(1.1) of the Regulations was enacted, the government knew its interpretation would create a debate, hence the serious issue in this case.
IRREPARABLE HARM
[11] On the assumption that Biolyse will suffer bankruptcy if the stay is not granted, and based on Biolyse's inability to compensate BMS in the event of damages, it seems that both parties will suffer irreparable harm.
[12] Although BMS conceded that Biolyse could go bankrupt, it claims that the amount of money it would lose if the stay is granted will constitute greater irreparable harm. To show good faith, BMS tried to mitigate its damages. Indeed, prior to the hearing of the motion for a stay, BMS gave an undertaking to Biolyse, in the event that this motion for a stay is dismissed, to pay to Biolyse an amount not exceeding $50,000.00 CDN per month until the Federal Court of Appeal renders a decision or for 6 months starting January 1, 2003, for the purpose of paying Biolyse's operating costs. This offer was made subject to BMS' right to appoint an auditor to ensure that the amounts are expended solely on operating costs.
[13] After the hearing, and before the Order, to ensure that Biolyse would not suffer irreparable harm as a result of BMS locking in long-term contracts if the stay is not granted, BMS further offered Biolyse to insert the following clause:
"...provided that the foregoing provisions will not apply to the situation where the purchaser wishes to purchase paclitaxel manufactured and sold by Biolyse Pharma Corp. during the term of this agreement."
into any exclusivity clause in any new contract for paclitaxel that is negotiated between now and the disposition of the Federal Court of Appeal's decision. Although BMS' offer seems reasonable in light of the situation, a closer look reveals that this undertaking would allow BMS to interfere with Biolyse's business, which, in my opinion, is inappropriate. Furthermore, the suggested amount of $50,000.00 is insufficient because, though it might cover the monthly operating costs, it would not cover, for instance, Biolyse's marketing costs and potential losses incurred from not selling its product, from breaching its contracts or even losing possible contracts.
[14] With respect to the undertaking required of Biolyse for filing this motion, I added the requirement as a condition to my Order of December 13, 2002 granting the stay. However, as there was evidence that Biolyse was not in a financial position to pay whatever damages might be awarded at trial [Turbo Resources Ltd. v. Petro Canada Inc. (1989), 24 C.P.R. (3d) 1 (F.C.A.) at page 22], it could obviously not undertake to pay damages in this case. I did not want such a procedural issue to impede Biolyse from pursuing its right of appeal, thus I granted the stay on the condition that Biolyse file an undertaking that it would abide to any Order the Court would make as to damages.
[15] As it is submitted by the moving party, harm is considered irreparable based not on its magnitude, but on whether the court hearing the appeal will be able, by an award of damages, to correct the damages that will occur if the Order is not stayed. Reference was made to the Supreme Court of Canada decision RJR-MacDonald, supra, at paragraph 53, indicating that permanent loss of market share and irrevocable damage to a party's business reputation constitutes irreparable harm:
"Irreparable" refers to the nature of the harm suffered rather than its magnitude. It is harm which either cannot be quantified in monetary terms or which cannot be cured, usually because one party cannot collect damages from the other. Examples of the former include instances where one party will be put out of business by the court's decision (R.L. Crain Inc. v. Hendry (1988), 48 D.L.R. (4th) 228 (Sask. Q.B.)); where one party will suffer permanent market loss or irrevocable damage to its business reputation (American Cyanamid, supra); or where a permanent loss of natural resources will be the result when a challenged activity is not enjoined (MacMillan Bloedel Ltd. v. Mullin, [1985] 3 W.W.R. 577 (B.C.C.A.)). The fact that one party may be impecunious does not automatically determine the application in favour of the other party who will not ultimately be able to collect damages, although it may be a relevant consideration (Hubbard v. Pitt, [1976] Q.B. 142 (C.A.)).
[16] Biolyse is a one-product company in which, if the company is not allowed to continue to market that product, it will go out of business. It is a very small pharmaceutical company in comparison to larger multinationals. It has only twelve full-time staff, and very limited revenue to date.
[17] Biolyse spent an average of $1 million annually for the last twelve years to develop its product and invested at least $5 million and three years of labour in building a manufacturing plant designed solely for the extraction and production of its product. During the last year, Biolyse invested in training technicians, chemists, sales people, management and production staff. Further, about 100 seasonal workers are hired for each harvest of raw materials (yew bushes) in impoverished Canadian regions, such as Gaspé, in Québec.
[18] More importantly, Biolyse had projected sales of about $2 million for the upcoming year for its product, whereas BMS sells $ 7 million worth of its equivalent product, Taxol, a day worldwide.
