Is The End In Sight?
I argued here that for litigation buffs, the Elysium-ChromaDex dispute is still in early innings, and there will be loads of intrigue ahead.
But for investors, the show is pretty much over -- nothing to see, move along. The lawyers still have to play out the final innings, but investors are already in the parking lot running to their cars, and the only fans who should be remain in stadium are those who want to watch Cooley pluck, quarter, de-bone, cook, and finally serve Elysium's goose. [Reader contribution: To 'spatchcock' a goose is to take the backbone out and flatten the body for cooking.]
It's going to take a while, and there are those who will enjoy every minute of it. But for ChromaDex investors the fog is lifting to reveal that there will probably be no big loss and no big payday -- just routine legal costs dispensing a particularly obnoxious inverse patent troll.
The Big Story
But there is more to the litigation than just the technical legal issues -- there is also the story that you tell to the jury of a good guy and a bad guy and why your client is the one wearing the white hat.
Without that story, it's harder to win, and with that story, it's harder to lose. That story is at least as important as the technical legal arguments, and THAT is why we know that Elysium's goose really is cooked.
ChromaDex's Fourth Amended Complaint revealed a significant unraveling of Elysium's story.
No More He-Said / She-Said
Until now, the ChromaDex-Elysium litigation has been a he-said/she-said dispute, with both sides accusing the other of fraud.
But the new, detailed allegations in the Fourth Amended Complaint (4AC) based on documents revealed in discovery, tell us not only whose claims are likely to prevail, but also whose overall story is going to be proved in court, and whose story is taking on water in anticipation of a one-way journey to the bottom of the sea. Elysium might even be allocated the kind of damages reserved for very bad boys who sign false allegations to the court.
[PICTURED: Elysium Health after spending too much time on the Litigation ride at Pleasure Island]
To explain just what a bad position Elysium has worked itself into, I will first tell Elysium's side of the story (excerpting Elysium's court filings), and then compare that to ChromaDex's story as drawn from ChromaDex's court filings BEFORE the 4AC.
Next, we will look at ChromaDex's new allegations in the 4AC based on documents revealed in discovery, which make Elysium's story untenable.
Then we will look at the implications -- not only for potential settlement, but also for Elysium's business and Elysium's customers.
Finally, for fun, and to demonstrate the Streisand Effect, we will reproduce all of the allegations from ChromaDex's Fourth Amended Complaint that had been redacted but which have now been made public.
Brief Background
Nicotinamide Riboside (NR) is what this battle is all about.
NR may be the Fountain of Youth, or maybe just a cure-all that prevents Alzheimers, Parkinson’s, heart disease, and cancer. Or maybe it’s nothing. But if it comes anywhere near its potential, it could be worth billions of dollars.
Until 2004, NR was a little-known and mostly-unloved molecule – an unimportant cousin of Vitamin B3, useful for growing the Haemophilus Influenza bacteria, which most people do not want to grow.
But that all changed when a Genetics professor at Dartmouth College, Dr. Charles Brenner, discovered a previously unknown pathway by which cells could use NR to create NAD.
NAD is essential because it powers all types of cells.
NAD is precious because as we age our NAD levels decline, and that decline causes many of the symptoms we associate with aging.
If there were a way to prevent that NAD decline, might we turn back the hands of time? Or at least stop the clock? Or please at least just slow it down?
Dr. Brenner patented NR formulated as a health supplement formulated to increase NAD ('807 Patent), and also as a pharmaceutical formulated to increase NAD ('086 Patent). Plus, he patented a way of making the NR.
The Brenner patents were assigned to Dartmouth University, which licensed them to David Sinclair’s company Sirtris. Dr. Leonard Guarente, who later co-founded Elysium, and Dr. Brenner, both served as advisors to Sirtris. (Brenner, Guarente)
Sirtris was bought by GlaxoSmithKline, which eventually shut down Sirtris. The Brenner patent rights then reverted back to Dartmouth, which then licensed them to ChromaDex.
Enter ChromaDex
Although Nicotinamide Riboside showed tantalizing potential, there was much work to be done. Hundreds of research studies would be necessary to understand the health potential of NR in humans. And before those studies could begin, someone would have to figure out how to manufacture NR at scale.
