Biotech Values

[ghmm]

GPCB/SPPI:

On the SPPI webcast of the FBR conference during the Q&A this morning they talk a great deal about the arbitration.
The link is http://www.wsw.com/webcast/fbr19/sppi/ it is about 25 minutes or so into the call that they talk about it.

I am not a lawyer and perhaps there is more to it BUT there is a real possibility that the contract between GPC and Spectrum could be terminated. Both GPC and Spectrum downplay this as likely, perhaps so. What doesn't make sense to me is this is binding arbitration. If the arbitrators deem that GPC violated the agreement then why wouldn't Spectrum's request to declare the contract null and void be allowed? [again I have no legal background but it sounds reasonable].

Now to the other side since GPC is not attempting to settle one could reasonable surmise that GPC thinks the risk/reward ratio doesn't justify settling. Since the risk could be total loss of the drug. They must think Spectrum's demand is much greater then paying them [us] off. So I'd summarize their view as:
1-Raj is asking too much
2-They believe there case is solid
3-Even if they lose they believe they would not lose total rights to the drug.

On the Q&A portion they talk about the points of dispute [going by memory i may have missed one or more]
1. No part of Pharmion payment to Spectrum
2. Not mentioning Spectrum in PR's/promotion
3. Not sending Spectrum communications with FDA
4. Co-promote option to not have any benefit [i.e. Spectrum pays their own expenses and receives nothing more then agreed upon royalty]
5. Not mentioned in the call but I believe Spectrum also claims GPC did not move in an diligent fashion to get as Japanese partner.

Now obviously point 1 is the key basis of dispute and while it would set precedent for future milestone payments as well (their is also still Japan to license out). But point 4 may be key as well. Spectrum probably wants as much to a profit share as they can get. GPC obviously wants to give them nothing. Aside from that though I think GPC wants Spectrum total out of any involvement here so a payoff (if they lose) makes sense. The other possibility would be for GPC to license out US marketing in which case they wouldn't be as obligated [they still are required to attempt to seek co-promote on Spectrum's behalf]. This clause to me may actually weakens Spectrum's case of a profit share and at best give them true "co promote". So here is how I would score the 5 points.
1. GPC edge [Spectrum left a hole open as Dew and others have pointed out and GPC took advantage. However I think interpretation may give Spectrum a chance].
2. neutral. I think Spectrum may have a point but it may be deemed not significant enough to break the agreement.
3. Spectrum edge [I am talking Spectrum's word on this. Perhaps GPC can show otherwise]
4. GPC edge [I think Spectrum probably left a whole open here too. What Spectrum may argue is that is not typical or sensible and perhaps they have a chance].
5. GPC edge. I think GPC can show they are trying it takes time, blah, blah, blah...

So the little point of #3 to me could be key if the arbitrators deem GPC violated and allow Spectrum to terminate the contract!!

If the arbitrators go for a half way ground then I believe Spectrum would get something on points 1 and 4 how much is hard to say.

I should also add that in GPC's counter suit they are seeking to get the drug for free [i.e. not obligated to pay royalty] because of Spectrum's bad faith. I won't comment on this other to say while I think it is without any merit it is still a risk since there is binding arbitration.