Page 75 - Acertaining Economic Damages Calculation

qualifications of those persons in charge of making the assumptions. He also has provided no
support for the accuracy of the statements and figures contained in the Final Business Case or
otherwise "demonstrate[d] why he believed the estimates were reliable." fn 10

SIGA Techs., Inc. v. PharmAthene, Inc., 132 A.3d 1108 (Del. 2015)

SIGA, a pharmaceutical company, acquired the ST246 technology for an antiviral drug used to treat
smallpox. SIGA entered into a series of agreements with PharmAthene, including a License Agreement
Term Sheet (the LATS) and Bridge Loan and Merger Agreements. However, the parties did not com-
plete a license agreement. SIGA brought suit, and the Delaware Chancery Court determined that

(1) SIGA breached its contractual obligation under the Bridge Loan Agreement and the Merger
Agreement to negotiate in good faith a definitive license agreement in accordance with the terms
of the LATS; (2) the parties would have agreed to a license agreement that was generally in ac-
cordance with the LATS had it not been for SIGA's bad faith breach." fn 11

Upon review, the Delaware Supreme Court remanded the case back to the Chancery Court to reconsider
its damages award.

On remand, in support of PharmAthene’s claim that it was entitled to an award of damages for SIGA’s
bad faith breach of contract, PharmAthene’s damages expert presented damage calculations for six dif-
ferent scenarios using a discounted future earnings method, relying, in part, on testimony offered by
PharmAthene’s pharmaceutical expert. After reviewing each of the six scenarios, the court selected the
scenario in which PharmAthene’s expert

calculated PharmAthene's damages according to the terms of the LATS... The starting point for
[Expert’s] damages calculation was a financial model prepared by PharmAthene in early 2006
while the parties still were negotiating a potential merger (the PHTN model). PharmAthene
shared this model with SIGA in 2006, and SIGA appears to have used it in some of the parties'
subsequent negotiations. fn 12

The Chancery Court accepted PharmAthene’s expert’s damage model as the basis for its damages, in-
structing the expert to modify his calculations to account for changes in certain assumptions addressed at
trial. The court concluded that (a) PharmAthene had a reasonable expectancy that ST246 would be
commercially viable; (b) PharmAthene had a reasonable expectation that sales would begin within four
years (rather than the two years assumed by its expert); (c) PharmAthene had a reasonable expectation
of selling ST246 to the U.S. government at $100 per course; and (d) it had a reasonable expectation of
the number of courses it would sell to the government.

After a second appeal, the Delaware Supreme Court affirmed the decision of the Chancery Court:

fn 10 Mosaid Techs., 2014 WL 807877, at *3.

fn 11 SIGA Techs., 132 A.3d at 1118.

fn 12 Id. at 1123.

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