ChromaDex solved the manufacturing problem, and began providing NR to researchers around the world.
In 2013, ChromaDex began selling NR under the brand name “Niagen.”
Enter Elysium
In 2014, Elysium Health was founded by an anti-aging researcher (Leonard Guarente), a Harvard MBA (Eric Marcotulli), and a bank executive (Dan Alminana).
Although Elysium promised to introduce a new category of health supplements, it only had, and to this day only has, a single product, which is NR combined with pterostilbene. Pterostilbene is similar to resveratrol in some respects, and has some anti-aging potential.
Elysium signed a three-year deal under which ChromaDex would supply Elysium with all the NR and pterostilbene Elysium could sell.
Elysium turned out to be an effective marketer. It called the combination of ChromaDex’s two ingredients “Basis,” and packaged them in the kind of white jar used for skin cream. Elysium generated media buzz in major magazines. That's how I found out about NR!
Central to Elysium’s strategy was to project itself as a science and research company, and not just a web marketer or distributor of ingredients discovered and manufactured by someone else.
To this end, Elysium hired a scientific advisory board of Nobel laureates, assigned itself some lofty strategy missions, and projected the impression that it was somehow involved in the discovery or development of the active ingredients in Basis, which it actually was not.
Here, you can read some of Elysium's self-praise in court filings. This is from Elysium's motion to dismiss ChromaDex's New York complaint:
Elysium, a growth-stage start-up, utilizes science and technology to create consumer health products. One of Elysium's co-founders, who heads MIT's aging center, has been described as "one of the world's leading scientists in the field of aging research." Elysium's flagship product, a nutritional supplement called "Basis," features nicotinamide riboside ("NR"), a precursor of a Vitamin B3 metabolite with "important anti-aging effects," and pterostilbene, an antioxidant derived from blueberries. ChromaDex, an ingredients company, licensed patents relating to NR and began selling Niagen in 2013.
Elysium differentiates itself with a dedication to scientific research and rigor sorely lacking in the nutritional supplement industry, evident in its Scientific Advisory Board, a group including numerous Nobel Laureates that "advise[] the Elysium team on product identification and development, clinical studies and ongoing research"; its research partnerships with prestigious institutions such as Harvard and Oxford; and its own scientific publication featuring articles on advances in aging and health-related research. Its website describes a multi-stage R&D process for new products under development that includes a review of scientific literature, various stages of development, and safety testing conducted for regulatory submissions.
Elysium also publishes Endpoints, a blog featuring articles on scientific research and related issues, including articles on FDA regulations. Elysium's co-founder has been often interviewed regarding his aging-related research. (emphasis added, citations omitted)
In case you didn't get the gist of Elysium's pitch, here's the short, blunt version: Elysium is all about science and is guided by scientists and was founded by an anti-aging researcher, whereas ChromaDex is just an ingredients company that licensed somebody's patents.
So, is Elysium all about science, or are they all about marketing?
If all that science doesn't add up to anything, then it's just marketing.
Also, if they are so high on their own myths that Elysium says things to the court that are not true, that's another sign that they are all about marketing.
But I get ahead of myself.
Elysium's Story
Here is Elysium's story, as excerpted from its pleadings and motions in the California and New York law suits:
Elysium had fully performed all of its obligations under the Agreements. In fact, Elysium had been an exemplary customer, even “self-policing” its contracts with ChromaDex to ensure that it had been paying all that it had agreed to pay under the Agreements... (Third Amended Complaint)
Alminana’s friendly request was intended to confirm that, in light of Elysium’s orders of substantial volumes of nicotinamide riboside and its full performance under the contracts, ChromaDex was similarly upholding its end of the bargain by providing Elysium with the lowest price. (Third Amended Complaint)
ChromaDex might have succeeded in deceiving Elysium had Jaksch not inadvertently neglected to delete two 'unblinded' sheets contained in the Excel spreadsheet... (Third Amended Complaint)
Elysium expended significant effort attempting to resolve this dispute amicably...but (was) hampered by ChromaDex’s refusal to provide information to Elysium necessary to calculate the credit due for ChromaDex’s breach of the MFN Provision. (Third Amended Complaint)
Instead of trying to resolve the parties’ differences in good faith, ChromaDex instead filed this lawsuit." (Motion to Dismiss ChromaDex's complaint in California)
Although ChromaDex terminated the agreement for supply of NR in early 2017, Elysium was able to locate an alternative source and to continue selling Basis. (Opposition to ChromaDex's Motion to Dismiss in New York)
ChromaDex's Story
From ChromaDex's complaint in New York, we get a very different account:
Elysium was founded with the specific goal of wrestling control of NR from ChromaDex through unscrupulous means, rather than to compete honestly or fairly....
