Lawsuit to End All Lawsuits -- ChromaDex says: "Enough."
ChromaDex yesterday filed in New York federal court a $200M lawsuit against Elysium Health, alleging false advertising, unfair competition, deceptive trade practices, unfair competition, and tortious interference with prospective economic advantage.
The complaint alleges that Elysium conspired to unjustly wrest control of the NR market from ChromaDex:
Elysium’s pattern of behavior with respect to ChromaDex reflects a nefariously conceived plan to damage and/or steal ChromaDex’s NR, reputation, employees, goodwill, and stature in the industry, as well as its customer opportunities. Elysium’s marketing falsely “borrows” ChromaDex’s research and regulatory achievements to endorse Elysium’s new product, and Elysium has maliciously targeted ChromaDex, its employees, and its commercial relationships by disseminating falsehoods about ChromaDex and refusing to pay for large orders – all with the intent of undermining ChromaDex’s viability and ability to compete. On information and belief, Elysium falsely disseminated untrue information to investors about ChromaDex’s financial health to further interfere with ChromaDex’s ability to raise money and defend itself against Elysium’s multi-front litigation and deceptive advertising war. And, on further information and belief, Elysium and/or its agents are associated with or responsible for stock “short attacks” intended to drive the share value of ChromaDex down, making it a more accessible take-over target.
You can read the complete complaint here:
ChromaDex does not like it that Elysium "relies on smoke and mirror marketing to create the wholly inaccurate impression that Elysium itself played a significant role in the scientific research concerning NR, and that its current Basis product is both novel and well-researched, when in fact it is not."
For example, an Elysium advertisement reads, “Meet Basis. The only supplement clinically proven to raise NAD+ levels, and “the world’s first cellular health product informed by genomics,” when in fact ChromaDex’s long-standing, well-researched products including Niagen and pTeroPure, came first.
ChromaDex also does not like that Elysium's marketing materials give the impression that Basis is approved by the FDA and is the subject of an NDIN, when it is not, and that Elysium falsely claims that Basis is "Pure."
ChromaDex says that
"Elysium also confuses consumers about the safety and testing of Basis by inferring that its blue ribbon panel of Nobel Laureates serving as Elysium’s 'Scientific Advisory Board' have all been involved in the science and discovery behind the Basis product, and implying that those members vouch for the safety of the product...None of these individuals are identified as having participated in any actual research, development or testing of the Basis product, id., and, on information and belief, not one has publicly made any statement endorsing or validating the safety or any other characteristic of Basis, yet their prominence on Elysium’s website clearly implies their endorsement of the company and its products as safe for human consumption."
Here is ChromaDex's claim for false advertising:
Elysium’s marketing, advertising and promotional statements and activities are false and misleading misrepresentations of fact and confuse consumers in New York and across the country into believing that its current Basis product (a) is manufactured subject to an NDIN, (b) has been approved by the FDA, (c) is the result of extensive scientific research and development conducted by Elysium, (d) has been clinically tested for safety, (e) is manufactured at facilities that meet FDA requirements, and, (f) has been endorsed by a multitude of renowned scientists and academic institutions. None of the foregoing is true, and consumers are likely to rely upon those false, misleading and deceptive statements, all to their detriment and the detriment of ChromaDex and its NIAGEN® and TRU NIAGENTM products.
You can read about the claims for Unfair Competition and Deceptive Practices in the complaint.
I am more interested in the claim for Tortious Interference with Prospective Economic Advantage. ChromaDex sets up the story by recounting the history of NR:
In 2004, Dr. Charles Brenner demonstrated that NR was a precursor of NAD
In 2006, ChromaDex learned of Dr. Brenner's work
In 2007, Dr. Brenner discovered an additional precursor pathway
During the following years, ChromaDex developed the first method of producing NR
Since 2013, ChromaDex has executed over 120 "Material Transfer Agreements" relating to studying the safety and efficacy of NR, which has resulted in many published studies.
