Merz can't tout drug for wrinkles until 2013, judge rules

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Merz Pharmaceuticals must wait 10 months before launching its botulinum drug in the cosmetic market, a district judge has ruled.

The firm's attempt to take a bite out of a marketplace now dominated by Allergan's Botox was officially halted last week, after US District Judge Andrew Guildford issued an injunction, thwarting what was to be Merz's imminent launch of Xeomin for easing facial lines. The judge did not immediately release his full opinion in the case, or the duration of the injunction, until yesterday.

In the 27-page opinion, Judge Guildford explained why he agreed with Allergan's contention that some Merz sales reps stole trade secrets. The judge deemed the acts a “misappropriation of trade secrets,” warranting a marketing stay for this indication until January 2013. Merz already sells its drug for quelling two types of muscle spasms.

In the meantime, the order requires new purchasers to sign sworn declarations that they weren't solicited. Specifically, Merz is barred from “providing or selling dermal filler products or soliciting purchases of dermal filler products in the facial aesthetics market” for 10 months unless customers will sign sworn statements that they were not subject to sales tactics, or if they were Merz customers between July 2009 and June 30, 2010.

A Merz spokesperson told MM&M that the details of the freeze as well as well as other requirements, including an electronic audit of Merz's computer files, were scheduled to be ironed out with the judge Tuesday. An Allergan spokesperson would not confirm the meeting or comment on the case. In a statement issued last week, Allergan said it was pleased with the ruling. (UPDATE: Merz said in a statement on Wednesday that it may try to have the injunction modified and "is pursuing an expeditious and effective file examination and remediation process that will enable the company to return quickly to business as usual." The company added "we regret that individual employees have violated our longstanding guidelines.")

Merz Aesthetics had gained an 8% share of the US facial aesthetics market by December 2011. Allergan, which controls most of the remainder of that market, had projected it would take Xeomin 15 months to hit the 9% benchmark. Leerink Swann analyst Seamus Fernandez had predicted that Xeomin posed more of a threat to Medicis' Dysport. "We've actually made no change to our Botox cosmetic forecast in the wake of the Xeomin injunction," the analyst said by e-mail. "We had been assuming much of the share would come from Dysport but have no estimates for Dysport currently."

The judge's decision follows nine days of oral arguments in which US-based Allergan accused the European company of poaching its Botox sales associates whom, according to Allergan, walked away with trade secrets by emailing them to their private accounts or downloading to thumb drives before leaving the California firm. By bringing confidential information from their former company with them, the seven former Allergan employees violated their employment contracts with Allergan, as well as the labor pacts they signed with their new employer, opined Guildford, who also ordered Merz to search its electronic and physical files for proprietary Allergan information. Purloined material, according to the opinion, included “Excel spreadsheets containing comprehensive information relating to the entire nationwide list of Allergan's nearly 24,000 physician customers for Botox,” and information on almost 15,000 physicians who were Juvederm customers, as well as documents that included the warnings “Do Not Duplicate or Distribute.”

Three of the accused former Allergan employees were poached by Merz, after they had sold Botox for therapeutic uses, in August 2010. That's about a month after Merz got the FDA's go-ahead to use Xeomin to treat an involuntary contraction of the neck muscles known as cervical dystonia and an involuntary contraction called blepharospasm. Botox is approved for both of these uses. Four of the former Allergan employees sold Botox cosmetic and another product, Juvederm, an injectable gel also indicated for wrinkles.

The judge added that the strategic marketing plans, sales and relationship information that passed into Merz's hands were such that “the value of this information is incalculable.”

Last Friday's decision came just days before Merz was set to unveil the new marketing for Xeomin for the cosmetic indication, approved in 2011. Xeomin was approved in July 2010 for its therapeutic uses.

The case is Allergan Inc v. Merz Pharmaceuticals (8:2011-cv-00446).

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