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...
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....
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.
So that leaves us with a big question -- who is telling the truth?
Was Elysium an "exemplary customer" that had "fully performed its obligations" that made a "friendly request" and "might have successfully been deceived" then "expended significant effort attempting to resolve the dispute amicably" but was "able to locate an alternative source of NR"?
OR
Was Elysium "founded with the specific goal of wrestling control of NR from ChromaDex through unscrupulous means" and subsequently discovered to be executing "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"?
That's the he-said /she-said dispute.
The Truth Comes Out
But now the truth is coming out. Because in the Fourth Amended Complaint, ChromaDex informs us that, through discovery, it has gathered evidence revealing a clearer picture.
The account below is drawn entirely from ChromaDex's Fourth Amended Complaint, edited for clarity, and ordered chronologically, because the timeline of events is what shows that Elysium's story is not true.
Elysium says that it was an exemplary partner until it learned something on a particular date, and thereafter acted in good faith and in self-defense. The timeline established by ChromaDex disproves Elysium's story:
Unbeknownst to ChromaDex, in April of 2016 Elysium began recruiting a senior ChromaDex employee, Mark Morris, who was at the time ChromaDex’s Vice President of Business Development.
With offers of employment, Elysium induced Morris to breach his loyalty and confidentiality obligations to ChromaDex and begin feeding Elysium ChromaDex’s confidential information while he was still a ChromaDex employee. Morris acted as Elysium’s inside agent at ChromaDex.
In May of 2016, Morris gave Elysium a spreadsheet, or the information contained in a spreadsheet, concerning the prices and volumes of NR ordered by another ChromaDex customer (the “Pricing Spreadsheet”).
In mid-June 2016 Elysium began planning to order a 12-month supply of NIAGEN and pTeroPure from ChromaDex.
Alminana and Marcotulli falsely stated that Elysium intended to be a good business partner to ChromaDex and explained that Elysium was ramping up, which was the reason the June 28 Purchase Orders were far larger than their past orders. Alminana and Marcotulli dishonestly represented that, due to the ramp up, Elysium expected to use all the NIAGEN ordered over the next few months and would place additional large orders in Q3 and Q4 2016. In reliance on Elysium’s statements and promises, ChromaDex offered Elysium a discounted price for NIAGEN.
At the time Marcotulli and Alminana spoke on the June 30 Call, Elysium had no intention of (1) ever working with ChromaDex to resolve Elysium’s concerns about the NIAGEN Supply Agreement, (2) paying for the NIAGEN or pTeroPure ordered in the June 30 Purchase Orders, or (3) ramping up their sales to the degree they represented.
Instead, unbeknownst to ChromaDex, Elysium was scheming to, or had already, solicited and recruited two of ChromaDex’s key employees with the purpose of exploiting the former ChromaDex employees’ knowledge about ChromaDex and its business to assist Elysium as it developed its own manufacturing capabilities.
Alminana’s and Marcotulli’s intent is evidenced by the fact that:
(a) Within days of placing the June 30 Purchase Orders, Elysium, working with its new employee Morris, concocted and began executing a plan to develop its own source of NR;
(b) Elysium never ramped up in a way that was consistent with Alminana and Marcotulli’s representations on the June 30 Call;
(c) Elysium projected that the NIAGEN and pTeroPure that was delivered in July and August 2016 would be sufficient supply for Elysium well into 2017, and the supply lasted in fact until July 2017, a year after Elysium placed the June 30 Purchase Orders; and
(d) Elysium did not place any other orders, let alone additional large orders, in Q3 and Q4 2016 as Alminana and Marcotulli represented it would.
