Why the tech world cares about a pharmaceutical lawsuit

Mergers and acquisitions could become more delicate.
Mergers and acquisitions could become more delicate.
Image: Reuters/Ueslei Marcelino
We may earn a commission from links on this page.

Tech giants such as Apple and Google are paying close attention to big pharma, and not because they’re moving into drug development. The legal battle between two pharmaceutical companies could have implications for the tech world.

The case

In 2006 Asahi Kasei Pharma, a Japanese company, made a licensing deal with a startup in San Francisco called CoTherix. CoTherix was meant to develop the Asahi drug fasudil, which treats pulmonary hypertension and still required FDA approval before it could be sold in the US.

But the Swiss company Actelion bought CoTherix in 2007. Actelion killed fasudil’s US development, expressing a concern over possible kidney-related side effects, but some suspect they were protecting a similar drug of theirs already on the market. Asahi got its rights back, but made CoTherix pay $90 million in damages. Then Asahi sued Actelion for interfering with the licensing contract. In 2011, the Japanese company was awarded $400 million. Actelion is appealing, claiming that the risks surrounding fasudil’s development make such an estimation of lost profit unreasonable.

Why tech should care

According to BloombergBusinessweek, the whole case has Silicon Valley “riled up.” Companies that grow by gobbling up startups have reason to fear the precedent this ruling could set. While paying some damages to make a broken contract go away is nothing new, being dragged into court and forced to pay up on (possibly dodgy) estimates of lost profits is troublesome.

Fears of post-acquisition courtroom drama hit close to home for most tech giants. To date, Facebook has made 45 acquisitions, Apple has made 55, and Google a staggering 145.