The Official Committee of Unsecured Creditors of Nobex Corporation (US) has filed a petition against Biocon Ltd seeking declaratory relief in the United States Bankruptcy Court for the District of Delaware on February 27, 2006, bearing case number 05-20050.
It may be noted, Nobex Corporation, a Delaware based Corporation, is a chapter 11 debtor, that commenced the bankruptcy case by filing a voluntary petition for relief under chapter 11 of the Bankruptcy Code on December 1, 2005. Pursuant to sections 1107 and 1108 of the Bankruptcy Code, Nobex continues in the management and operation of its business and property as a debtor in possession. On December 2, 2005, Nobex filed an expedited motion to establish bidding procedures in connection with the sale of substantially all of its assets and to approve sale motion.
On January 23, 2006, the Court entered the final order- authorising post petition financing and granting security interests and super-priority administrative expense status pursuant to title 11 of the United States Code, authorizing use of cash collateral and modifying the automatic stay. Pursuant to Bidding Procedures Order, bids on the Nobex's assets are due till March 13, 2006, and objections of the Sale Motion are due the same date. A hearing on the Sale Motion is scheduled for March 20, 2006. Biocon is the stalking horse bidder for the Debtor's assets. In addition to it, Biocon is also the Debtor's post-petition lender.
Nobex and Biocon entered into the Oral Insulin Joint Product Development Agreement (JPDA), on October 20, 2004, a collaboration for the development and commercialization of an Oral Insulin product under a proof of concept program in India. The Oral Insulin JPDA is governed by the laws of India.
The petition document stated, Biocon approached Nobex in 2004 with a willingness to acquire rights in the Nobex's Oral BNP technology. By April 2005, Biocon was insistent that Nobex enter into the Oral BNP Joint Product Development Agreement, implicitly threatening the continuation of the Oral Insulin partnership if Oral BNP was not likewise developed jointly. In its fragile financial condition, Nobex could not afford to lose its key Oral Insulin partnership with Biocon. Nobex had already demonstrated its ability to co-develop Oral Insulin technology by meeting relevant milestones under the Oral Insulin JPDA and, accordingly, Nobex demanded better terms than those offered in the Oral BNP JPDA.
On April 25, 2005, Nobex entered into the Oral BNP JPDA with Biocon, a collaboration for the development and commercialization of an Oral BNP product under a proof of concept program in India, which is governed by the laws of India. Profits are allocated between the parties such that Biocon receives 80 per cent and Nobex 20 per cent, similar to the profit sharing percentage in the Oral Insulin JPDA. Nobex feared that an 80 / 20 split would not be compelling enough for a third party to want to join the development process. Upon information and belief, at least two potential strategic partners ceased pursuing their interests in Oral BNP because of the unfavourable split.
In furtherance of the Oral BNP JPDA, Nobex and Biocon entered into the Nobex Corporation Investment Agreement. Biocon invested $ 3.15 million in consideration for a series of convertible notes and a series of warrants to purchase up to 4.4 million share of common stock. On April 27, 2005, Biocon funded $ 1.3 million and received a convertible note on the same amount.
The Committee has stated in the petition document that a judicial declaration is necessary and appropriate at this time in order for the parties to ascertain the nature and extent of Biocon's relationship with Nobex and requested the Court to declare that Biocon is an insider of Nobex as such term is defined in the Bankruptcy Code.
The petition stated, a judicial declaration is necessary to ascertain the nature and extent of Biocon's interests in the First Amendment to Oral Insulin JPDA transfers, Second Amendment to Oral Insulin JPDA Transfers, License Agreement Transfers, Basal Insulin Addendum Transfers and Oral BNP JPDA Transfers.
The Committee has requested the Court to declare that the First Amendment to Oral Insulin JPDA Transfers, Second Amendment to Oral Insulin JPDA Transfers, License Agreement Transfers, Basal Insulin Addendum Transfers and Oral BNP JPDA Transfers,constitute fraudulent transfers which should be avoided pursuant to Bankruptcy Code Section 548.
A judicial declaration is necessary and appropriate at this time in order for the parties to ascertain the nature and extent of Biocon's interests in Nobex's intellectual property. The Committee requested the Court to declare that Bankruptcy Code Section 365 (n) and its protections are not available to Biocon in connection with its asserted license rights under the Biocon documents and to declare that the inchoate or conditional commercialization rights granted Biocon in the Biocon Documents are subject to rejection pursuant to Bankruptcy Code Section 365 (a) and that Section 365 (n) does not protect or apply to such license rights in that context.
A judicial declaration is necessary and appropriate to ascertain the nature and extent of Biocon's interests in the Foreign IP upon any Nobex rejection of the Biocon Documents. The Committee requested the Court to declare that upon any Nobex rejection of the Biocon Documents, Biocon's license rights in the Foreign IP are terminated.
To ascertain the true nature, character, validity and priority of Biocon's rights and claims under the Biocon Documents, it has been expressed that a judicial declaration is necessary. The Committee requested the Court to declare that the Biocon Documents evidence a contract to make a loan and / or to extend debt financing, which do not create licensure interests in Nobex intellectual property.
The petition stated, a judicial declaration is necessary to ascertain the true nature, character, validity and priority of Biocon's rights and claims under the Biocon Documents. The Committee requested the Court to declare that the Biocon funding contributions are properly characterized as equity contributions or are subordinate to unsecured claims.