Complaint,Petition: MEDIVATION, INC. VS. FGH BIOTECH, INC. ET AL

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                                SHEPPARD, MULLIN, RICHTER & HAMPTON LLP
A Limited Liability Partnership
Including Professional Corporations

MICHAEL W. SCARBOROUGH, Cal. Bar No. 203524

JOY O. SIU, Cal. Bar No. 307610

Four Embarcadero Center, 17" Floor

San Francisco, California 94111-4109

Telephone: (415) 434-9100

Facsimile: (415) 434 -3947

ELECTRONICALLY

FILED

Superior Court of California,
County of San Francisco

09/26/2017
Clerk of the Court
BY:JUDITH NUNEZ

Email: mscarborough@sheppardmullin.com Deputy Clerk
jsiu@sheppardmullin.com
GIBBS & BRUNS, L.L.P.
SAM W. CRUSE III (pro hac vice)
JORGE M. GUTIERREZ, JR. (pro hac vice)
1100 Louisiana Street, Suite 5300
Houston, Texas 77002
Telephone: (713) 650-8805
Facsimile: (713) 750-0903
Email: scruse@gibbsbruns.com
igutierrez@gibbsbruns.com
Attorneys for Defendant
FGH BIOTECH, INC.
SUPERIOR COURT OF THE STATE OF CALIFORNIA
COUNTY OF SAN FRANCISCO
MEDIVATION, INC., Case No. CGC-17-558993
Plaintiff, DECLARATION OF JORGE M.
GUTIERREZ, JR. IN SUPPORT OF
v. DEFENDANT FGH BIOTECH, INC.’S
DEMURRER TO PLAINTIFF
FGH BIOTECH, INC., and DOES 1 through MEDIVATION, INC.’S AMENDED
10, inclusive, COMPLAINT
Defendants. [Notice of Demurrer to Plaintiff Medivation,

Date:
Time:
Dept:
Judge:

Inc.'s Amended Complaint, Demurrer,
Memorandum of Points and Authorities,
Request for Judicial Notice, and [Proposed]
Order filed concurrently herewith]

October 30, 2017

10:30 a.m.

304

Hon. Curtis E.A. Karnow

SMRH:484159054.2 GUTIERREZ DECLARATION IN SUPPORT OF FGH BIOTECH, INC.’S

DEMURRER TO AMENDED COMPLAINTDECLARATION OF JORGE M. GUTIERREZ, JR.

I, Jorge M. Gutierrez, Jr., declare as follows:

1. Tam an attorney duly licensed to practice law in the State of New York and
duly admitted pro hac vice in this Court. Tam an associate at Gibbs & Bruns LLP and an attorney
of record herein for Defendant FGH Biotech, Inc. (““FGH”).

2. If called as a witness, I could and would competently testify to all facts
within my personal knowledge except where stated upon information and belief.

3. This declaration is submitted pursuant to Code of Civil Procedure section
430.41(a)(3).

4, On September 20, 2017, I conferred by telephone with counsel for Plaintiff
Medivation, Inc. (“Plaintiff”), Andy Chan and Thomas Fitzpatrick, regarding Plaintiff's Amended
Complaint, filed with the above-captioned Court on September 1, 2017.

5. As part of the meet and confer process, I indicated that Medivation’s
Amended Complaint in its entirety was subject to demurrer, identified the legal deficiencies with
the Amended Complaint, and inquired whether Plaintiff opposed the demurrer.

6. Among other things, I informed Mr. Chan and Mr. Fitzpatrick that
Plaintiff's claims were barred because, under Code of Civil Procedure section 426.30, such claims
were compulsory in the First California Action, dismissed on May 15, 2017, and were thus barred
in this subsequent action. Plaintiff indicated that it opposed FGH’s demurrer. The parties have
not reached an agreement resolving the objections raised in the Demurrer to the Amended
Complaint.

7. In support of its Demurrer to Medivation’s Amended Complaint, FGH
submits the following materials:

a. Attached hereto as Exhibit A is a true and correct copy of FGH

Biotech, Inc.’s Complaint, CGC-16-550661 (Feb. 26, 2016).
b. Attached hereto as Exhibit B is a true and correct copy of

Medivation, Inc.’s Answer to Complaint, CGC-16-550661 (July 25, 2016).

aie
SMRH:484159034.2 GUTIERREZ DECLARATION IN SUPPORT OF FGH BIOTECH, INC.°S
DEMURRER TO AMENDED COMPLAINTc. Attached hereto as Exhibit C is a true and correct copy of
Medivation, Inc.’s Memorandum of Points and Authorities in Support of Motion for Leave to File
a Cross-Complaint, CGC-16-550661 (Apr. 11, 2017).

d. Attached hereto as Exhibit D is a true and correct copy of
Medivation, Inc.’s [Proposed] Cross-Complaint, which was attached as Ex. A to the Declaration of
L. Andrew Tseng in Support of Medivation, Inc.’s Motion for Leave to File a Cross-Complaint,
CGC-16-550661 (Apr. 11, 2017).

e. Attached hereto as Exhibit E is a true and correct copy of
Medivation, Inc.’s Complaint, CGC-17-558993 (May 17, 2017).

f. Attached hereto as Ex.

