PharmAthene Wins Delaware Court Ruling on Profits for Siga Smallpox Drug
Siga Technologies Inc. (SIGA) must share with PharmAthene Inc. profits from sales of a smallpox drug that may total more than $400 million, a judge ruled. Trading in shares of both companies was halted.
Delaware Chancery Court Judge Donald Parsons Jr. in Wilmington said today New York-based Siga breached its obligation to negotiate in good faith on ST-246, an antiviral drug for use in case of a biological attack. Parsons rejected PharmAthene’s claim that Siga breached a binding license agreement. He also denied claims for a lump sum award and instead ordered the companies to share the profits.
“The plaintiff is entitled to share in any profits realized from the sale of the drug in question,” Parsons said today in a 118-page opinion.
Siga spokesman Lewis Goldberg said the company couldn’t immediately comment on the ruling. Siga was preparing a statement to be released today, he said. Stacey Jurchison, a spokeswoman for Annapolis, Maryland-based PharmAthene, didn’t immediately return a call for comment.
PharmAthene sued Siga in 2006 claiming the biotechnology firm lost more than $1 billion in potential profits when its rival reneged on the licensing agreement for the smallpox drug. Government officials awarded Siga a $433 million contract to provide ST-246 to the U.S. Department of Health and Human Services, the company said in May. ‘Non-Binding’
Lawyers for Siga argued at trial that licensing talks were never completed and documents outlining proposed terms were marked as “non-binding.” A PharmAthene official said in court that the heading was left on the documents by mistake.
PharmAthene’s attorneys argued during a two-week trial in January that Siga was running out of money to develop ST-246 in late 2005 when it proposed a merger or license agreement.
PharmAthene executives ultimately loaned Siga $3 million to keep the drug’s development going while the two companies negotiated, according to court testimony. Company officials claimed that ex-Siga Chairman Donald G. Drapkin guaranteed the companies would either merge or Siga would grant PharmAthene a license for the medicine.
Drapkin, a former executive of billionaire Ronald Perelman’s MacAndrews &; Forbes Holdings Inc. holding company, countered during the trial that he never promised PharmAthene officials a license. A term sheet was intended to serve as a “jumping off point” for negotiations if merger talks faltered, Drapkin said.
PharmAthene rose 48 cents, or 21 percent, to $2.74, before trading was halted on the NYSE Amex stock exchange. Siga fell 2 cents to $4.70 before trading was halted on the Nasdaq Stock Market.
The case is PharmAthene Inc. (PIP) v. Siga Technologies Inc., CA2627, Delaware Chancery Court (Wilmington).
To contact the reporters on this story: Sophia Pearson in Wilmington, Delaware, at spearson3@bloomberg.net; Jef Feeley in Wilmington, Delaware, at jfeeley@bloomberg.net; Dawn McCarty in Wilmington, Delaware, at dmccarty@bloomberg.net
surf1944 Tuesday, 06/21/11 11:17:38 AM Re: surf1944 post# 298 Post # 300 of 1117 Go PharmAthene, Siga Technologies Could Soar on Judge's Ruling
There's a drama unfolding in the healthcare field that is as dramatic as the daytime soap operas. Lots of ";he said, she said"; has been tossed around, and just to add a little spice, a ";bete noire"; has also appeared on the scene to cause trouble. If this drama plays out a certain way, then shareholders of one or two of the companies involved may see a big windfall.
The drama began back in 2006 when little-known PharmAthene (PIP) sued Siga Technologies (SIGA) for damages stemming from a broken business deal. PharmAthene had loaned Siga money to fund research into a vaccination against smallpox. The loan was presumed to be an interim step before the two firms eventually merged. At a minimum, PharmAthene hoped to at least be granted rights to Siga's drug, known as ST-246. The two firms had even drawn up documents that appear to imply a merger discussion was the eventual expected result.
Siga appeared to eventually lose interest in any deal, figuring that it no longer needed PharmAthene's stronger balance sheet to help fund the development of ST-246. In October 2010, this dispute suddenly became a very big deal. The U.S. Department of Health and Human Services (HHS) awarded Siga a $500 million contract for ST-246, with an option to take it up to $2.8 billion. (Stay tuned, as these numbers really imply the wide range of potential benefits that these firms are fighting over.)
