AbbVie Endocrine Inc. v. Takeda Pharmaceutical Company Limitead
CA No. 2020-0953-SG
| Del. Ch. | Sep 22, 2021Background
- AbbVie Endocrine (successor to the original distributor) and Takeda entered a requirements Supply Agreement for Lupron (leuprolide acetate); Takeda agreed to manufacture, sell, deliver, comply with laws/cGMP, fulfill firm quarterly orders, and maintain a 12-month safety stock with at least a 3-month dedicated supply for AbbVie.
- In November 2019 FDA inspected Takeda’s Hikari manufacturing facility, issuing a Form 483, an OAI (Official Action Indicated) letter and a June 2020 Warning Letter, and later an EIR documenting multiple cGMP deficiencies; a July 2021 follow-up inspection left the site with OAI status.
- The cGMP issues and Takeda’s remediation caused production delays beginning in 2020; Takeda produced an allocation schedule diverting scarce lots, and both parties’ safety stocks were depleted.
- From April 2020 through at least March 2021 AbbVie placed 106 firm Lupron lots and received only 41; AbbVie alleges lost customers, doctors, market share and sales.
- Procedural posture: bench trial (Apr–May 2021) on liability and injunctive relief (injunction denied in a separate opinion); this memorandum adjudicates breach liability and leaves damages for a later phase.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| 1. Whether Takeda breached by failing to operate Hikari in compliance with cGMP (Section 16.1(a)) | Takeda breached its express obligation to comply with Applicable Laws and cGMP; FDA findings show noncompliance. | Takeda says best-efforts clause in Section 8.1(a) limits its obligation (i.e., only must use best efforts). | Court: Specific cGMP obligation controls; FDA findings establish breach. |
| 2. Whether Takeda breached by failing to fulfill AbbVie's firm orders (Section 9.2) | Firm orders are binding and time-based; Takeda failed to deliver required quantities for quarters (106 ordered, 41 delivered). | Takeda contends there is no strict timeliness requirement and only a best-efforts duty to supply. | Court: Firm-order obligation is mandatory/time-based and overrides general best-efforts; Takeda breached. |
| 3. Whether Takeda breached by failing to maintain contractually required safety stock (Section 9.6(a)) | Takeda failed to keep the dedicated three-month safety stock for AbbVie beginning April 2020 (documentary evidence). | Takeda argued pleading/inclusion issues and relied on allocation/shortage defenses. | Court: Trial evidence shows safety-stock shortfall; breach established. |
| 4. Whether Takeda’s use of an allocation schedule breached the contract (Sections 9.4 and force majeure 21.3) | Allocation violated AbbVie’s entitlement under the agreement because shortages were within Takeda’s control. | Takeda says allocation is permitted under 9.4 when it cannot supply due to causes beyond reasonable control; allocation was necessary. | Court: Contract permits allocation in principle; because Takeda’s production failures were within its control, 9.4 was not triggered but using an allocation schedule was not itself a separate breach (it aggravated other breaches). |
Key Cases Cited
- Pepper Constr. Co. v. Palmolive Tower Condos., 59 N.E.3d 41 (Ill. App. Ct. 2016) (elements of a breach-of-contract claim under Illinois law)
- Am. Fed’n of State, Cty. & Mun. Emps. v. State Labor Relations Bd., 653 N.E.2d 1357 (Ill. App. Ct. 1995) (specific contract provisions prevail over general provisions)
- Suburban Auto Rebuilders, Inc. v. Associated Tile Dealers Warehouse, Inc., 902 N.E.2d 1178 (Ill. App. Ct. 2009) (courts construe contracts to avoid absurd results)
- Coghlan v. Beck, 984 N.E.2d 132 (Ill. App. Ct. 2013) (principles on contract interpretation cited for breach analysis)