F is a true and correct copy of
Medivation, Inc.’s Amended Complaint, CGC-17-558993 (September 1, 2017).

I declare under penalty of perjury under the laws of the State of California that the
foregoing is true and correct.

Executed on this 25th day of September 2017, at Houston, Texas.

lO hyhlGftd,

pr M. Guygrréz, TOOLS

a2
SMRH:484159054.2 GUTIERREZ DECLARATION IN SUPPORT OF FGH BIOTECH, INC.’S
DEMURRER TO AMENDED COMPLAINTEXHIBIT AATTORNEYS AT LAW
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COMMINS & KNUDSEN
PROFESSIONAL CORPORATION

David H.S. Commins (CSBN 124205)
Kit L. Knudsen (CSBN 154714)
COMMINS & KNUDSEN, P.C.

400 Montgomery Street, Suite 200

San Francisco, CA 94104 F

Tel (415) 391-6490 Superior Court of California
Fax (415) 391-6493 County of San Francisco
david@commins.com FEB 28 2016

kit@commins.com

Attorneys for Plaintiff i Te COURT
FGH Biotech, Inc. BY

Deputy Clerk

SUPERIOR COURT OF CALIFORNIA

COUNTY OF SAN FRANCISCO
UNLIMITED JURISDICTION
FGH BIOTECH, INC, Case No. CGC - 16-559 661
FGH’S COMPLAINT FOR:
Plaintiff,
1. FRAUD
a 2, BREACH OF CONTRACT
3. BREACH OF IMPLIED
MEDIVATION, INC., and DOES 1 through COVENANT OF GOOD FAITH
10, inclusive, AND FAIR DEALING
4. UNJUST ENRICHMENT BASED
Defendants. ON QUASI-CONTRACT AND
/ FRAUD
5.  MISAPPROPRIATION OF TRADE
SECRETS

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Plaintiff FGH Biotech, Incorporated (“FGH”) brings this Complaint against
Medivation, Inc. (“Medivation”) for Damages and Injunctive and Declaratory Relief, alleging as

follows:
I. INTRODUCTION

1. FGH is a small collaboration of scientists whose life’s work has been
dedicated to understanding the synthesis and regulation of fat. The team has applied its
discoveries to focus over the past fifteen years on small molecule candidates for the treatment of
metabolic conditions such as obesity, diabetes, and liver disease. This work culminated in the
discovery of certain compounds-which FGH calls “fatostatins”-that inhibit the sterol regulatory
element binding protein (“SREBP”) pathway. In layman’s terms, these compounds are capable
of turning off the master metabolic regulatory switch in the body that synthesizes fat. Because of
its small size and focus on research, FGH’s business plan is to partner with a company that has

the resources for drug development and commercialization of its discoveries.

2. Medivation describes itself as “a biopharmaceutical company focused on
the rapid development of medically innovative therapies to treat serious diseases for which there

are limited treatment options.”

3. In early 2012, FGH and Medivation were introduced by a mutual friend.
Carlos Nacimiento, a scientist and friend of Medivation’s Sebastian Bernales, spoke to Bernales
about FGH’s work. Nacimiento was familiar with FGH through his friend Dr. Salih Wakil, one
of FGH’s founders and lead scientists. Medivation then contacted FGH to inquire about FGH’s
fatostatin research program. To FGH, Medivation seemed like a potentially good partner.
Medivation held the rights to “Xtandi,” a prostate cancer drug that it licensed from the University
of California. But Xtandi was Medivation’s only commercial product, and Medivation needed to

expand its product pipeline. Moreover, because Medivation focused on oncology drugs and

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expressed interest in a license limited to that field, FGH saw the possibility that it could partner
in a limited license of oncological applications, but leave FGH to develop and license its

compounds separately for metabolic applications.

4. FGH required Medivation to enter into a confidentiality agreement before
it would share its proprietary research. Medivation agreed, promising that it would not disclose
or use FGH’s confidential information for purposes other than license discussions. With the
confidentiality agreement in place, FGH revealed to Medivation its confidential and proprietary
lead compounds, testing methodologies and results, and clinical target disease strategies. FGH
later shared with Medivation additional confidential information regarding its intellectual

property strategy and patent applications.

5. Medivation recognized the vast potential of FGH’s SREBP-inhibitor
research, and its words and actions led FGH to believe Medivation was genuinely interested in a
license and would not misuse FGH’s confidences. For example, Medivation signed a letter of
intent and exchanged drafts of a formal agreement to license FGH’s compounds for oncology

applications.

6. In April 2014, Medivation abruptly terminated the negotiation. Although
Medivation claimed at the time that its priorities had shifted and that it was out of the target
space, FGH later discovered that Medivation had been pursuing a nascent competing
drug-development program at the same time it was soliciting FGH’s confidential information
under the false pretense of entering a license agreement. Despite the parties’ agreements and
extensive business dealings, Medivation did not tell FGH about its competing work. In fact,
Medivation went to great lengths to conceal this material information-all the while presenting

itself as an ally and potential partner in order to induce FGH to share its proprietary work.

