Cyprus company sues Genzyme biotech over Ukraine deal gone sour

A Cyprus company is suing the world’s third-largest biotechnology company, Genzyme Corp. of Massachusetts, over a major pharmaceuticals supply deal to the Ukraine that it claims went sour 13 years ago when Genzyme had changed the particulars of a drug, making it non-marketable.
In a statement of claim filed in Nicosia District Court that is being heard this week, Kayat Trading Ltd., is seeking damages from the U.S. company for failing to deliver tablets of the brand MelaPure containing melatonin, a powerful antioxidant that also helps regulate the sleep-wake cycle by chemically causing drowsiness and lowering the body temperature.
In 1996 the melatonin hormone was considered the ‘wonder drug’ of that time as its properties were studied for the treatment of cancer, immune disorders, cardiovascular diseases, depression, seasonal affective disorder (SAD), circadian rhythm sleep disorders and even sexual dysfunction.
According to the claim, although MelaPure was not manufactured directly by Genzyme, it was made under license and the company wanted to break into the European and CIS markets, where unlike its description as a dietary supplement in the U.S., it was still considered as medicine and needed to have the appropriate permits from the authorities.
In 1997 Genzyme and Kayat came to an agreement for exclusive sales rights in the Ukraine and Russia, where there was a need for the melatonin-based drug. Genzyme encouraged Kayat to widely promote MelaPure, and declared their interest in large sales volumes of the product.
Having secured the necessary certification in Kiev, Kayat placed substantial orders with Genzyme from August 1997 but the U.S.-based biotech company, after extensive delays, could only deliver a small part of the orders. However, the particulars and quality of the tablets were completely non-conforming with the certified product and, as a result, the Ukrainian authorities rejected them and ordered their destruction.
The deal between Kayat and Genzyme should have lasted until May 2000, but in January 1998, just seven months after the new tablets were shipped to the Ukraine, Genzyme announced that as part of its restructuring plans it would focus on the development of other medicines and would move away from a number of bulk chemicals and nutritional supplements, including MelaPure melatonin, causing Kayat to file for breach of contract with damages estimated to run into the tens of millions of dollars.
The action was initially filed in July 2002, after the plaintiff obtained leave from the court to serve a writ outside its jurisdiction, because the contract involved a deal made outside of Cyprus.
Genzyme appeared under protest and tried to have the case dismissed on grounds that Cyprus was considered a forum of non-convenience.
The first statement of claim was filed in late 2004 and following advice from co-counsel in the U.S., filed for a discovery order in Massachusetts that was followed by the deposition of nine witnesses in Kiev, some of whom were top government officials who confirmed Kayat's claims, two in Nicosia and three top officers of Genzyme's pharmaceutical division in Cambridge, Massachusetts.
The final hearing began in December 2009 with the evidence deposed by Mrs. Achkar, the founding director of Kayat who secured the initial contract with Genzyme. Testifying this week is Konstantin Meshkov, present-day director of Kayat.
Genzyme works towards finding drugs that would cure enzyme deficiency conditions considered essential to human survival and which usually afflict a very small percentage of the world’s population. Drugs used to treat such conditions are considered to be ‘orphan drugs’.