Two months later, in January 2011, the long-awaited trial finally got under way. Predictably, both companies hold very different views on what took place five years ago. PharmAthene's president Eric Richman told the court, ";We weren't loaning another company money unless we merged or got the product,"; according to Bloomberg News. Siga only recalls making oral commitments to merge or license ST-246, and insists it was within its rights to ultimately walk away from the talks. During the course of a week's testimony, PharmAthene's lawyers provided ample evidence that advanced talks took place, but failed to actually produce any sort of signed final agreement. Investors have since been left to wonder if ";an agreement to agree"; is a legally binding action.
In coming weeks (or perhaps in a month or two), the court is finally expected to decide. Parsing the judge's comments, it does appear some sort of beneficial outcome will result for PharmAthene. It could be as modest as $10 million or $20 million to compensate PIP for minor damages and legal expenses or it could be a truly Solomonic solution, where both parties equally benefit from the HHS contract award.
Although investor message boards are filled with partisan rhetoric on both sides, predicting an outright victory for one stock or the other, it's quite possible that both stocks will rally on a verdict if a worst-case scenario for either party is avoided. This is not a zero-sum game.
But that HHS contract award may look better than it actually is. Investors are fixated on a potential $2.8 billion payday, but Uncle Sam has only committed to a $500 million deal. In light of the current budget woes in Washington, it's prudent to assume that a $500 million smallpox vaccine will have to suffice for now. That's not peanuts, but probably not enough to enable each of these stocks to post 100% to 200% gains the most bullish investors are expecting. Instead, upside closer to 50% for each or both parties may be the best for which they can hope.
The plot thickens... Just as this drama appeared to almost be at an end, another twist has emerged. Privately-held Chimerix has protested the HHS contract award, citing the fact that Siga does not possess the required ";small business"; designation that is stipulated as part of the contract award. Siga is backed by MacAndrews &; Forbes, the large hedge fund run by Ron Perelman. And that affiliation implies Siga has ample access to capital, unlike a true small business.
Congressman Darrell Issa (R-CA) supports Chimerix's protest. The Congressman has a stated mission of halting and investigating virtually any contract award doled out under the Obama administration. So it's easy to dismiss his support for Chimerix as merely partisan politics. It doesn't help that Chimerix's law firm has been a financial backer for Issa, making his motives even murkier. Chimerix's challenge will need to be addressed by August 2010, and the company appears to have little chance of succeeding. But it was enough to spook investors in Siga Technologies and PIP. Both stocks have plunged in recent days and weeks.
That plunge actually opens a nice opportunity for investors not yet in these stocks. Shares of PIP had been up near the $4 range in anticipation of a beneficial verdict that would take shares to $5, $6 or beyond. Shares are now below $3. Siga's shares have fallen from $14.50 to $11 in the last few weeks on those same Chimerix-related concerns. This sets up a potential double, if Siga's most ardent backers are correct in their analysis.
The gains for both of these stocks may prove to be more modest if investors stop fixating on a $2.8 billion contract and instead think about a $500 million contract. Nonetheless, an imminent legal ruling and closure with the Chimerix challenge could help to give one or both of these stocks a nice quick gain later this summer.
Disclosure: Neither David Sterman nor StreetAuthority, LLC hold positions in any securities mentioned in this article.