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7. Medivation’s plan to cut FGH out and pursue drug development on its
own was revealed in November 2015, when its CEO David Hung announced to investors on its
quarterly earnings call that the company had “developed internally at Medivation” a “novel”
small molecule inhibitor of the SREBP pathway. Hung described the compound as
“MDV-4463,” currently in Phase I testing for metabolic applications. Since then, Medivation has
blazed forward in its false representations that MDV-4463 was of its own creation. At the
January 2016 JPMorgan Healthcare Conference, a landmark event in the pharmaceutical
industry, Hung represented to the market that 4463 is “Medivation’s first New Chemical Entity”
and elaborated on the SREBP inhibitor’s metabolic applications. On February 25, 2016,

Medivation executives reaffirmed its SREBP program.

8. Contrary to what it now claims publicly, Medivation’s SREBP-inhibitor
program was not of its own creation. Indeed, Medivation failed to enact even the most basic
controls to protect FGH’s confidential information from internal exploitation. The company
instead promoted and utilized a structure in which some of the same scientists who received
FGH’s confidential research were involved in the alleged “internal” development of MDV-4463.
Moreover, although FGH has not seen the chemical structure of MDV-4463 or other compounds
under research at Medivation, FGH alleges based on publicly-available information that
Medivation developed at least MD V-4463 based on the confidential compounds and data that
FGH had previously disclosed. Regardless of whether Medivation blatantly copied FGH’s work
or used it as a springboard, Medivations’s actions violate California law and the confidentiality

restrictions to which Medivation had agree.

9. Accordingly, FGH brings this action, requesting relief as set forth in this

Complaint.

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IL PARTIES

10. Plaintiff FGH is, and at all times mentioned herein was, an entity

incorporated under the laws of the State of Delaware and located in Houston, Texas.

11. Defendant Medivation is, and at all times mentioned herein was, an entity
incorporated under the laws of the State of Delaware and located in San Francisco, California.
Medivation has its principal place of business at 525 Market St., 36th Floor, San Francisco,
California 94105. Medivation is publicly traded on the NASDAQ stock exchange (TICKER:
MDVN).

12. | FGH does not presently know the true names and capacities of the
Defendants sued herein as DOES 1 through 10, inclusive. FGH will seek leave of court to amend
this Complaint to identify those Defendants by their true names and capacities as soon as it

ascertains them.

13. At all times mentioned herein, Defendants, and each of them, including
DOES 1 through 10, were authorized and empowered by each other to act, and did so act, as
agents of ewach other, and all of the things herein alleged to have been alone by them were done
in the capacity of such agency. Upon information and belief, all Defendants are responsible in
some manner for the events described herein and are liable to FGH for the damages FGH has

incurred.
Il. JURISDICTION, VENUE, AND COMPLEX CASE DESIGNATION

14. This court has jurisdiction to hear the subject matter of this Complaint.

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15. Medivation is a citizen of California or has sufficient minimum contacts
with California by virtue of maintaining its principal place of business and engaging in many of
the actions described in this Complaint in California, such that the exercise of jurisdiction over it

by this Court is consistent with traditional notions of fair play and substantial justice.

16. Venue is proper in this Court because a large part of the incidents
underlying this Complaint occurred in San Francisco, including meetings during which FGH
shared its confidential information. Defendant Medivation’s principal place of business is also

located in this county.

17. | The amount in controversy exceeds the jurisdictional threshold for an

unlimited civil case and damages exceed $100,000.

18. This lawsuit will require exceptional judicial management. First, the case
will most likely involve extensive motion practice. For example, many of the critical documents
in this case — including Medivation’s laboratory books and other records regarding the inception
and advancement of its competing drug development program — contain information that
Medivation will claim is confidential. Active oversight of confidentiality and protective order
issues will be required to facilitate the production of those essential documents. Second, the case
involves a large number of witnesses and a substantial amount of documentary evidence.
Compounding the complexity, key witnesses for Medivation reside in India and Chile, where
Medivation is believed to have performed many of the wrongful acts described in this Complaint.
Court assistance may be required to secure documents and testimony from those remote
locations. Finally, evidence of liability and damages will involve complex expert testimony from

scientists and economists.

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IV. FACTUAL ALLEGATIONS
A. FGH is founded to do lifesaving medical research on fatostatin compounds.

19. | FGH was formed in 2010 as a collaboration of scientists working to
discover and develop lifesaving drug candidates. The founders, Professors Salih Wakil,
Motonari Uesugi, and Lufti Abu-Elheiga, are distinguished experts in their fields. Dr. Wakil, for
example, holds an endowed chair in the Department of Biochemistry and Molecular Biology at
Baylor College of Medicine, where he is now Professor Emeritus after nearly forty years of
teaching and research at both Duke University and Baylor. His landmark publications — nearly
200 in all — on the mechanisms of fatty acid synthesis are considered to have pioneered the
current understanding of fat metabolism. Dr. Wakil’s contributions have been commended with
membership in the National Academy of Science and in Resolutions by the Texas Senate and
House of Representatives, as well as with accolades including the Bristol-Myers Squibb

Metabolic Research Award and a lifetime achievement award at MIT.

20. The culmination of the life’s work of these scientists consists of having
discovered and developed certain compounds, called “fatostatins.” These molecules block the
synthesis of fat in the body by inhibiting the SREBP pathway, and therefore are crucial to
fighting deadly diseases such as diabetes, obesity, liver disorders, and others. One of FGH’s

most important compounds is known as “FGH 19.”
B. FGH shares confidential information with Medivation.

