UPDATE: To provide additional important details on these legal matters for our natural products industry readers, Insider has updated the article originally published on Aug. 5, 2021.
Details that have emerged over four-plus years of litigation between ChromaDex and Elysium Health at times read like a Netflix manuscript. Allegations of executive deceit, corporate piracy, drug use and bad-faith negotiations have been lobbed like bombs into legal proceedings opened on no fewer than four separate fronts.
It also happens to serve as a valuable industry lesson about the importance of the relationships that brands have with their ingredient suppliers and their employees.
The story would be run-of-the-mill corporate carnage if not for the stakes involved, namely, control over the promising anti-aging ingredient nicotinamide riboside, or NR.
The ingredient buzz around NR—a form of vitamin B3, introduced in 2013 as NIAGEN—is because of its potential ability to replenish levels of nicotinamide adenine dinucleotide (NAD), critical to energy metabolism and mitochondrial function. Boosting flagging levels of NAD+, the reduced form of NAD, could help resist the metabolic stresses of aging (Nat Commun. 2018;9(1):1286).
ChromaDex, a public company (NASDAQ: CDXC) with the exclusive license to include NR in supplements, fired the first salvo in the legal war with ingredient buyer Elysium in the waning days of 2016, in federal district court in California. More than 500 court filings later, a jury trial is planned for Tuesday, so an inevitable resolution in the primary case between the two may be unfolding.
Road to NR supplier-brand partnership
Researcher Charles Brenner, while a faculty member at Dartmouth College, happened upon the discovery that NR is a specific vitamin precursor of NAD, while testing the wiring diagram of NAD synthesis in yeast. He and Dartmouth coordinated on obtaining the patents on the use of isolated NR in foods and supplements, and ChromaDex licensed those patents, with sales of NIAGEN-branded NR beginning in 2013. Today, Brenner serves as chief scientific advisor at ChromaDex.
Elysium Health burst forth in 2014, the creation of CEO Eric Marcotulli—a Harvard Business School graduate who joined the famed Silicon Valley venture capital firm Sequoia Capital as its youngest partner, before starting Elysium. For the new venture, he recruited Dan Alminana as chief operating officer, and MIT biologist Leonard Guarente, a heavyweight in the anti-aging research field.
Elysium’s public mission was bold—to bring clinical scrutiny to dietary supplements—and they recruited a star-studded roster for their scientific advisory board, including five Nobel Prize winners, adding certain heft to the upstart company.
Guarente led a team to launch Basis, a supplement with two active ingredients, NIAGEN and pTeroPure, both originally solely supplied by ChromaDex. pTeroPure is a synthetic version of pterostilbene, the polyphenol found in blueberries, and for most of Elysium’s history Basis has been its only product.
Today, ChromaDex’s business model is primarily direct-to-consumer sales of NR, through the Tru Niagen brand. The company’s original model was essentially business to business, and Elysium was one of many customers for their NR, though at one time one of their biggest.
The previously unremarkable relationship between the two, however, changed dramatically in 2016.
The California complaint: Alleged destruction from within
On June 30, 2016, then ChromaDex vice president of business development Mark Morris held a call between top officials at both companies—Marcotulli and Alminana from Elysium, and ChromaDex’s then CEO Frank Jaksch and vice president of sales and marketing Will Black. The call was to resolve issues about two outsized and unusually discounted purchase orders placed by Elysium two days prior, the detailed court record shows (U.S. District Court, Central District of California, Southern Division, Case No. 8:16-cv-02277-CJC-DFM, requires log in).
Nine days before that call, Morris sent Alminana a text, according to discovery in the case:
“Time to change the world and get rid of the scumbags holding this magnificent technology!”
ChromaDex lawyers contend this text—and many others discovered since filing their original breach of contract complaint in 2016—illustrate a coordinated and nefarious effort between Morris and Elysium Health to destroy ChromaDex.
Attorneys allege Morris acted as Elysium’s inside agent at ChromaDex for nearly two months, and text messages from the personal devices of Morris, Alminana and Marcotulli, offered as evidence in the case, may support the charge.