[19] Not only will Biolyse probably go bankrupt if the stay is not granted, but it would also suffer other damages. For example, its stockpiled raw materials for the production of its product would be spoiled. Also, Biolyse already produced paclitaxel, and if prevented from selling, this inventory will have its shelf-life shortened and eventually expire.
[20] Biolyse's reputation on the pharmaceutical market will be negatively affected and this will consequently be detrimental for future business with potential clients. Existing valuable contracts, such as the one between Biolyse and HealthPro will be jeopardized, and probably cancelled. In my view, this is irreparable damage.
[21] Moreover, if the stay is not granted and Biolyse falls out of business, it will not be able to repay its creditors and investors. Biolyse is relying on upcoming revenue to satisfy these debts.
[22] BMS submits that it was made clear from the cross-examination of Ms. Kiecken, the President of Biolyse, that BMS sells its product at a somewhat higher price and well beyond start-up. It alleges that, as such, economies of scale and experience mean that BMS' damages would likely be greater than Biolyse's damages. Further, BMS claims that it already had to drop its price in competition with Biolyse. Since these allegations are not supported by any affidavit, I give them a low probative value against the affidavit evidence submitted by Biolyse.
[23] Evidently, the financial consequences to Biolyse and the consequences in the marketplace will be fatal to the existence of the company. If the judgment of Blanchard J. is not stayed, the appeal will probably be pointless because Biolyse won't have the financial means to pursue it. The quashing of the NOC will cause irreparable harm to Biolyse and will place its existence in jeopardy.
BALANCE OF CONVENIENCE
[24] The test for the balance of convenience was described in Re: Attorney General of Manitoba v. Metropolitan Stores (MTS), [1987] 1 S.C.R. 110, at paragraph 35:
The third test, called the balance of convenience and which ought perhaps to be called more appropriately the balance of inconvenience, is a determination of which of the two parties will suffer the greater harm from the granting or refusal of an interlocutory injunction, pending a decision on the merits.
[25] In the case at bar, having compared Biolyse's alleged irreparable harm with BMS's alleged losses, which were not supported by evidence, I find that Biolyse will undoubtedly suffer greater harm from the refusal of the motion for a stay, pending a decision from the Court of Appeal. The balance of convenience is clearly in favour of maintaining the situation as it existed before Blanchard J.'s decision, in order to allow Biolyse a chance to stay in business. The consequences flowing from the decision against the Minister are too material to Biolyse to ignore. Further, it would not be in the public interest to allow a small pharmaceutical company, with an innovative and cheaper product, to go out of business.
[26] Finally, considering the factual situation and the immediate concerns that need to be addressed in a timely manner for the stay and the appeal to be effective, I required Biolyse to file a motion requesting an expedited hearing.
AMENDED ORDER
THIS COURT ORDERS:
1. Conditional to:
Biolyse signing an undertaking "to abide by any order the Court may make as to damages in case the Court shall thereafter be of opinion that the [Applicant] shall have sustained damages by reason of this order [granting of stay] which the [Respondent] ought to pay" [see: Algonquin Mercantile Corp. v. Dart Industries Canada Ltd. et al. (1987), 16 C.P.R. (3d) 193 (F.C.A.), p. 199];
Biolyse presenting a Notice of appeal within five days of this Order; and
Biolyse presenting a motion to expedite the hearing of the appeal,
the stay is granted, pending the final determination of the appeal of the decision of Justice Blanchard.
2. That each party will pay their own costs.
Judge
FEDERAL COURT OF CANADA
TRIAL DIVISION
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: T-1898-01
STYLE OF CAUSE : BRYSTOL-MYERS SQUIBB COMPANY and BRISTOL-MYERS SQUIBB CANADA INC. and
THE ATTORNEY GENERAL OF CANADA and BIOLYSE PHARMA CORPORATION
PLACE OF HEARING : Ottawa, Ontario
DATE OF HEARING : December 12, 2002
REASONS FOR ORDER : THE HONOURABLE JUSTICE SIMON NOËL
DATED : December 20, 2002
APPEARANCES :
Mr. Anthony G. Creber FOR THE APPLICANTS
Mr. Patrick Smith
Mr. Douglas N. Deeth FOR THE RESPONDENT Biolyse Pharma Corporation
SOLICITORS OF RECORD :
Gowling, Lafleur, Henderson FOR THE APPLICANTS
Ottawa, Ontario
Deeth, Williams Wall FOR THE RESPONDENT
Toronto, Ontario Biolyse Pharma Corporation
Mr. Morris Rosenberg
Deputy Attorney General of Canada FOR THE RESPONDENT
The Attorney General of Canada
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