21. On February 10, 2012, Medivation contacted FGH after hearing about
FGH’s work from Carlos Nacimiento, a former graduate student of Dr. Salih Wakil’s who was
mutual friends with Sebastian Bernales, a Senior Director of Medivation’s Discovery Research

group. Soon thereafter, on February 24, 2012, Bernales contacted Dr. Wakil to ask him to travel

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to Medivation’s office in San Francisco to discuss Dr. Wakil’s research on fatostatins for a

possible licensing arrangement.

22. Before the meeting, FGH took the precaution of insisting that the parties
enter a Confidential Disclosure Agreement to protect FGH’s confidential information and trade
secrets. Medivation agreed, and the parties entered into the Confidential Disclosure Agreement
on February 28, 2012. It is attached to this Complaint as Exhibit A. Among other clauses, the

Confidential Disclosure Agreement provides that:

a) 1:“FGH intends to engage in discussions and negotiations concerning
Fatostatins. In the course of these discussions and negotiations, it is anticipated
that FGH may disclose or deliver to [Medivation] certain of FGH’s trade secrets

or confidential or proprietary information.”

b). 3 “[Medivation] shall hold in confidence, and shall not disclose to any person
outside its organization, all Proprietary Information, and shall use such Proprietary
Information only for the purpose for which it was disclosed. [Medivation] shall
disclose Proprietary Information received by [Medivation] under this Agreement
only to persons within its organization who have a need to know such Proprietary
Information in the course of the performance of their duties and who are bound to

protect the confidentiality of such Proprietary Information.”

c). 5 “Return of Documents: [Medivation] shall, upon request of FGH, return to
FGH all drawings, documents and other tangible manifestations of Proprietary

Information received by [Medivation] pursuant to this Agreement (and all copies
and reproductions thereof), except that the Company may retain one copy thereof

solely for the purpose of determining the extent of its obligations hereunder.”

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d). 6 “This Agreement shall not be deemed to grant or Convey to [Medivation]

any license in or other right to the Proprietary Information.”

e). 7 “The parties hereto agree that if there is a breach by [Medivation] of any of
the covenants contained herein, the damage to FGH will be substantial, although
difficult to quantify, and money damages will not afford FGH an adequate
remedy. Therefore, if any such breach occurs, in addition to any other remedies as
may be provided by law, FGH shall have the right to specific performance of the

covenants contained herein by way of temporary or permanent injunctive relief.”

f.) 8: “[Medivation] agrees to hold in confidence all Proprietary Information
disclosed to it by FGH for a period of five (5) years from the Agreement Date.”

23. The meeting that Bernales requested did occur, on March 14, 2012, in San
Francisco. At the meeting, Drs. Salih Wakil and Ed Wakil of FGH explained their research and
discoveries related to fatostatins with the assistance of a series of PowerPoint slides. Two
sections of the PowerPoint discussed during the meeting were marked “Confidential” and
revealed information that had not been published, publicly disclosed, or included in any patent
application. These sections of the PowerPoint detailed FGH’s development of a particularly
advantageous testing methodology for in vivo fatostatin drug development and showed the

results of tests performed with the proprietary methodology.
24. In the following weeks, FGH and Medivation exchanged emails about a

possible business collaboration. Medivation expressed interest in FGH’s proprietary compounds

but admitted that it needed “additional time to better understand this area” of research.

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25. The discussion resumed in August, when Medivation again emailed FGH
to request a “new meeting to explore possible synergies between our groups.” The parties
scheduled the meeting for November 2, 2012, at Medivation’s headquarters in San Francisco. In
the intervening time, Sebastian Bernales requested to “start a scientific discussion by email.”
Bernales asked specific questions about the implications of, and explanations for, phenomena
seen in Dr. Salih Wakil’s prior work, about what was the “best model system to evaluate the
effects of this class of compounds” on certain other molecules, and about FGH’s views on
clinical disease targets in which “these compounds would have a greater effect.” When Dr.
Wakil did not respond within a few days, Bernales insisted that these questions came up in an
internal Medivation meeting and that answers were needed to “find a space to collaborate and

work together.” Dr. Wakil complied by providing answers to Medivation’s questions.

26. Additionally, Bernales requested that the meeting agenda include a
“scientific presentation with all current data . . . focus[ing] both in metabolic syndrome and
oncology” and data on FGH’s “analogs and chemistry” and “intellectual property.” Dr. Wakil
responded by emphasizing his priority that the meeting include a discussion of “partnership
strategies that would lead to a research plan for drug development.” To this end, he sent
Bernales a PowerPoint presentation that would allow the parties to focus the in-person meeting
on summarizing the data and maximizing the time for business discussions. The slides
“summarize[d] FGH data of the effect of [FGH’s lead compound] on obesity/related diseases and
cancer,” and included data about particularly advantageous histology, toxicity studies, cancer
data, and proof of concept as a treatment for human obesity. The PowerPoint’s discussion of

FGH’s non-public propriety work was identified as “Confidential”.