Just days after Elysium placed the June 30 Purchase Orders and while he was still working for ChromaDex, Morris and Elysium agreed that when Morris began working for Elysium, his main duty would be to assist Elysium in developing its alternative supply of NR. Morris did not tell his then-employer ChromaDex about Elysium’s intention to develop a competing source of NR and to use the money that Elysium owed ChromaDex for the June 30 Purchase Orders to fund that dishonest goal.
Before Morris left ChromaDex, he used his personal email account to send Elysium a list of manufacturers who could potentially produce NR for Elysium. He also attached a ChromaDex document that described the manufacturing process for NR. Morris told Elysium it could use the manufacturing information as a shortcut in developing its own commercial supply of NR.
Shortly after ChromaDex shipped the extraordinarily large volumes of ingredients to Elysium, Elysium executed its planned employee raid, hiring Morris, who had acted as Elysium’s agent, and Dellinger, before notifying ChromaDex that it would refuse to pay for the product it ordered. Thus, shortly after the product was delivered, the two senior ChromaDex employees abruptly resigned and began employment with Elysium. These two former ChromaDex employees took several ChromaDex documents with them to Elysium and thereby assisted Elysium in its misappropriation of ChromaDex’s trade secret information.
Shortly after Morris began his official employment with Elysium, he started working with a third-party manufacturer to develop a new commercial supply of NR independent of ChromaDex. Morris was, and continues to be, Elysium’s main contact with the manufacturer, and closely oversaw the development of a manufacturing process.
When it came time for Elysium to provide instruction to its alternative manufacturer on how to manufacture NR, Elysium relied on proprietary ChromaDex documents to do so.
Elysium’s conduct and statements evidence its intent to deliberately weaken and undermine ChromaDex by withholding payments for products it ordered and received, making ChromaDex Elysium’s unwilling lender as it endeavored to create its own supplies of NR and pterostilbene while cheating off of ChromaDex’s confidential and proprietary information in the process.
Elysium, through Morris, converted for its own advantage the NR GRAS Dossier and the valuable information it contains. Morris took screenshots of select pages of the document in a way that removed all references to ChromaDex and the FDA submission. Elysium then claimed the document containing screenshots of ChromaDex’s information as its own property by placing a statement at the bottom of each page stating: “This document is proprietary and confidential. No part of this document may be disclosed in any manner.” Finally, on August 1, 2016, Morris provided this fraudulent document to Elysium’s alternative manufacturer on behalf of Elysium as the blueprint for developing a process for the commercial manufacture of NR.
On August 2, 2016, Morris sent another email to Elysium’s alternative manufacturer with two documents providing further information to guide the development of a new supply of NR. Both documents contained converted ChromaDex information.
Elysium converted the NRCl Analytical Method and the NR Specifications when it retyped the ChromaDex documents nearly word-for-word into two separate documents and claimed the resulting document as its own by placing a statement at the bottom of each document stating: “This document is the property of Elysium Health and contains proprietary and confidential information. No part of this document may be disclosed in any manner.”
While Elysium was pursuing and investing in its own manufacturing process for NR, it was still falsely representing to ChromaDex that it would honor its contractual commitments and be a good business partner. Elysium did not notify ChromaDex that it would refuse to pay the Past Due Invoices until August 10, 2016.
So If You Don't Know...Now You Know
So Elysium was NOT an exemplary customer, had NOT fully performed its obligations, did NOT make a friendly request, could NOT have been successfully deceived, was NOT attempting to resolve the dispute amicably, and did NOT "locate" an alternative source of NR, but instead created its own NR using ChromaDex's secret information, and ChromaDex apparently has the documents to prove it.
Elysium's story hinges on it's being an exemplary customer until it discovered in June 2016 that something was amiss. But now we know that in April, two months prior to Elysium's "discovery" of a pricing issue, Elysium was already plotting a coup, and the "discovery" it made was not result from a friendly call, but instead resulted from industrial espionage. The friendly call was a setup, the giant order was made under false pretenses, and the evidence of the nefarious plan is now tangible.
Now What?
We have already shown that Elysium's legal claims are on thin ice for technical reasons, but now we know that the big story of wrongdoing that Elysium would rely on to support those weak legal claims points the other way.
So there is no plausible path forward for Elysium in court.
The next question is whether there is a plausible path to settlement?
