42 Commitments and contingencies

42.1 Capital and other commitments

At 31 December 2018, the Group has committed to spend € 43 million (2017: € 63 million) mainly with respect to expected capital expenditures on milestone payments on collaboration agreements.

UCB has entered into long-term development agreements with various pharmaceutical enterprises, clinical trial operators and financial investors. Such collaboration agreements may include milestone payments which are dependent on successful clinical development or on meeting specified sales targets. The table below sets out the maximum that would be paid if all milestones, however unlikely, are achieved but excludes variable royalty payments based on unit sales and amounts accrued for milestones already achieved. The amounts are not risk-adjusted or discounted and the timing of the payments is based on the Group’s current best estimate of achievement of the relevant milestones.

 

 

 

€ million

2018

2017

Less than 1 year

133

58

Between 1 and 5 years

156

101

More than 5 years

527

860

Total

816

1 019

 

 

 

UCB has concluded several agreements with Contract Manufacturing Organizations for the supply of its products. Total outstanding commitments towards these CMOs amount to € 415 million as per end of 2018 (2017: € 447 million).

As part of UCB’s innovation strategy, UCB has established a corporate venture fund, UCB Ventures. The main objectives of the fund are to add breadth to UCB’s innovation ecosystem, to create a window on new technologies, products, platforms and channels to augment or complement UCB’s existing activities, to develop network and strategic relationships in the venture capital investor community to identify opportunities that UCB might not otherwise see. Within this framework UCB has outstanding commitments at the end of 2018 for a total amount of USD 14 million relating to investments in venture capital funds.

42.2 Guarantees

Guarantees arising in the normal course of business are not expected to result in any material financial loss.

42.3 Contingencies

The Group continues to be actively involved in litigations, claims and investigations. The on-going matters could result in liabilities, civil and criminal penalties, loss of product exclusivity and other costs, fines and expenses associated with findings adverse to UCB’s interests. Potential cash outflows reflected in a provision might be fully or partially off-set by insurance in certain circumstances. UCB has not established provisions for potential damage awards for certain additional legal claims against our subsidiaries if UCB currently believes that a payment is either not probable or cannot be reliably estimated.

42.3.1 Intellectual property matters (selected matters)

Vimpat®

  • Delaware District Court Litigation: In June 2013, UCB filed suit in the District Court of Delaware, against 16 defendants, who were seeking approval of their generic versions of Vimpat®. The defendants filed certifications challenging, among other things, the validity of the RE38,551 (‘551) Vimpat patent. On 12 August 2016, Judge Stark ruled in UCB’s favor and upheld the validity of the patent. The defendants have appealed and on 23 May 2018, the Court of Appeals for the Federal Circuit affirmed the decision. Early October 2018, Accord Healthcare and Intas Pharmaceuticals filed a petition for certiorari in the U.S. Supreme Court, which was denied on 19 November 2018. On 21 November 2018, Mylan, Sun and Alembic, filed another petition for certiorari to the U.S. Supreme Court. Currently awaiting a ruling.
  • Additional Delaware District Court Litigation: In 2016, UCB filed suit in the District Court of Delaware against three defendants, Hetero, Zydus and Aurobindo (C.A. Nos. 16-451-LPS, 16-452-LPS, and 16-903-LPS), who were seeking approval of a second generic version of Vimpat® (“Second Wave ANDA Cases”). The parties stipulated that the outcome of the initial Delaware litigation shall control and terminate these second wave cases.
  • Inter Partes Review (IPR): In November 2015, Argentum Pharmaceuticals filed a petition for an IPR before the U.S. Patent and Trademark Office (USPTO) and Patent Trial and Appeal Board (PTAB), seeking to invalidate the Vimpat ‘551 patent. In May 2016, the PTAB instituted the review. Mylan, Breckenridge, and Alembic have joined the IPR. On 22 March 2017, the PTAB upheld the validity of the ‘551 patent. Argentum did not appeal the decision, but Mylan, Breckenridge, and Alembic have appealed the decision to the Court of Appeals for the Federal Circuit. On 1st February 2019, the Federal Circuit affirmed the PTAB’s earlier finding that the Vimpat patent is valid.
  • Accord U.K. Litigation: In July 2016, Accord Healthcare filed a legal action before the United Kingdom High Court, requesting a declaration of invalidity and revocation of European Patent (U.K.) 0 888 829, disclosing and claiming lacosamide. In November 2017, Judge Birrs issued his decision in UCB’s favor, confirming the validity of the UK part of the European patent. Accord recently appealed the decision to UK Court of Appeal. A hearing on the appeal is scheduled for 8/9 May 2019.
  • Accord Netherlands Litigation: On 29 June 2017, Accord filed a writ before the District Court of The Hague, seeking to invalidate the Dutch Vimpat® patent and SPC. On 23 February 2019, the Court ruled to UCB’s favor and confirmed the validity of the patent.
  • Accord and Teva German Litigation: In the summer of 2017, Accord Healthcare and Teva filed nullity actions in the German Patent Court, seeking to invalidate the German part of the European Vimpat® patent/SPC. The cases are consolidated and the hearing date is scheduled for 15 October 2019. A preliminary opinion issued by the German Patent Court in December 2018 was favorable with respect to the validity of the Vimpat patent.
  • Accord Italian Litigation: In October 2017, Accord filed a nullity action against the Italian part of the European Vimpat® Patent in the Court of Milano. No trial date has been scheduled.
  • Laboratorios Normon, Spanish Litigation: In October 2017, UCB was notified by the Court of Barcelona that a nullity action against the Spanish part of the European Vimpat® Patent was filed by Laboratorios Normon, S.A. No trial date has been scheduled.
  • GL Pharma, Austria Litigation: In November 2017, GL Pharma filed a request for a declaration of non-infringement with respect to their generic lacosamide product, alleging that the Vimpat® patent is unenforceable. Case is on-going.