27.  Inresponse to Medivation’s inquiries, FGH shared additional confidential
and proprietary information with Medivation at the meeting itself, which occurred as planned on
November 2, 2012, in San Francisco. Specifically, Dr. Motonari Uesugi of FGH gave a

presentation about “backup compounds” for FGH 19, in which he shared the results of years of

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work. That work entailed identifying particular structural features that improve the efficacy of
these types of compounds in medical applications and discovering a small group of compounds
with these features out of a “library” of over five million potential compounds. As this research
was both incredibly valuable and non-public, it appeared in a part of Dr. Motonari’s presentation.
marked “Unpublished Confidential.” And because Medivation conditioned any continued
collaboration on its ability to replicate FGH’s in vivo results, Dr. Lufti Abu-Elheiga of FGH

discussed details about his proprietary testing methodology.

28. Ostensibly as part of its evaluation of FGH’s technology, Medivation had
been trying to replicate the results of FGH’s in vivo testing. As part of this effort, Medivation
expressed interest in traveling to Houston to observe FGH’s in vivo testing. FGH offered to
help, but before doing so it wanted to make sure the parties’ future discussions, which would
involve disclosures by both FGH and Medivation, were kept confidential. Because the existing
Agreement only protected confidential information disclosed by FGH to Medivation, FGH
suggested that a bi-lateral agreement would better facilitate the free flow of data between the

companies.

29. On December 18, 2012, FGH and Medivation entered into a second
Confidential Disclosure Agreement (attached to this Complaint as Exhibit B), with Medivation
returning a signed copy to FGH on January 10, 2013. This second agreement was much like the
first, obligating each party not to “make use of, disseminate, or in any way disclose any
Confidential Information of the Disclosing Party to any person, firm or business, except to the
extent necessary for negotiations, discussion, and consultations with personnel or authorized
representatives of the Disclosing Party and any purpose the Disclosing Party may hereafter
authorize in writing.” It added that the parties were mutually protected to the extent that each
disclosed confidential information and that the agreement superseded the prior Confidential

Disclosure Agreement.

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30. On February 6, 2013, Dr. Salih Wakil asked Medivation to share with
FGH the results of Medivation’s pharmacokinetic (“PK”) testing on FGH’s compounds. Dr.
Wakil explained that FGH was on the verge of applying for a grant, and that having the results of
those tests would be helpful in getting funded. Medivation responded on May 19, apologizing
for the “long delay” and reiterating its “interest[] in entering into licensing discussions on your
patent/patent applications.” Medivation’s email introduced its Chief Business Officer and Chief
Financial Officer Pat Machado as reassurance that FGH would have access to a “primary

business contact” going forward.

31. | Medivation subsequently sent FGH some of the data Medivation had
generated with FGH’s compounds and testing methodologies, and the parties discussed the data
during a conference call on June 13, 2013. Medivation represented that it had been unable to

replicate the results of FGH’s in vivo testing.

32. Following this data exchange, Medivation pressed FGH regarding the
status of its intellectual property rights. Machado insisted that “once we pin those items down,
we should be able to come back to you quickly with more specific thoughts on development
plans and terms.” Medivation raised the issue again on July 3, 2013, in an email from Bernales
to Dr. Wakil, in which Bernales said he “was asked to find out if [FGH had] filed any additional

patent applications in the last 1.5 years.”

33. Later in July 2013, Dr. Ed Wakil of FGH and Medivation’s Sebastian
Bernales met in person to continue the discussions of their partnership. Bernales explained that
Medivation’s decision to limit its interest in licensing FGH’s technology to cancer applications
was strictly a commercial decision, but that Bernales personally was very excited about the
technology’s potential in the metabolic space. The cancer limitation was consistent with
Medivation’s earlier insistence on narrowing the field of a potential license to oncology,

Medivation’s area of expertise, while excluding the metabolic space, which FGH would retain.

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Nevertheless, a key point of the discussion was Bernales’s determination that Medivation be able

to repeat FGH’s in vivo testing of the compounds’ metabolic effects.

34. Thereafter, throughout August and September 2013, FGH and Medivation
(with the involvement of Dominic Piscitelli, Medivation’s Vice President of Finance) began to
exchange drafts of a letter of intent to document Medivation’s desire to license FGH’s
technology. The document, entitled “Non-Binding Summary of Principal Terms: License
Agreement between [Medivation] and [FGH]” provided for Medivation to make an upfront
payment, milestone payments, and royalty payments in exchange for using FGH’s compounds in
the field of oncology. It also reaffirmed the prior confidentiality agreements, stating that “The
terms of this term sheet and the parties’ discussions related hereto constitute confidential
information pursuant to the Confidential Disclosure Agreements between the parties dated Feb
[sic] 28, 2012 and December 18, 2012, and are subject to the terms and conditions of such

agreement.” The parties executed a final letter of intent on December 19, 2013.