Further, ChromaDex attorneys allege Morris fed Elysium critical information about what competitors were paying ChromaDex, information used as leverage in the negotiations running up to the June 30 call. He also allegedly shared a spreadsheet containing the detailed purchasing history of every ChromaDex customer, something ChromaDex says they didn’t know about until Elysium produced the document during discovery.
ChromaDex lawyers say the company was “induced” to accept and fill large, discounted orders of NIAGEN and pTeroPure, about US$3 million worth, but when it came time to collect on the oversized orders, Elysium essentially went dark and to this day hasn’t paid.
“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,” the complaint reads.
In a motion for summary judgment that addressed Morris’ alleged misappropriation of pricing information, Elysium argued that ChromaDex “cannot show any causal link between any allegedly misappropriated trade secret and the [orders discussed in the June 30 call], Elysium’s alleged failure to pay, or Elysium’s profits from those ingredients.” Specifically, Elysium argued that ChromaDex gave Elysium, on the June 30 call, the information Elysium first received from Morris, so Elysium’s possession of that information could not have caused ChromaDex to accept the orders.
Elysium was denied summary judgment on those issues, though, with U.S. District Court Judge Cormac J. Carney writing in a Jan. 16, 2020, order that “genuine disputes of fact remain” about what Elysium was entitled to know about other customers’ pricing, what exactly was said on the June 30 call, and what effect that had on the negotiations.
In analyzing these three angles, Carney ruled that a reasonable jury “could conclude that Morris gave Elysium substantially more information” than was required by the agreement between the two, that the information he provided Elysium was well beyond what ChromaDex offered during the June 30 call, and that “Elysium gained an unfair advantage by being able to use this information to plan for nearly a month in advance regarding its negotiating position.”
Soon after the controversial orders shipped, Morris quit ChromaDex, where he had worked since 2007. Similarly, Ryan Dellinger, ChromaDex’s former director of scientific affairs, resigned effective immediately on Aug. 10, 2016—the same day Elysium notified ChromaDex that it refused to pay its past due invoices.
Elysium now sells Basis with NR and pterostilbene it obtains from sources other than ChromaDex. Morris and Dellinger are both high-level executives at Elysium today.
Drug use, and discredited depositions
With the prospect of a jury trial looming, the personal text messages of Marcotulli and Alminana have been thrust to the fore; they undergird ChromaDex’s assertions about executive poaching and sharing of confidential trade secrets. Their texts also are being used to discredit the deposition testimony of both Elysium executives.
Marcotulli was grilled during his deposition about texts in 2015 and 2016 that allegedly showed he frequently purchased and used cocaine—including having it delivered to the Elysium office. He denied it under oath, but later admitted “he regularly bought and used cocaine during the period of his employment with Elysium and certain contract negotiations with ChromaDex,” as stated in an April 27, 2021, order from Carney.
Alminana also admitted that he lied during his deposition, when he said he was not aware of Marcotulli’s drug use. Personal text messages—which Elysium lawyers “inadvertently produced,” and failed to claw back in legal filings—showed Alminana knew the Elysium CEO was using cocaine. The details were central to Carney’s April 27, 2021, order.
Admissions by both Marcotulli and Alminana that they lied during their depositions could be problematic for their credibility during a jury trial, set to begin Tuesday. Carney ruled some of the text messages and testimony about the depositions would be admissible at trial.
Elysium has vigorously defended itself in California by filing a flurry of legal countermeasures, including counterclaims alleging patent misuse, undue royalty requirements and failure to disclose levels of regulated substances under California’s Proposition 65 by ChromaDex. Those issues are similarly set to be addressed in the jury trial planned for the California case.
Patent challenges and other legal battles
As the California complaint has played out, the two companies have battled contemporaneously over the critical Dartmouth-held patents for NR that ChromaDex licenses.
Just last week, Elysium won a major victory in U.S. District Court in Delaware, when a judge essentially invalidated the patents by granting a motion for summary judgment to Elysium in the case. The original court action was initiated by ChromaDex and Dartmouth and alleged patent infringement by Elysium, and the judge’s ruling canceled a jury trial that had been planned for Sept. 27.