When all is said and done, Elysium is going to owe ChromaDex a lot of money: First, it has to pay for all the product it sold -- that's $3M right there; Second, there are trade secret damages, which might be trebled; Third, there is the real possibility of a patent infringement suit, also with treble damages. Elysium's defenses and claimed offsets look to be much smaller than its potential liability.
But Elysium probably doesn't have a load of money to pay a settlement. Elysium is a small company that is presumably investing ahead of growth, like ChromaDex is.
It would be different if Elysium really believed in its own mission, and intended to clean up the supplements industry by introducing a new CATEGORY of health supplements based on rigorous, science-based methodology.
But there is no action accompanying the talk.
It would take no effort at all for Elysium to create Elysium-branded versions of common supplements, like St. John's Wort, and talk about the science and purity of their offerings. But they don't do that, which suggests that their real agenda is to own some lucrative piece of the anti-aging market, like NR or something else, like NMN.
If NR is no longer available, does Elysium have any will to live?
I ask, because I can imagine a settlement in which ChromaDex claws back whatever it can of Elysium's ill-gotten gains, and Elysium helps transition all its customers to Niagen, and Elysium promises to take patents more seriously in the future, in exchange for which ChromaDex spares Elysium a bankruptcy filing and leaves it with enough assets that it can continue its business with legal products.
But that only works if Elysium wants to do anything besides sell NR.
So if Elysium has no Plan B for its business after it realizes that it can't legally sell NR, then how long will Elysium continue bothering to litigate as it becomes increasingly clear every day that it has no path forward?
That may depend on who is paying for the litigation.
Skadden and Foley are not cheap, and they will especially appreciate to be paid in advance if their client looks like a bankruptcy risk. Is Elysium generating enough positive cash flow to fund $1M-$2M per quarter in litigation? Doubtful. So how long will Elysium's creditors be willing to throw good money after bad? Not indefinitely, but we don't know. It is possible that Elysium will very soon find itself with a mandate to change course.
What About Elysium's Basis Customers?
The NR market has never looked better. The science behind NR keeps growing. International availability keeps expanding.
Do Elysium's customers care if their supplier might go bankrupt and/or lose access to the product.
My guess is mostly not.
The worst case scenario for an Elysium customer would be to prepay $480 for a one-year subscription and then find that the company they paid has no ability to fulfill its side of the bargain.
I would not be surprised if ChromaDex were willing to fulfill Elysium's obligations to Elysium's customers if those customers migrated their Basis subscriptions to Tru Niagen by ChromaDex and renewed for a year, and ChromaDex would focus on the lifetime value of Elysium's customer base, even if it meant delivering for a time product that Elysium got paid for.
But on the other hand ChromaDex might not honor those contracts, and might instead just let Elysium's customers sink or swim with the other unsecured creditors in a Chapter 7 bankruptcy proceeding. ChromaDex could reasonably say "Welcome aboard!" with a free month or a 10% discount, rather than redeeming Elysium's debt for customers who, wittingly or not, were, in my opinion, funding an illegal patent-infringing operation.
If I had to bet, I'd bet that Elysium and ChromaDex will find some way to bridge those customers over rather than letting them be collateral damage in this fiasco.
But if I had to give some advice, I would advise Elysium's customers to consider the possibility that they may in the future encounter less uncertainty and risk with their subscriptions if they start buying directly from the patent holder. There is nothing about Elysium that, too me, inspires the kind of affection or loyalty that would make me want to stand with them on the deck of a sinking ship.
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REDACTIONS REVEALED
When Judge Carney ordered ChromaDex to remove the redactions in its Fourth Amended complaint, it was fun to find out whether what we GUESSED was under the black ink was in fact what was there. But it wasn't easy. So for those curious but unwilling or able to do a lengthy comparison process, I have excerpted below JUST the portions of the Fourth Amended Complaint that included redacted material:
PAGE 1
making ChromaDex Elysium’s unwilling lender as it endeavored to create its own supplies of NR and pterostilbene while cheating off of ChromaDex’s confidential and proprietary information in the process.
PAGE 2
Elysium intended to make ChromaDex its unwilling banker and lender, supporting Elysium’s business by supplying Elysium with nine months’ worth of the two essential ingredients required for Elysium’s product, all while Elysium invested the money it owed to ChromaDex into developing its own alternative sources of NR and pterostilbene.