35. In furtherance of the parties’ ongoing license discussions, Medivation sent
limited additional data to FGH on February 18, 2014. That presentation discussed Medivation’s
experiments using FGH’s testing methodologies and compounds and also listed certain
derivatives developed from FGH’s compounds, without revealing the chemical structure of those
derivatives. MDV-4463 was one of the compounds included in the presentation. The scientists
from Medivation who conducted this testing included Bernales and Savarvajit Chakravarty,
Medivation’s Vice President of Medicinal Chemistry. Bernales’s and Chakravarty’s
participation made perfect sense to FGH because they were also involved in the meetings and
discussions in which FGH had shared its confidential research, and Medivation generally held
them out as the scientists responsible for evaluating FGH’s compounds for purposes of the
license. In the presentation, Medivation stated that the results it had generated for metabolic

indications were “inconclusive” and further work in that field had been “put on hold.”

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Consistent with the parties’ proposed license, the presentation concluded that oncology would be

the focus of Medivation’s future efforts.

36. On Medivation’s insistence, FGH revealed in early March 2014 an
updated list of its entire patent portfolio, including its recent patent applications that were not yet

public. Again, FGH did so under the protection of the Confidential Disclosure Agreement.

37. In the interim, the parties continued to discuss licensing terms, and
Medivation continued to reiterate that it was committed to getting the deal done. Consistent with
Medivation’s claim that it was not moving forward with work on metabolic applications, the
licensing discussions continued to focus exclusively on oncological applications. Throughout
February and March 2014, the parties exchanged drafts of a License Agreement under which, like
the Non-Binding Summary of Principal Terms, Medivation would pay FGH licensing fees,
milestone payments, and royalty payments in exchange for using and commercializing FGH’s
compounds for oncological applications. FGH prepared a draft press release in anticipation of

the announcement of its collaboration with Medivation as soon as the deal became final.

38. On April 8, 2014, Medivation abruptly shut down the license agreement

negotiation.

39. | FGH responded by requesting the return of its confidential information a
and the transfer of work that Medivation had done using FGH’s compounds and trade secrets, as
required under the Confidential Disclosure Agreement. Medivation refused, incredibly asserting
that its work was based on publicly-available data, even though it had previously enjoyed
behind-the-scenes access to FGH’s scientists and their confidential compounds and testing
methods and results. This implausible statement was tempered by Dominic Piscitelli’s April
2014 representation that Medivation’s priorities had changed and that it had shifted away from

the target space.

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40. In aconversation the following month between FGH’s outside license
counsel Paul DeStefano and Medivation’s in-house license counsel Sam Kais, Medivation tried a
new tact — stating that Medivation had developed “its own” compounds in the course of a
research program that began before Medivation ever spoke to FGH and continued throughout its
discussions with FGH. If Medivation’s latest explanation was truthful, it was a startling
revelation that was inconsistent with Medivation’s words and actions when it solicited the

disclosure of FGH’s confidential information.

Cc. Medivation uses FGH’s confidential information to apply for patents on

nearly identical compounds behind the scenes.

41. Just four months after abruptly ending negotiations with FGH, on August
28, 2014, one of Medivation’s affiliates - Medivation Technologies, Inc. — filed United States
Patent Application 14/471,977 in this exact space: a treatment for “metabolic disorders” using
“inhibition of the SREBP pathway” to “reduce lipid biosynthesis and thus be a strategy to treat
metabolic diseases, such as Type II diabetes, insulin resistance, fatty liver and atherosclerosis.”
Remarkably, Chakravarty was listed as the lead inventor on the application even though he also
signed the first Confidential Disclosure Agreement and attended both the March 14, 2012 and
November 2, 2012 meetings in which FGH presented its confidential data. FGH did not learn

about this patent application for seven months until it became public in March 2015.

42. For its claim of priority, Medivation’s U.S. patent application cited (but
did not provide) two patent applications it purported to have filed in India. Specifically,
Medivation claimed to have applied for India Patent Applications No. 2816/MUM/2013 and
3497/MUM/2013 on August 28 and November 4, 2013, respectively. Although Medivation did
not provide the referenced India patent applications to the Patent and Trademark Office (PTO) as
requested by the PTO, and the applications are not otherwise available from the Indian

government, Medivation’s citation to them in support of its U.S. patent applications leads FGH

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to conclude that the Indian applications relate to the same metabolic compound and proprietary
technology. Medivation never told FGH about its Indian patent applications; FGH learned about

them for the first time in March 2015 when Medivation’s U.S. application became public.
D. Medivation announces its “discovery” to the market.

43.  Onits quarterly earnings call on November 5, 2015, Medivation was “very
pleased” to announce to investors that it had “developed internally at Medivation” a “novel small
molecule inhibitor of the SREBP pathway” for “metabolic” applications. Medivation stated that
its preclinical studies demonstrated that this compound — which it called “MDV 4463” — “lowers
triglycerides, cholesterol, glucose, insulin, and weight in animals” and that it was “currently in a
Phase I trial in healthy volunteers.” On February 25, 2016, Medivation executives reaffirmed its
SREBP program.

44. Medivation then unveiled additional details about 4463 to the healthcare
industry at the JPMorgan Healthcare Conference on January 11, 2016. There, Medivation CEO
David Hung gave a PowerPoint presentation which gave 4463 the scientifically significant title
of “Medivation’s first New Chemical Entity.” He added that 4463 is a “novel small-molecule
inhibitor of a pathway called SREBP” that regulates “both cholesterol and lipid biosynthesis.”
According to Hung, MDVN 4463’s “preclinical studies” had shown that it “lowers triglycerides,
cholesterol, . . . glucose, insulin, and weight in animals,” making it potentially indicated for
“{Non-Alcoholic Hepatic Steatosis], hyperlipidemia, diabetes, obesity, and metabolic syndrome.”