Prior to the recent ruling, the judge in the case ruled that ChromaDex and Dartmouth lacked standing to allege Elysium infringed the asserted patents after March 13, 2017, finding that a consumer products company once under the common control of ChromaDex, Healthspan Research, possessed the right to give Elysium a license to practice the asserted patents as of that date, and thus ChromaDex did not have the right to exclude Elysium from practicing the patents from that date forward.
ChromaDex’s stock tumbled following news of the Delaware judge’s ruling, though the company vowed to appeal the decision and said in a statement that “ChromaDex retains a strong and growing intellectual property portfolio for nicotinamide riboside.”
Elysium spokesperson Whitney Christopher wrote in response to the Delaware ruling: “After three years of litigation, we are gratified that the court vindicated our position and concluded that the Dartmouth patents licensed by ChromaDex are invalid, as we have contended all along.”
Elysium previously challenged the validity of the two Dartmouth-held NR patents licensed by ChromaDex, filing inter partes review (IPR) with the Patent Trial and Appeal Board (PTAB) of the U.S. Patent and Trademark Office. While the PTAB rejected a challenge to one of the patents (#8,197,807), an IPR was initiated on the other (#8,383,086); in January 2019, the PTAB ruled that four of the five claims of the ‘086 patent were invalid, a ruling affirmed by the U.S. Court of Appeals for the Federal Circuit in March 2020.
ChromaDex interpreted the PTAB ruling as a successful defense of their ‘086 patent. In an Aug. 16, 2021, email, a ChromaDex spokesperson wrote, “In order for a patent to be upheld during a PTAB challenge, only one claim needs to ‘survive,’” and, “Claim 2 was upheld, which continues to validate our patent.”
In yet another venue, Elysium sued ChromaDex in federal court in the Southern District of New York (SDNY), after ChromaDex filed a citizen petition with FDA asking to stop Elysium’s sale of what it says are adulterated health supplements. That was followed by a countersuit by ChromaDex for Lanham Act violations and “improper conduct” aimed at taking over control of the NR market. The lawsuits were merged into one case, which has yet to be resolved at trial.
Despite all the court traffic on multiple fronts, the legal freight train that is the California case is running out of track. A jury trial is set to begin today in the case.
“We look forward to presenting the facts to a jury,” ChromaDex CEO Rob Fried said in a statement.
About California, Elysium’s Christopher wrote in an email, “Our issues with ChromaDex arose from a simple contract dispute when Elysium discovered that ChromaDex had breached multiple parts of our agreement.”
She continued: “Though ChromaDex has sought to embellish the nature of the dispute, it’s actually quite straightforward, which is reflected in the summary judgment order issued Oct. 9, 2019, by a federal district judge in California. The judge stated plainly: not only that this is a ‘straightforward breach of contract action’ but also that there were ‘huge leaps in [the] causal chain the Court is not sure how ChromaDex can prove.’”
It’s noteworthy that much of the text message evidence was presented to the court, in an effort to prove that causation, after the Oct. 9, 2019, judge’s order cited by Elysium.
Christopher added, “It is also worth noting that … ChromaDex has become involved in two new lawsuits, both with other former customers.”
ChromaDex is currently in litigation it initiated against Thorne Research in SDNY federal court, alleging willful infringement of its patents (Case No. 1:21-cv-04241-ER, log in required). The suit comes after Thorne filed a petition for, and was granted, an IPR on the ‘807 NR patent. However, in May 2021 the PTAB ruled that “there is not a reasonable likelihood” of Thorne prevailing with respect to the challenged claim of the ’807 patent. A second patent challenge from Thorne is currently under review by the PTAB.
ChromaDex is also in a dispute with another customer, Rejuvenation Therapeutics, who have requested a full refund of about $1.6 million of NIAGEN purchased. The suit, filed May 13, 2021, in Superior Court of California in Orange County, alleges breaches of the supply agreement between the parties (Case No. 30-2021-01201121-CU-FR-CJC).
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A previous version of this story contained errors about litigation timing and a venue related to a quote from Elysium’s spokesperson. It also was missing context about lawsuits outside of the California dispute.