PharmaPrint, Customer Sue Each Other

Herbal supplement maker PharmaPrint Inc. and its only major customer, American Home Products Corp., said Wednesday they have filed lawsuits against each other in the wake of plans by American Home to end a licensing and supply contract.

The small Irvine firm, in a lawsuit filed Tuesday in Orange County Superior Court, accuses American Home of using PharmaPrint trade secrets to develop its own products.

It also alleges that the Madison, N.J., giant contacted its suppliers to learn trade secrets and breached a supply agreement by developing its own line of similar products.

American Home contends in a Newark, N.J., lawsuit filed Nov. 8 that PharmaPrint hasn’t lived up to its part of the bargain and that it falsely accused American Home of misappropriating its technology to develop new products.

In an Oct. 21 letter, American Home formally gave PharmaPrint one-year notice of its intent to terminate the agreement, American Home spokeswoman Carol Dornbush said. She declined to discuss the company’s reasons for ending the collaboration.

PharmaPrint, a money-losing company, said it has stopped shipping the supplements to American Home because it learned that the drug maker is using PharmaPrint trade secrets to develop new products.

“There was never an intention to honor this agreement,” PharmaPrint Chief Executive C. Richard Piazza said. “There was always the intention to compromise this company and take the technology.”

Dornbush declined to respond to Piazza’s allegation, saying that American Home doesn’t comment on pending litigation.

PharmaPrint has struggled to cut its losses. Investors have responded by steadily reducing the stock price, wiping out 88% of the value since February when the stock hit its peak this year of $14.88 a share. It closed Wednesday at $1.78 a share, up 6 cents in Nasdaq trading.

On Tuesday alone, the market dropped the company’s value 39% after PharmaPrint disclosed that it lost $6.6 million, or 48 cents a share, for its fiscal second quarter on revenue that had plummeted to $590,000 from $4 million for last year’s second quarter.

The loss, although improved from last year’s, still was more than double the 22-cent loss forecast by the one analyst that had submitted a forecast to First Call Corp.

Stock in American Home fell $2.56 a share Wednesday to close at $52.44 in New York Stock Exchange trading.