Hung concluded by stating that 4463 “is currently in a Phase I trial in healthy volunteers.”

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E. Medivation fraudulently conceals its wrongdoing.

45. Before learning in March 2015 of Medivation’s patent applications, FGH
did not know or have reason to suspect that Medivation had a competing SREBP-inhibitor drug
development program and was misusing FGH’s confidential information and trade secrets.
Before that time, Medivation actively concealed its behavior by, among other things, expressing
continued interest in licensing FGH’s technology, claiming that its research was in furtherance of
the proposed license, and falsely claiming when the negotiation ended that it had no development

plans in the field.

46. | FGH did not have access to information that could have revealed
Medivation’s wrongful conduct. For example, FGH did not have access to Medivation’s
chemical compounds, lab books, and other documents and records regarding Medivation’s

ill-gotten SREBP-inhibitor development program.
V. CAUSES OF ACTION

FIRST CAUSE OF ACTION FOR FRAUD
(Against Medivation and DOES 1 through 10)

47. FGH re-alleges paragraphs 1 through 46 as though set forth fully herein.
48.  Medivation made a series of false representations and material omissions
of fact to FGH in the course of their business relationship with the intent and effect of inducing

FGH to disclose its confidential research, to disclose the confidential details of its patent

portfolio, and to delay and hinder its drug development efforts.

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49. Medivation fraudulently misrepresented, through false statements,
half-truths, intentional concealment, and otherwise, the fact that it had and was developing a
competing research program. Medivation and FGH engaged in business transactions and license
negotiations from February 2012 through April 2014. During this time period, Medivation and
FGH executed two confidentiality agreements in which both parties promised to protect each
other’s confidential information and to use it solely for the purpose of advancing license
negotiations. Medivation and FGH also entered a signed letter of intent that outlined the
commercial terms of the proposed license agreement and specifically referenced the parties’
ongoing confidentiality obligations. The express purpose of these agreements and of the parties’
entire course of dealing was to facilitate discussion regarding a business arrangement whereby

Medivation would license and develop FGH’s proprietary research and technology.

50. Atno point during this two-year period did Medivation reveal that it had a
competing development program covering the same field of research that FGH had disclosed to
Medivation pursuant to the Confidential Disclosure Agreements and that was the subject of the
parties’ license discussions. Medivation had exclusive knowledge regarding its development
program in this field of research, and FGH had no way of learning the truth without honest
disclosure from Medivation. But Medivation kept its program and intentions secret and
employed an array of tactics — including active concealment, half-truths, and outright lies ~ to

hide the truth from FGH.

51. During meetings on March 14, 2012 and November 2, 2012, Medivation’s
scientists asked rudimentary questions and generally projected, through their words and actions,
that the company was new to the field of SREBP-inhibition. Sebastian Bernales also told Dr. Ed
Wakil that Bernales had given a number of presentations to his colleagues at Medivation about
SREBP-inhibition following his initial contact with FGH to try to generate interest in this space.
Contrary to Medivation’s words and actions at the time it was extracting and exploiting FGH’s

research, Medivation’s in-house lawyer Sam Kais claimed in May 2014 that the company had an

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SREBP- inhibition research program that began before it ever spoke to FGH. Medivation also
misrepresented the extent and purpose for which it was working to create and test derivatives of
FGH’s compounds. The information and data that Medivation showed FGH in June 2013 and
February 2014 created the false impression that all of Medivation’s work was in furtherance of a
license with FGH.

52. | On June 13 and 14, 2013, Medivation’s Pat Machado requested
confidential information about FGH’s intellectual property rights by representing that “once we
pin those items down, we should be able to come back to you quickly with more specific
thoughts on development plans and terms.” Sebastian Bernales followed up on July 3, 2013, in
an email to Dr. Wakil, in which he stated that he was “asked to find out if [FGH had] filed any
additional patent applications in the last 1.5 years” — not coincidentally, the same 18-month time
period in which patent applications are kept confidential by the PTO. Like Machado, Bernales
represented that Medivation needed this information in order to move forward with license
discussions with FGH. In fact, the true purpose of these questions was to obtain additional
non-public information regarding FGH’s research in order to advance Medivation’s own
competing program. FGH complied with these requests by providing Medivation with a detailed
list showing the dates and descriptions of FGH’s entire portfolio of patent applications. Shortly
after extracting this valuable information, and unbeknownst to FGH, Medivation apparently filed

non-public patent applications in India on August 28 and November 4, 2013.

53.  Medivation again used false pretenses to press FGH for confidential
information in late 2013 and early 2014. Medivation (with the involvement of Dominic
Piscitelli, its Vice President of Finance) signed a Non-Binding Summary of Principal Terms on
December 19, 2013. In that document, Medivation expressed its intent to enter into a license
agreement that included upfront payments, milestone payments, and royalty payments in
exchange for using FGH’s compounds in the field of oncology. In supposed support of these

intentions, Medivation requested, and received, additional confidential information about FGH’s

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research and patent applications. In February and March 2014, Medivation again insisted on
receiving an updated list of FGH’s entire patent portfolio, including its recent patent applications
that were not yet public. Medivation did so by continuing to reiterate that it was committed to
getting a license agreement in place and exchanging drafts of a license agreement with FGH.
Medivation knew at the time that its representations were false and misleading and that, instead,
it was biding its time while it secretly worked behind the scenes to advance and seek protection

for what it would later falsely claim to be homegrown compounds.