Neupro®

  • Watson Delaware District Court Litigation: In August 2014, UCB filed suit in the District Court of Delaware against Watson Pharmaceuticals, who is seeking approval of its generic version of Neupro® . Watson filed a paragraph IV certification challenging, among other things, the validity of certain patents pertaining to Neupro®, principally the 6 884 434 (‘434). Trial was held in June 2017. Judge Stark ruled in UCB’s favor and upheld the validity of the ‘434 patent but revoked the polymorph patent ‘414. Actavis has filed an appeal. UCB has cross-appealed. Case is on-going.
  • Zydus Delaware District Court Litigation: In November 2016, UCB filed suit in the District Court of Delaware against Zydus Pharmaceuticals, who is seeking approval of its generic version of Neupro®. Zydus filed a paragraph IV certification challenging, among other things, the validity of certain patents pertaining to Neupro®. The case was stayed until August 2019.
  • Mylan Delaware District Court Litigation: In March 2017, UCB filed suit in the District Court of Delaware against Mylan Pharmaceuticals, who is seeking approval of its generic version of Neupro®. Mylan filed a paragraph IV certification challenging, among other things, the validity of certain patents pertaining to Neupro®. The case is on-going.

Toviaz®

Mylan Inter Partes Review (IPR): In January 2016, Mylan Pharmaceuticals filed a petition for an IPR before the U.S. Patent and Trademark Office (USPTO), seeking to invalidate all of the Orange Book listed patents pertaining to Toviaz®. In July 2016, the Patent Trial and Appeal Board (PTAB) instituted the review. Alembic, Torrent and Amerigan have filed joinder motions. On 19 July 2017, the PTAB upheld the validity of all of the Orange Book listed patents. Mylan has appealed the PTAB ruling at the Federal Circuit together with the ruling of the District Court of Delaware in UCB’s favor; Amerigan has joined the appeal. On 11 January 2019, the Federal Circuit ruled in UCB’s favor. Case is on-going.

Adair Patent Litigation – Chugai

On 14 December 2016, Chugai Pharmaceuticals filed a legal action in the United Kingdom Patents Court, seeking a declaration that the sale of their product Actemra® does not infringe UCB’s U.S. patent 7 556 771. Trial was held in March 2018. The Court found in favor of Chugai in a decision rendered in August 2018. UCB has appealed.

42.3.2 Product liability matters

  • Distilbène product liability litigation – France: France Entities of the UCB Group have been named as defendants in several product liability cases in France. The claimants in these actions claim that their mothers took Distilbène, a former product of the UCB Group, during their pregnancy, and that as a result of this they suffered bodily injuries. The Group has product liability insurance in place but as this insurance cover will not be sufficient, the Group has accounted for a provision. (See Note 33).
  • Opioid Litigation: In March 2018, the U.S. entity was named, along with multiple defendants, in two lawsuits involving the promotion and sale of opioids. Those cases are American Resource Insurance Co., Inc. v. Purdue Pharma, LP, et al., in the U.S. District Court for the Southern District of Alabama, and State of Arkansas, et. al. v. Purdue Pharma, L.P. in the Circuit Court of Crittenden County, Arkansas. The cases are on-going.

42.3.3 Investigations

Southern District of New York – Pharmacy Benefit Managers and Cimzia®

In March 2016, the Company received a Civil Investigative Demand (CID) from the Civil Frauds Unit of the U.S. Attorney’s Office in the Southern District of New York. The CID requests the Company to identify and provide all contracts (from January 2006 through the date of the CID) between the Company and any Pharmacy Benefit Manager (PBM) concerning Cimzia®, including all documents necessary to show all services performed by any PBM as well as all payments made to any PBM. As of August 2016, all documents requested have been submitted to the government. The Company is cooperating with the U.S. Attorney’s Office in response to the CID provided.

42.3.4 Other matters

Cimzia® CIMplicity® Lawsuit: In March 2018, UCB, Inc. was served with a lawsuit alleging that since 2011, Cimzia® CIMplicity® program, namely the nurse educator services and reimbursement services, violated federal and state false claims act and anti-kickback statutes. On 17 December 2018, the U.S. Department of Justice moved to dismiss all claims. The case is on-going.

42.3.5 Concluded legal matters

  • Ex Parte Reexamination: In March 2016, Argentum Pharmaceuticals filed an ex parte reexamination request before the Patent Trial and Appeal Board (PTAB), seeking to invalidate the Vimpat® ‘551 patent. On 16 June 2016, the USPTO granted the request for the reexamination. On 23 February 2018, the USPTO confirmed the patentability of the Vimpat® ‘551 patent.
  • Divested Business Litigation: Desmopressin in October 2008, Apotex Inc. filed suit against UCB, Lonza Braine S.A. and S&D Chemicals (Canada) Ltd., in the Ontario Superior Court in Toronto, Ontario, Canada, alleging breach of contract and seeking damages for alleged failure to supply Apotex with the drug, desmopressin. UCB divested this drug as a part of its Bioproducts Business to Lonza in 2006. Lonza has cross-claimed against UCB and S&D Chemicals, UCB has cross-claimed against Lonza and S&D Chemicals, and S&D Chemicals has cross-claimed against UCB and Lonza. During Q2 2018, the parties reached an amicable settlement with no payments due by UCB. All claims against UCB were dismissed in May.