MARSAM LAWSUIT AGAINST GENEVA SEEKS DISSOLUTION OF PARTNERSHIP
MARSAM LAWSUIT AGAINST GENEVA SEEKS DISSOLUTION OF PARTNERSHIP on the grounds that Geneva has "engaged in a secret course of self-dealing at Marsam's expense" and violated the terms of a June 1990 joint venture agreement between the two generic manufacturers. The complaint, filed July 22 in Newark federal court, charges that Ciba-Geigy subsidiary Geneva Pharmaceuticals "secretly has charged Marsam for as much as fifty percent (50%) of the sales and marketing costs of Geneva's bulk pharmaceutical products" and has kept all the profits from the estimated $10 mil.-plus in annual sales for itself. The 1990 joint operating arrangement calls for Geneva to market Marsam's generic injectable products and Geneva's unit-dose oral generic drugs under the Geneva-Marsam label, with the two firms sharing equally marketing expenses and profits. Marsam maintains that during the 1990 negotiations Geneva "refused Marsam's request" to include Geneva's bulk pharmaceuticals as part of the joint venture, citing "insignificant sales." In addition to dissolving the joint venture, Marsam is asking the court to: award $5 mil. in punitive damages; revert all rights to the injectable products to Marsam; declare that Marsam may offer employment to one-half of the Geneva-Marsam sales force; and direct Geneva to supply Marsam with unit-dose oral products at prices set forth in the joint venture agreement. Marsam's 1991 revenues of $15.8 mil. included sales to Geneva of $5.3 mil. and a $568,900 loss "resulting from slower than anticipated ramp-up of revenues through the distribution agreement with Geneva," the firm noted in a recent 10-K Securities and Exchange Commission filing. The product line marketed under the Geneva-Marsam label includes 20 generic injectables in 48 dosages and 70 unit-dose oral drugs in 147 packages. Geneva's hospital sales force numbers between 10 and 15 people, while the firm's total sales force is about 70. Geneva responded to the lawsuit with a statement denying the Marsam allegations and vowing to "vigorously defend our rights." The firm also asserted that "we will continue to conduct business as usual and fulfill all of the joint venture contractual obligations." Other breaches cited in the lawsuit include the allegation that Geneva has "failed to make diligent efforts" to market and sell the Geneva-Marsam products and that Geneva "repeatedly has failed" to try to sell products approaching expiration, resulting in unnecessary destruction of expiration-dated products. In addition, Marsam believes that Geneva's pursuit of bulk pharmaceutical sales has drained profits from the unit-dose products. In conjunction with the lawsuit, Marsam issued a statement citing its commitment to the formation of its own sales and distribution capabilities which will help the firm "avoid problems which have slowed our progress" and "fully control our own destiny and maximize the company's long-term growth and strength." Prior to its joint venture with Geneva, Marsam distributed its products under a 1985 agreement with Squibb. That agreement dissolved when Squibb merged with Bristol-Myers in 1989. Marsam has 21 ANDAs pending approval for 62 dosages and is in the process of developing 30 additional injectables. The Cherry Hill, N.J.-based firm netted $24.7 mil. from a stock and warrant offering completed in July 1991 and had $28.2 mil. in cash and short-term investments as the end of 1991.
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