These former ChromaDex employees have enabled Elysium to unlawfully benefit from the substantial investments ChromaDex has made in advancing NR and pterostilbene in the market and clearing regulatory hurdles necessary to produce and market the ingredients.
PAGE 4
ChromaDex was the sole United States commercial source and supplier of NR and was Elysium’s sole supplier of NR and pterostilbene, until Elysium diverted the funds it owed ChromaDex into developing its own alternative sources of both Ingredients. Elysium secretly recruited two senior ChromaDex employees to help it achieve its goal before it exhausted nine months’ worth of ingredients it had stockpiled From ChromaDex.
PAGE 5
Unbeknownst to ChromaDex, in April of 2016 Elysium began recruiting a senior ChromaDex employee, Mark Morris, who was at the time ChromaDex’s Vice President of Business Development.
PAGE 6
As shown through discovery in this action, in mid-June 2016 Elysium began planning to order a 12-month supply of NIAGEN and pTeroPure from ChromaDex.
PAGE 8
Morris—still a ChromaDex employee at the time—remained silent about the fact that Elysium’s orders were expected to last for nine months.
PAGE 10
unbeknownst to ChromaDex, Elysium was scheming to, or had already, solicited and recruited two of ChromaDex’s key employees with the purpose of exploiting the former ChromaDex employees’ knowledge about ChromaDex and its business to assist Elysium as it developed its own manufacturing capabilities.
Marcotulli and Alminana also intended to create financial pressure for ChromaDex by refusing to pay for the orders, making ChromaDex Elysium’s unwilling bank and lender while it concurrently obtained an alternative source of NR.
within days of placing the June 30 Purchase Orders, Elysium,
working with its new employee Morris, concocted and began
executing a plan to develop its own source of NR;
PAGE 11
Elysium projected that the NIAGEN and pTeroPure that was delivered in July and August 2016 would be sufficient supply for Elysium well into 2017, and the supply lasted in fact till July 2017, a year after Elysium placed the June 30 Purchase Orders
PAGE 13
while he was still working for ChromaDex, Morris and Elysium agreed that when Morris began working for Elysium, his main duty would be to assist Elysium in developing its alternative supply of NR. Morris did not tell his then-employer ChromaDex about Elysium’s intention to develop a competing source of NR and to use the money that Elysium owed ChromaDex for the June 30 Purchase Orders to fund that dishonest goal.
PAGE 14
Before Morris left ChromaDex, he used his personal email account to send Elysium a list of manufacturers who could potentially produce NR for Elysium. He . also attached a ChromaDex document that described the manufacturing process for NR. Morris told Elysium it could use the manufacturing information as a shortcut in developing its own commercial supply of NR.
PAGE 15
Shortly after Morris began his official employment with Elysium, he started working with a third-party manufacturer to develop a new commercial supply of NR independent of ChromaDex. Morris was, and continues to be, Elysium’s main contact with the manufacturer, and closely oversaw the development of a manufacturing process. Given Morris’s detailed knowledge of ChromaDex’s internal operations, he is well-positioned to use this proprietary information to advance Elysium’s competing development.
When it came time for Elysium to provide instruction to its alternative manufacturer on how to manufacture NR, Elysium relied on proprietary ChromaDex documents to do so.
To instruct the alternative manufacturer on the process of creating NR, Morris relied on a ChromaDex document submitted to the U.S. Food and Drug Administration (“FDA”) to show that NIAGEN was safe for human consumption. This document (the “NR GRAS Dossier”) contains a step-by-step guide for manufacturing NR along with a description of each step.
Elysium knew that the NR GRAS Dossier contains valuable information that belonged to ChromaDex, as evidenced by the prominent statement, “Prepared for ChromaDex, Inc.,” that appears on every page of the NR GRAS Dossier and by Elysium’s use of the information it contains to jump-start its own production of NR.