54. In addition to the fraud described in the preceding paragraphs, Medivation
also falsely represented that it would use FGH’s confidential information only for purposes of
pursuing license negotiations. Specifically, Medivation promised in the first Confidential
Disclosure Agreement that it would “hold in confidence, and . . . not disclose to any person
outside its organization, all Proprietary Information, and [that it would] use such Proprietary
Information only for the purpose for which it was disclosed.” In the second Confidential
Disclosure Agreement, Medivation promised that it would “not make use of, disseminate, or in
any way disclose any Confidential Information . . . except to the extent necessary for
negotiations, discussions, and consultations with personnel or authorized representatives of the
Disclosing Party.” Medivation never intended to honor these promises. Rather, as detailed
below, its plan was, and is, to use FGH’s confidential information to advance what it now claims

to be a homegrown SREBP-inhibitor candidate.

55. In making these misrepresentations and omissions, Medivation intended to
deceive FGH into thinking that Medivation’s only interest in its dealings with FGH was the
legitimate pursuit of licensing negotiations. Within the scope of these misrepresentations and
omissions, Medivation repeatedly requested FGH’s confidential information under the guise of
advancing the business relationship with the end of reaching a license agreement. But its true
and knowing intent at the time was to induce FGH to rely on those misrepresentations and

material omissions to enter into Confidential Disclosure Agreements and to provide Medivation

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with substantial confidential information — proprietary research that Medivation instead intended
to use, and did use, to seek patents and commercialize competing compounds. Medivation also
intended to, and succeeded in, delaying FGH’s development and commercialization of its own

compounds.

56. | Medivation’s fraudulent intent is demonstrated throughout this Complaint

and in the following specific examples by way of illustration:

a. First, throughout August and September 2013, Medivation expressed its
interest in entering a license with FGH by exchanging drafts of what in December
2013 would become the executed letter of intent. At the same time, Medivation
secretly filed two Indian patent applications, which Medivation cited for priority
in its later-filed U.S. patent application. On information and belief, this U.S.
patent application includes MDV 4463, the SREBP-inhibitor compound that is

now in Phase I testing.

b. Second, Chakravarty, Medivation’s Vice President of Medicinal
Chemistry who signed the first Confidential Disclosure Agreement and attended
the March 14 and November 2, 2012 confidential meetings with FGH, is listed as
the lead inventor on Medivation’s U.S. patent application. In other words,
Medivation intentionally (or, at best, with gross recklessness) cross-pollinated its
lead chemist between the discussions in which FGH disclosed its confidential
information and the team at Medivation that purportedly developed the competing

compound.

c. Third, Medivation repeatedly pressed FGH for the confidential details of
its patent applications, claiming it needed the information for negotiations of a

license agreement with FGH. In truth, Medivation used the information to

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advance its own research program and patent applications. Under the guise of

engaging in license negotiations, Medivation ultimately strung FGH along well

after its competing program was in place.

d. Fourth, Medivation referenced and relied on the terms of the Confidential
Disclosure Agreements in the December 2013 letter of intent. In so doing,
Medivation reaffirmed to FGH that it would continue to honor those agreements.
By that time, however, Medivation was already secretly well down the path of
wrongfully using FGH’s proprietary information to advance its competing

program.

e. Fifth, on February 18, 2014, Medivation sent FGH a presentation in which
it represented that Medivation’s experiments using FGH’s testing methodologies
and compounds, including those analog and derivative compounds identified by
Dr. Motonari, were “inconclusive” and that further work on the applications of
those compounds “for metabolic indications was put on hold.” Medivation knew
this to be false and that instead it was secretly developing the compounds and

research precisely for the metabolic space.

f. Sixth, after Medivation terminated the license discussions in April 2014,
Dominic Piscitelli represented that Medivation’s priorities had shifted and that it
had no development plans in the field. However, just a few months later, in
August 2014, Medivation filed a U.S. patent application for “compounds and

methods of using those compounds to treat metabolic disorders[.]”

g. Seventh, around the time Medivation terminated the license discussions in

early 2014, and unbeknownst to FGH, Medivation’s Sebastian Bernales admitted

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to Carlos Nacimiento that Medivation was going to pursue development in the
SREBP-inhibitor space without FGH and that Medivation’s lawyers were looking

for the best strategy for doing so.

h. Eighth, in May 2014, Medivation lawyer Sam Kais claimed that
Medivation had a competing research program that had begun well before
Medivation ever spoke to FGH and that continued throughout Medivation’s
discussions with FGH. Regardless of whether Medivation’s research program
really pre-dated the discussions with FGH or began after FGH disclosed its
confidential information, there can be no doubt that the individuals at Medivation
involved in the discussions with FGH (including Chakravarty) knew about the

competing work and intentionally concealed it.

i