cash2go Sunday, 11/07/10 11:08:41 PM Re: cash2go post# 244 Post # 245 of 1117 Go This news about Siga, MacAndrews &; Perelman
The lawyers got this past a judge that will not be happy:
PharmAthene, Inc. v. SIGA Techs., Inc., C.A. No. 2627-VCP (Del. Ch. July 10, 2009) In this letter decision after in camera review of documents listed on defendant SIGA Technologies’ privilege log, the Court held that communications between SIGA and the in-house counsel of a significant, though not controlling, SIGA stockholder, MacAndrews &; Forbes Holding, Inc. (“MAF”), qualified as privileged to the extent they were for purposes of legal and not business-only advice. The Court’s ruling relied upon the following factual findings: (a) SIGA is a small company that does not have its own in-house counsel and sometimes relies upon counsel at MAF, the employer of several SIGA board members; (b) MAF’s investment in SIGA includes an agreement for “added services,” such as legal services through counsel employed by MAF; and (c) given MAF’s significant investment in SIGA, the two companies share a “common interest” in SIGA’s success such that MAF attorneys could jointly represent both. The Court thus held that SIGA board members could reasonably infer that MAF attorneys were representing them and could reasonably rely upon the advice of those attorneys. To the extent communications between MAF counsel and SIGA contained “confidential information for the purpose of facilitating the rendition of professional legal services to [SIGA],” the Court held those communications to be protected by the attorney-client privilege.
jbog Sunday, 11/07/10 07:00:19 PM Re: None Post # 108355 of 209978 Go Biotech Firm's Drug Pact at Risk
Agency Says Ties to Perelman Disqualify Siga From Set-Aside for Small Business
By ALICIA MUNDY
WASHINGTON—A small biotechnology company that was told by the government last month that it was the likely winner of a smallpox-drug contract valued at as much as $2.8 billion may lose that job because of ties to billionaire investor Ronald Perelman.
The Department of Health and Human Services intended to award the contract to Oregon-based Siga Technologies Inc. under a program that sets aside some government work for small businesses.
But the Small Business Administration told the company in a letter late Friday that Siga doesn't qualify as a small business because it ";is controlled by and affiliated with"; privately held MacAndrews &; Forbes Holdings Inc.
MacAndrews &; Forbes is wholly owned by Mr. Perelman, its chairman and chief executive. The SBA's letter, a copy of which was reviewed by The Wall Street Journal, cited several large companies controlled by MacAndrews &; Forbes, including cosmetics giant Revlon Inc.
Under Siga's proposed contract with HHS's biodefense division, called the Biomedical Advanced Research and Development Authority, or Barda, the company was to produce and sell some 1.7 million treatments of a new antiviral therapy for smallpox for the U.S. Strategic National Stockpile.
Barda has faced criticism from a bipartisan government commission on weapons of mass destruction, which has expressed concerns about U.S. readiness against bioterror attacks involving diseases such as anthrax or smallpox.
At present, there isn't a medicine approved to treat smallpox, only a vaccine designed to prevent the deadly infection.
The commission, which gave an ";F"; to U.S. biosecurity preparedness in January, has been pushing Barda to speed up contracts for new medicines, such as an updated anthrax vaccine that would cost less than the existing version.
In the aftermath of the SBA's letter, a Barda spokeswoman said the agency was weighing its next step.
";We believe that Siga appropriately qualified"; for the small-business award, the company's chief executive, Eric Rose, said in a statement. Siga will continue developing its ";groundbreaking"; oral drug for smallpox, which has been funded by the government, Mr. Rose added.
Siga said it intends to appeal the SBA decision. It plans to make a public announcement about the SBA decision before the stock market opens Monday, said spokeswoman Christine Taylor, who was also speaking on behalf of Mr. Perelman and MacAndrews &; Forbes.
Congress has allotted Barda's Project Bioshield several billion dollars for anti-biowarfare medicines, and has pushed it to spread the money to small biotech firms, rather than concentrating on giant drug companies.
The SBA's ruling on Siga came in response to a protest filed by Siga's rival for the contract, Chimerix Inc., a privately held biotech company based in North Carolina.
";We notified Barda in July 2009 that Siga did not qualify for a small-business set-aside,"; said Chimerix Chief Executive Kenneth Moch.
He said Barda had indicated to Chimerix earlier that the agency intended to award contracts to both Siga and Chimerix for smallpox medicine, to prevent any one company from having a monopoly.
Chimerix said that when it was notified in early October that Siga would get the sole contract, it filed a ";size challenge"; against Siga with the SBA.
In June, Andy Stern, former president of the Service Employees International Union, joined Siga's board as a director. For the third quarter of 2010, the company reported an operating loss of $2.4 million on revenue of $6.6 million from research and development grants and contracts.
