Drug company ordered to arbitrate dispute over cancer treatment

A Los Angeles judge granted a San Diego pharmaceutical company's motion to compel arbitration in a dispute involving an accusation that billionaire Patrick Soon-Shiong's drug companies engaged in a scheme to buy, then intentionally tank, a competing cancer drug to secure market dominance and avoid a $1.2 billion contract payment.

Shortly after the suit was filed in May, Soon-Shiong said in a statement, "Because it is totally without merit, we shall defend ourselves vigorously against this baseless allegation."

Citing a binding arbitration clause in the allegedly breached contract, San Diego biotech company Sorrento Therapeutics Inc., represented by John C. Hueston and Steven N. Feldman of Hueston Hennigan LLP, moved to compel arbitration between it, Los Angeles Times owner Soon-Shiong and his pharmaceutical companies involved in the deal.

In response, Soon-Shiong filed a cross-complaint and moved to stay or dismiss arbitration on all claims.

Ruling last week, Los Angeles County Superior Court Judge Terry A. Green granted Sorrento's motion to compel arbitration as to NantCell Inc., one of Soon-Shiong's companies. The judge also denied Soon-Shiong's motion to stay or dismiss arbitration and his alternative request for a preliminary injunction against arbitration in the original suit.

"This is a significant victory for Sorrento, and we look forward to proceeding to trial on all of our claims," Feldman said in a phone interview Wednesday.

The legal battle began when Sorrento filed a derivative complaint in Los Angeles Superior Court in April, claiming Soon-Shiong tried to purchase the rights to the chemotherapy drug Cynviloq that would have been the only competition to a cancer treatment drug Abraxane, which Soon-Shiong invented.

Sorrento alleges Soon-Shiong, through his company NantPharma LLC, bought Cynviloq for $90 million in cash and as part of the deal promised to pay $1.2 billion after the drug received Food and Drug Administration approval.

However, once the deal was made and Soon-Shiong obtained control of Cynviloq, the opposing court documents claim he tanked the drug's approval process and let the patents lapse, "essentially destroying the drug as a marketable asset and avoiding the $1.2 billion in promised payments altogether."

Soon-Shiong said in his earlier statement: "The allegation that we have not developed Cynviloq to protect the sales of Abraxane is false and it ignores the facts."

Soon-Shieng and his company Nantcell filed a cross complaint claiming Henry Ji, the principal of Sorrento, tricked him into investing in Sorrento in a series of transactions, which included the Cynviloq purchase. Immunotherapy Nantibody , LLC v. Sorrento therapeutics Inc., 19STCV18304 (L.A. Sup. Ct., filed May, 24, 2019).

In the cross complaint, which includes fraud and breach of contract allegations, Soon-Shiong claims he was never given access to certain research items as the deal had promised, and Cynviloq was unstable and never close to receiving FDA approval. His cross complaint also claims the drug killed patients in other countries.

Sorrento's complaint, which seeks $90.05 million from Soon-Shiong, NantCell, and its legal officer Charles Kim, was filed alongside an arbitration demand with the American Arbitration Association in Los Angeles seeking more than $1 billion in damages, according to a 9-K form filed with the Securities and Exchange Commission.

Sorrento seeks damages for breach of contract, breach of fiduciary duties, abuse of control, corporate waste and unjust enrichment against Soon-Shiong personally and his companies involved in the alleged scheme.

Feldman said not only did the alleged scheme damage Serrento, it prevented patients from access to an affordable alternative to a leading chemotherapy drug.

John B. Quinn of Quinn Emanuel Urquhart & Sullivan LLP, who represents Soon-Shiong, was unavailable for comment Wednesday.

The parties are now expected to enter discovery.