PAGE 16
Elysium, through Morris, converted for its own advantage the NR GRAS Dossier and the valuable information it contains. Morris took screenshots of select pages of the document in a way that removed all references to ChromaDex and the FDA submission. Elysium then claimed the document containing screenshots of ChromaDex’s information as its own property by placing a statement at the bottom of each page stating: “This document is proprietary and confidential. No part of this document may be disclosed in any manner.” Finally, on August 1, 2016, Morris provided this fraudulent document to Elysium’s alternative manufacturer on behalf of Elysium as the blueprint for developing a process for the commercial manufacture of NR.
Also on August 1, 2016, Morris sent Elysium’s management a copy of the confidentiality agreement he and other ChromaDex employees were required to sign as a condition of their employment. On information and belief, Elysium knew of Morris’s confidentiality obligations before this date.
On August 2, 2016, Morris sent another email to Elysium’s alternative manufacturer with two documents providing further information to guide the development of a new supply of NR. Both documents contained converted ChromaDex information.
PAGE 17
The second document Morris sent to Elysium’s alternative NR manufacturer described ChromaDex’s specifications for the range of acceptable results for several analyses that were regularly performed on the NIAGEN ChromaDex sold (the “NR Specifications”).
The NR Specifications sent to Elysium’s NR manufacturer appear to be based on at least two or more versions of ChromaDex’s NR Specifications, showing that Morris wrongfully accessed documents he stole from ChromaDex during his employment when drafting the document falsely labeled as Elysium’s property.
PAGE 18
Elysium converted the NRCl Analytical Method and the NR Specifications when it retyped the ChromaDex documents nearly word-for-word into two separate documents and claimed the resulting document as its own by placing a statement at the bottom of each document stating: “This document is the property of Elysium Health and contains proprietary and confidential information. No part of this document may be disclosed in any manner.”
Elysium sent the converted NRCl Analytical Method and NR Specifications to its alternative NR manufacturer to use in the development of a competing supply of NR.
Elysium’s inequitable reliance and use of ChromaDex’s information and documents, the extent of which can only be revealed through discovery, substantially reduced Elysium’s costs for developing a new commercial source of NR while denying ChromaDex a return on its investment in developing the technical processes and standards, and the documents themselves.
While Elysium was pursuing and investing in its own manufacturing process for NR, it was still falsely representing to ChromaDex that it would honor its contractual commitments and be a good business partner.
Shortly after Dellinger joined Elysium, a potential investor asked Elysium for information concerning the science supporting the marketing claims made by Elysium about its product, Basis. Elysium did not have such a presentation at that time.
PAGE 19
Morris informed Elysium’s management that he had used ChromaDex material when drafting the presentation and Elysium’s management consented, expressly or impliedly, to the wrongful use of ChromaDex information.
Elysium also presented the converted NR Presentation as its own to the National Advertising Division of the Better Business Bureau in November 2016 in response to an inquiry regarding Elysium’s marketing claims.
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The Presentations are not the only ChromaDex documents that Dellinger helped Elysium convert. In 2017, Dellinger helped Elysium prepare a New Dietary Ingredient Notification (“NDI”) for submission to FDA to prove that Basis is safe for human ingestion. Dellinger worked with Elysium’s regulatory consultants to develop the NDI. Under Dellinger’s knowing guidance, Elysium used a confidential ChromaDex document created in 2011 that detailed the safety of pterostilbene, specifically the pTeroPure ingredient produced by ChromaDex (the “pTeroPure GRAS Report”).
Dellinger provided the pTeroPure GRAS Report to Elysium’s regulatory consultants as a shortcut in developing its own regulatory submission. By wrongfully using the information in the pTeroPure GRAS Report to prepare its own regulatory submission, Elysium profited from ChromaDex’s substantial investment in developing the required safety information. Regulatory submissions such as a GRAS report cost several hundred thousands of dollars to develop and Elysium saved itself time and money by simply “updating” the ChromaDex information in its preparation of an NDI submission for Basis.
On information and belief, Elysium also wrongfully used ChromaDex documents detailing information concerning the safety of NR in its preparation of the NDI submission, such as the NR GRAS Dossier, thereby further profiting off of ChromaDex’s considerable investments and experience in the research, production, and marketing of NR.
