Siga Technologies Inc. (SIGAQ) on Wednesday asked the Delaware Supreme Court to slash a damages award that threatens to put the already-bankrupt company into deeper trouble.
The damages were assessed when Siga lost a fight with biodefense company PharmAthene Inc. (PIP) over smallpox drug Tecovirimat, which is now part of the Strategic National Stockpile, the country's biodefense arsenal of vaccines, antidotes and antitoxins.
Tecovirimat is believed to be useful in preventing or treating smallpox. It can be made in pill or capsule form, so it would be relatively easy to distribute in mass quantities in the event of a bio-attack.
Delaware's Court of Chancery in January told Siga to pay PharmAthene $194.6 million, a figure that includes $113 million in "expectation" damages for lost profits from Tecovirimat. Additionally, Siga's on the hook for interest of more than $30,000 per day, for each day the judgment goes unpaid.
Siga says the award was improperly calculated, and the lost profits were "speculative and too uncertain, contingent, and conjectural" to form the basis of a damages award for what it says was a failed licensing negotiation over an experimental drug of unknown potential.
"To put this award in perspective, it is greater than the market capitalizations of PharmAthene and Siga combined," Siga lawyer Stephen Lamb told the Delaware high court at Wednesday's hearing. Mr. Lamb is a former Court of Chancery judge.
"It is vital to Delaware's future as a significant commercial jurisdiction that this court reverse the judgment and rule that such speculative, indeed punitive, damages are not available," Mr. Lamb added.
PharmaAthene says there was no failed licensing negotiation and the damages were a proper remedy. According to PharmAthene, Siga experienced "seller's remorse" after the experimental drug started looking like a multibillion dollar hit.
PharmAthene urged the Delaware court to preserve the damages award or ask the lower court to consider awarding damages in the form of a share of cash flow generated from the drug. By PharmAthene's reckoning, it lost $400 million to $1 billion due to Siga's refusal to go through with the Tecovirimat deal.
Siga filed for chapter 11 protection in September 2014, short on cash and with the intention of continuing the court fight with PharmAthene.
In a recent bankruptcy-court filing, Siga said it is expecting a ruling from the Delaware Supreme Court by the end of the month or, at the latest, Jan. 5, 2016.
"Given the size of the Chancery Court's judgment and its potential impact on Siga's business, creditors, stockholders, and the entire plan process, the importance of pursuing the appeal to finality cannot be under-estimated," company lawyers said in the Sept. 10 bankruptcy court filing.
