Court of Appeal refuses injunction in Neurim v Mylan

England and Wales

We recently reported on the High Court judgment of Mr Justice Marcus Smith in Neurim Pharmaceuticals (1991) Limited and Flynn Pharma Limited v Generics UK Limited (t/a Mylan) [2020] EWHC 1362 (Pat) in which the judge refused to grant an interim injunction preventing Mylan’s launch of generic Circadin, pending an expedited trial in October this year. The report of the High Court judgment is here. The Court of Appeal heard an expedited appeal on 18 June 2020, and handed its reasoned judgment down on 24 June 2020 (having informed the parties of its decision by email on 19 June). The appellate judges have refused the appeal unanimously.  Whilst the Court of Appeal has stressed, expressly, that its ruling is highly fact specific, the ratio of this judgment may apply to other interim injunction applications in the future, particularly when expedited trials have been ordered. 

The background

The detailed background to the action can be accessed in our previous article, but as a brief recap, in the High Court judgment, Smith J applied the American Cyanamid test and found that damages would be an adequate remedy for the Claimants, in particular because the damages would be quantifiable (albeit with some difficult), and would only relate to a relatively short period of time.

The appeal

Neurim and Flynn appealed, primarily on the grounds that the judge erred in finding damages would be an adequate remedy in lieu of an interim injunction. Neurim relied on ten broad grounds of appeal, only five of which the Court of Appeal considered relevant to the matters they had to decide. In particular, Floyd LJ stated that grounds 5-9 appeared to be “an attack on the components of a finding which the judge did not make, namely that the balance of convenience favoured the refusal of the injunction”. He also described the submissions as “an extraordinarily unhelpful set of grounds of appeal”. Practitioners should take note – encouraging the submission of Grounds of Appeal in the correct form and format has been something of a mission for the Court of Appeal in recent years.

Floyd LJ then went on to consider the grounds that he had found to be relevant. When applying the American Cyanamid test he confirmed that whilst an interim injunction should not turn into a “mini-trial” of the merits of the action, the Court needed to decide issues relating to the adequacy of damages and the balance of convenience based on the evidence the parties placed before it: “The issues of fact which emerge on the evidence relevant to stages 2-4 are not issues which will in most cases fall to be resolved at a trial. It may, in the end, prove impossible to form a view on certain issues on the available evidence, but the court should not abandon the task at the outset.” The Court went on to find that, whilst Smith J had erred in his finding that he should not attempt to resolve disputes of fact insofar as they relate to stages 2-4 of the Cyanamid test, this did not affect the Court of Appeal’s ability to resolve the issues on appeal, as all the evidence was in writing and so was available to it on the same basis.

Reviewing the evidence before the first instance court, the Court of Appeal found the same problems accepting Neurim’s arguments of unquantifiable loss, particularly in relation to the impact of Mylan’s market entry on Neurim’s ability to fund its research and development activities. The Court based this partly on the fact that all Neurim’s submissions asserting a price spiral had not been made out, given the likelihood was that only one generic company would launch the product before trial. Such limited launches do not generally result in excessive downward price pressure nor do they trigger recategorisation of the product as being a widely available generic under the UK Drug Tariff.

The Court also found that Smith J was right to find that any damage to the Claimants would occur in two periods: (i) Period 1, being the period between Mylan launching and trial, during which Mylan would deplete the Claimants’ profits; and (ii) Period 2, being the period after a final injunction (if any is granted) until patent expiry, during which Neurim would not be able to fully and immediately restore its monopoly prices. Neurim and Flynn have, and have provided to the Court, reasonably detailed forecasts of their expected sales revenues in Periods 1 and 2. Those forecasts, plus additional evidence, can form the basis for adequate compensation for Period 1. Whilst a calculation in respect of Period 2 will require some extrapolation, it will only be marginally less robust, and so the Claimants can also be adequately compensated in respect of Period 2.

For these reasons, Smith J had been right to refuse the injunction.

Comment

Whilst the circumstances of this case were specific and led to the interim injunction being refused, it is likely that similar scenarios will arise in the future, giving rise to analogous facts. In particular, patentees may now need to provide evidence which proves it is likely that multiple generic companies will enter the market before trial, therefore leading to a price spiral in the particular drug market. This may be particularly difficult in expedited proceedings. This decision is also a salutary lesson for all patentees to ensure that the evidence for the first instance hearing is “fit for purpose” as appellate courts will generally be restricted to this evidence if they identify errors of law that require an evidential review.