Siga's stock price jumped more than 40% in October when it announced that it was likely to receive the Barda contract.
scion Member Level Tuesday, 10/05/10 10:39:32 AM Re: None Post # 6263 of 21826 Go Rajaratnam Takes Stand at Hearing
October 4, 2010, 5:26 pm dealbook.blogs.nytimes.com/2010/10/04/rajaratnam-takes-center-stage-at-galleon-hearing/
7:05 p.m. | Updated Almost a year to the day after agents from the Federal Bureau of Investigation arrested him on insider-trading charges, the hedge fund manager Raj Rajaratnam took the witness stand at a pretrial hearing in federal district court on Monday, raised his right hand and swore to the tell the truth, the whole truth and nothing but the truth.
Mr. Rajaratnam appeared before Judge Richard J. Holwell in a Lower Manhattan courtroom at what might be the crucial hearing ahead of the actual trial. At issue: whether to admit into evidence the roughly 2,400 wiretapped conversations between Mr. Rajaratnam and his friends and accused accomplices. For three days, his lawyers, led by John Dowd of Akin Gump Strauss Hauer &; Feld, are arguing that the government illegally obtained the wiretap evidence by failing to disclose previous investigations of Mr. Rajaratnam by the F.B.I. and the Securities and Exchange Commission.
The 53-year-old Mr. Rajaratnam, founder of the Galleon Group, was indicted on charges of securities fraud and conspiracy in what the Justice Department is calling the biggest hedge fund insider-trading case in American history. He has pleaded not guilty, along with his co-defendant, Danielle Chiesi, who also showed up for Monday’s hearing. The case has produced 21 arrests and several guilty pleas.
Mr. Rajaratnam’s trial is scheduled to begin in January.
But before the wiretap hearing, Judge Holwell called Mr. Rajaratnam to the stand for a mini-hearing to make sure he understood that his law firm, Akin Gump, had a potential conflict of interest in the case. Before his testimony, Mr. Rajaratnam sat toward the back of the courtroom looking relaxed and casually chit-chatting with Samidh Guha, an Akin Gump partner working on the case.
What was Akin Gump’s conflict? The firm also represents AM General, the maker of the Humvee military vehicles, as well as sport utility vehicles sold under the dying Hummer brand. It turns out that Lauren Goldberg, a former federal prosecutor who worked on the warrant application and will be a witness at the hearing, is now an in-house counsel at the parent company of AM General. (The billionaire Ronald Perelman’s MacAndrews &; Forbes, where Ms. Goldberg works as a senior vice president, owns AM General.)
Dressed in a dark suit, white shirt and dark-blue tie, Mr. Rajaratnam said little on the stand, responding with “no, your honor” and “yes, your honor.”
Judge Holwell, who conducted the questioning, explained the implications of Akin Gump’s divided loyalties, like the possibility that Mr. Dowd could choose to not question Ms. Goldberg as vigorously “so as not to disturb the relationship with AM General and its owners.” Mr. Rajaratnam said that he was not bothered by any of this. Perhaps his most emotional moment on the stand was when the judge asked whether he was happy with Akin Gump’s representation so far. “Very much so, you honor,” he replied.
At the end of the five-minute session, Mr. Rajaratnam waived his right to conflict-free representation and right of appeal on the grounds of ineffective assistance of counsel. (This neat little Q.&;A., for all you curious law students out there, is called a Curcio hearing.)
With that, Mr. Dowd of Akin Gump opened the main event. In a hard-hitting opening statement, Mr. Dowd accused the government of misleading Judge Gerard Lynch into authorizing the wiretaps. He argued that because the S.E.C. had spent more than a year building a “classic insider-trading case” against Mr. Rajaratnam, the use of wiretapping, which had never been used before in an insider-trading case, should not have been granted. “They gamed the system,” Mr. Dowd said.
A federal prosecutor, Jonathan Streeter, responded that the government acted fairly and that the unprecedented surveillance tactics were necessary because the S.E.C.’s investigation had failed to yield sufficient criminal evidence.
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