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Elysium’s inequitable reliance and use of ChromaDex’s proprietary information substantially reduced its costs for developing an alternative source of NR. Had Elysium spent the time and resources to develop an alternative source of NR without stealing ChromaDex’s information, it would have taken a substantially longer period of time to develop the competing supply of NR that caused ChromaDex to lose sales of NIAGEN it otherwise would have made during that period of time. Elysium’s further blatant misappropriation of ChromaDex’s investments in developing the information to satisfy key regulatory requirements for NIAGEN and pTeroPure further allowed it to profit while denying ChromaDex a return on its investments. The full extent of Elysium’s conversion of ChromaDex information and documents can only be revealed through further discovery.
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Elysium breached Section 15.1 of the pTeroPure Supply Agreement when it disclosed the pTeroPure GRAS Report to its regulatory consultants for the purpose of preparing its NDI submission to FDA regarding a pterostilbene manufactured by an entity other than ChromaDex.
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Elysium breached Section 4.1 of the NIAGEN Supply Agreement when it disclosed the NRCl Analytical Method to its alternative manufacturer of NR for the purpose of developing a competing source of NR.
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Despite the fact that the NR Study Data was labeled
“confidential,” Elysium distributed the NR Study Data to at least two dozen potential investors during the second half of 2015—before the data became public and without ChromaDex’s authorization, as required by the NIAGEN Supply Agreement.
Elysium breached Section 4.2 of the NIAGEN Supply Agreement when it disclosed the NR Specifications to its alternative manufacturer of NR for the purpose of developing a competing source of NR.
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The Ingredient Sales Spreadsheet is the central sales document at ChromaDex tracking all sales for all ingredients. The spreadsheet Elysium illegally possesses contains the detailed purchasing history of every customer who purchased any ingredient from ChromaDex from 2012 through at least May 27, 2016—including customer names, prices, volumes, and dates of purchases.
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Elysium wrongfully used the converted information in the retyped NRCI Analytical Method when it sent the document to its new NR manufacturer on August 2, 2016, to use in the development of a competing supply of NR.
Elysium wrongfully used the information contained in the pTeroPure GRAS Report as a shortcut in the preparation of an NDI submission for Basis in 2017, in violation of the pTeroPure Supply Agreement’s Confidentiality Provision. In communications about the preparation of that NDI submission, Dellinger stated that Elysium provided the pTeroPure GRAS Report to its regulatory consultants who then “updated” it for Elysium’s own FDA submission.
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By wrongfully using the confidential information contained in the pTeroPure GRAS Report, Elysium reduced its costs in money, time, and other resources related to the development of its own regulatory submission establishing the safety of pterostilbene for human consumption.
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Elysium sent the NR Presentation, now with Elysium’s logo on it, to potential investors in August of 2016 and presented it to the National Advertising Division of the Better Business Bureau in November 2016 in response to an inquiry regarding Elysium’s marketing claims.
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Elysium sent the Pterostilbene Presentation, now with Elysium’s logo on it, to potential investors in August of 2016.
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Elysium wrongfully used the NR Specifications when it breached the NIAGEN Supply Agreement by disclosing the NR Specifications to its alternative manufacturer of NR. In addition, because the NR Specifications Elysium disclosed contain information from later versions of the NR Specifications, Elysium improperly obtained possession of other versions of the document when Morris breached his confidentiality obligations to ChromaDex by wrongfully accessing a ChromaDex document for the use of his new employer after his employment with ChromaDex had terminated.
Elysium converted the NR Specifications when it retyped the ChromaDex document word-for-word into a separate document and placed a statement at the bottom of the document stating: “This document is the property of Elysium Health and contains proprietary and confidential information. No part of this document may be disclosed in any manner.”
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Elysium sent the retyped NR Specifications to its new NR manufacturer on August 2, 2016, to use in the development of a competing supply of NR.
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Elysium converted the NR GRAS Dossier when it took screenshots of the document in a way to remove all language identifying the document as ChromaDex’s regulatory submission. Elysium then falsely claimed the resulting document as its own property by adding language stating: “This document is proprietary and confidential. No part of this document may be disclosed in any manner.”
Elysium provided the document to its new NR manufacturer to serve as the blueprint while it was developing a method for the commercial manufacture of NR. Elysium’s false assertion of ownership over the document and wrongful use of the information contained therein allowed it to profit by substantially saving on the research and development costs of creating a process for the commercial production of NR that could likely be certified as GRAS or otherwise safe by the FDA.