Elysium, by contrast, has not conducted thorough safety studies of the effects of its newly-sourced Basis product, and does not hold any issued patent rights pertaining to NR
In other words, says ChromaDex, "While ChromaDex has for over 11 years diligently researched and developed the technology to produce and confirm the safety of NR, Elysium was founded in 2014 and began selling in 2015."
Then ChromaDex gets right to the heart of the matter:
"Elysium was founded with the specific goal of wrestling control of NR from ChromaDex through unscrupulous means, rather than to compete honestly or fairly."
The plan, according to ChromaDex's complaint, ran something like this: The goal was to acquire ChromaDex. So Elysium,
1. Negotiated an exclusivity arrangement that limited ChromaDex's ability to sell to other customers
2. Stole two key ChromaDex employees
3. Placed a $3M order that it did not intend to pay for, and
4. Disseminated false information to investors
These steps simultaneously imposed severe financial losses on ChromaDex, AND limited ChromaDex's ability to recover, since ChromaDex's ability to sell to paying customers was contractually limited, and ChromaDex's ability to raise capital by issuing stock was also severely reduced. Here is ChromaDex:
"As a public company, Elysium was able to monitor ChromaDex’s finances and calculate just how to create a shortfall that would threaten ChromaDex’s continued ability to do business, including to buy raw supplies necessary to manufacture new NR for which other customers would actually pay. Ultimately, Elysium attempted to isolate ChromaDex from its other customers and then orchestrate the downfall of the deal that it demanded ChromaDex make, all in an effort to undermine and weaken ChromaDex...On information and belief, Messrs. Morris and Dellinger conspired and acted in concert with Elysium to corner the market on NR and then “ripcord” the supply from ChromaDex such that it could not sell NIAGEN® to other parties or recover from a nearly $3 million loss."
Although early in the complaint ChromaDex asserts that, "A company like Elysium does not engage in a concerted unscrupulous and orchestrated plan of this nature, to deceive consumers and harm a competitor, without the authorization and direction of both its management and its board of directors," ChromaDex shines specific light on Dr. Guarente. From the complaint:
59. Elysium was co-founded by Dr. Leonard Guarente, Elysium’s Chief Scientist and lead “scientific” spokesman. Guarente recognizes himself as an “expert” in aging science, but his scientific research methods are suspect at best. Of the three papers Guarente has published on anti-aging, remarkably two have been retracted and another has been subjected to a “mega-correction” as characterized by research watchdog Retraction Watch. Exhibit O. It is highly unusual in any scientific career that a single paper is retracted, but beyond experience that a scientific expert has had his only three papers on the subject attacked and undermined to the point of requiring “mega-corrections” and full retraction.
60. On information and belief, Guarente is closely involved in the operations of Elysium and its willful and malicious dissemination of deliberately misleading and patently false advertising promoting Basis as safe and pure when both he and the company know Elysium has not conducted any research to support such claims. Guarente’s spotty history as an unscrupulous researcher and his involvement in continually covering up Elysium’s fraudulent scheme discredit any claims he makes about Basis or relevant science.
If history is any guide, Skadden will be tapped to answer this complaint, and we can expect a response that is orders of magnitude beyond agitated.
This is the fourth active lawsuit between the parties.
The first one, in the Central District of California, involves ChromaDex's breach of contract claims, and Elysium's counterclaims for breach of contract, fraud, and patent misuse.
The second one is Elysium's ex parte proceeding before the USPTAB to try to get ChromaDex's patents invalidated.
The third one is Elysium's complaint in the Southern District of New York objecting to ChromaDex's citizens petition to the FDA challenging the regulatory status of the mysteriously formulated new Basis.
But only this fourth one feels like we are finally getting to the real story.
UPDATE: A prior version of this article suggested that ChromaDex had fingered Dr. Guarente as a Mastermind behind Elysium's actions. Although the complaint says that Dr. Guarente was "closely involved in the operations the company" and was involved in "continually covering up Elysium's fradulent scheme," I don't actually have any opinion about who might or might not be a Mastermind of the alleged scheme.