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Drug-maker Cangene can close for upgrades

Baltimore drug manufacturer Cangene bioPharma does not have to cancel its scheduled plant shutdown to make hundreds of thousands of doses of a colorectal cancer treatment, a U.S. District Court judge ruled Monday afternoon.

California-based Spectrum Pharmaceuticals Inc., which relies on Cangene to assemble Fusilev and had sought a preliminary injunction last week, filed an appeal to the 4th U.S. Circuit Court of Appeals about an hour later.

The Baltimore facility plans to cease operations Friday and reopen for business in March.

In keeping with his comments at the end of an all-day hearing last Tuesday, Senior Judge Marvin J. Garbis decided Spectrum had not given Cangene enough of a heads-up before making batch orders starting in June that were “grossly disproportionate” to what it had ordered previously and forecast a year ago.

Spectrum had told Cangene it expected needing only two batches in the second half of 2010, but when the U.S. Food and Drug Administration announced a shortage of a similar drug in June, it quickly ordered 10 batches and then several more in subsequent months.

“By no means has Spectrum made a clear showing that it is likely to establish that it gave adequate notice for the Fusilev orders at issue,” Garbis wrote in an 8-page opinion.

Attorneys in the case did not immediately return calls for comment.

Spectrum’s urgent need for more Fusilev stemmed from the FDA’s announcement of the shortage of Leucovorin, another chemotherapy-related drug with the same active ingredient, and a request from federal regulators to provide Fusilev as a temporary replacement.

Spectrum has played up the patient health consequences, but also stands to miss out on profits from the spike in demand for the off-label but proper use of Fusilev.

Cangene, on the other hand, said it would have loved to sell Spectrum all the Fusilev it has ordered but simply does not have the capacity or the time, in light of other customers’ demands this fall and its long-planned closure.

It has claimed certain parts of the closure are mandated by the FDA and any further alteration to the schedule would result in a costly business disruption.

Disproportionate to forecast

Spectrum argued Cangene was obligated to fill its orders over the past few months under the companies’ May 2008 Master Supply Agreement, which gives Cangene about two months to fill the orders. But Cangene countered that the contract was for goods, not services, and that Cangene has always been able to reject any work requested by Spectrum.

While Garbis didn’t fully wade into this argument, the judge wrote that if Cangene is correct and the contract is governed by the Uniform Commercial Code, Spectrum loses; and even if Spectrum is correct, it still might not prevail.

Cangene’s lawyer, who said his mother-in-law died of colorectal cancer, also noted that Spectrum was not obligated to make Cangene its sole supplier under the Master Supply Agreement, which extends through May 2013.

A pair of executives from both Spectrum and Cangene testified in Judge Garbis’ fifth-floor downtown courtroom last Tuesday, and each company’s lawyers explained to the judge how an adverse decision would be catastrophic.

Garbis’ closing questions and comments, which seemed to pit his desire to help cancer patients against his legal reasoning, previewed his ruling.

“I’ve got to get [Cangene] liable to do it,” Garbis told Spectrum attorney Mark A. Pals. “I’m trying to make them liable.”

But, Garbis concluded, Spectrum had asked too much of Cangene — and then of him.

“By any reasonable standard, three orders in five days in June, 2010 totaling 190,000 units would be grossly disproportionate to a forecast of no orders in the first two quarters of the year, and orders of about 19,000 units in each the third and fourth quarters of the year,” Garbis wrote in Monday’s memorandum and order.

Spectrum continued to request more Fusilev — nearly 700,000 vials as of Nov. 10 — even though Cangene said it would be difficult to fill even a fraction of the incoming orders.

Spectrum’s vice president of business solutions and government affairs testified that, through May, the company had sold fewer than 30,000 units of Fusilev. From June through November, it has sold more than 234,000 doses to its wholesalers, who supply it to physicians and hospitals.

Cangene, which also supplies other cancer drugs, treatments for genetic diseases and even an antidote for rattlesnake venom, has produced 145,000 vials but says it cannot meet Spectrum’s demand, despite offers from Spectrum of more money or more vials to up Cangene’s current supply of about 61,000.

“Nothing would please Cangene more than to do this,” said its lawyer, Frederick L. Whitmer, during the hearing. “We can’t do it.”

Tests and improvements

Cangene’s general manager claimed in her affidavit that the company, which has annual revenue of $12 million to $20 million, could face lost profits of $4 million if the shutdown is called off.

Cangene, a 100-employee division of the Canadian company of the same name, told its 30 customers in January about its plans to shut down in order to check its air filtration system, install a second lyophilizer (which freeze-dries the drugs) and run other tests. It offered to put Spectrum’s order at the front of the line when it emerges from hibernation on March 11, but the California company was not satisfied. The Leucovorin shortage is expected to continue until at least April.

Colorectal cancer is the second-leading cause of cancer deaths in the U.S., according to Spectrum’s lawsuit, and will kill more than 50,000 Americans in 2010 alone.

Leucovorin works in concert with chemotherapy drugs, such as methotrexate, by helping them bind longer to cancer cells. It also protects healthy cells from the toxicity of the chemotherapy. Fusilev, which is FDA-approved to “rescue” patients by protecting healthy cells from high-dose chemotherapy for cancerous bone tumors, is often prescribed as a substitute to Leucovorin.