Should see the beginning of the revenue stream from Arestvyr beginning this quarter (small for fiscal year 2012, but huge in 2013). Based upon my research SIGA has already received $42 million in either up-front payments from DHS ($30 million from DHS, and $12 million recently). Therefore the $40 million SIGA revenue requirement has been met according to the SIGA-PIP case decision last year.
Accordingly, all new revenue from Arestvyr will be split 50-50 for the next 10 years with PharmAthene. Unless the case is overturned by the Delaware Supreme Court (doubtful) or the appeal changes the outcome of the Chancery decision settlement amount (possible).
I would suspect it would be in the best interest of SIGA to consummate a buyout of all shares of PharmAthene at its current low valuation in the next week or two to ensure it receives 100 percent of the potential billions in revenue stream in the next 10 years.
I would expect a buyout offer to come for PIP in the next week or two. The final agreement has probably already been made in the 4th quarter, and will be announced with earnings. With the purchase of PIP by SIGA, SIGA stands to gain several major assets related to the Anthrax drug market, and PIP will not have to share its future profit potential with another company.
A win-win will be the result, with both companies appreciating handsomely in value over the next coming months and several years as both companies become quite profitable.
Sentiment: Strong Buy
Go back to the basement, your Mom is calling you....The case will be OVERTURNED....Get ready for a HARD slap in the face....Whether you agree or not with the decision, this was planned years ago....Good Luck......BUY as Much as you can quickly....
If you think you're going to win an appeal, so that damages are reduced to the neighborhood of $5 million, why would you buy out a company that has no valuable assets, a whopping burn rate, and a long history of enmity with virtually all your company officers? SIGA does not want PIP; they want to win.
Pipster you do not even understand the ruling. PIP does not receive a dime until after SIGA has 40 million in net profit. Do you know the difference between gross and net? Now let's see if the Supreme Court in Delaware amends the current travesty.
Sentiment: Strong Buy
Further, the judge accepted SIGA's definition of "net profit," not PIP's so a lot more cost of development will have to be recovered before they get anything. If the judgement stands, PIP will see nothing until well into 2014. Personal opinion, Appeals Court will remand the case back to the lower court and PIP will become toast as their product portfolio is garbage.
While the court found that the parties did not enter into a definitive license agreement by attaching the licensing term sheet to the merger agreement, the court found that SIGA breached its contractual obligation to negotiate a license agreement in good faith with PharmAthene. Once the merger agreement was terminated, SIGA proposed terms that were significantly more favorable to SIGA than those in the term sheet attached to the merger agreement. The court indicated that under Delaware law, bad faith constitutes “not simply bad judgment or negligence, but rather … the conscious doing of a wrong because of dishonest purpose or moral obliquity; it is different from the negative idea of negligence in that it contemplates a state of mind affirmatively operating with furtive design or ill will.” Therefore, the defendant's conduct must be “motivated by culpable mental state or driven by an improper purpose that rises to a high level of egregiousness.” The court had previously held in the context of a duty to negotiate in good faith that “an attempt to condition future agreement on a previously contested and compromised point is an unambiguous act of bad faith where the other party performed in reliance on that compromise.” The court found that PharmAthene made the requisite showing in this case because the parties had contested and compromised the primary economic terms for a license, PharmAthene acted in reliance on that compromise, and SIGA disregarded those terms and attempted to negotiate an agreement containing terms “drastically different and significantly more favorable to SIGA than those in the term sheet.” According to the court, the parties were required “to negotiate in good faith a license agreement with economic terms substantially similar to those contained in the [term sheet],” and SIGA breached that obligation. The court further found that PharmAthene was entitled to relief under the doctrine of promissory estoppel. With respect to damages, the court found that absent SIGA's bad faith negotiations, the parties likely would have entered into a license agreement generally in accordance with the terms in the term sheet. Based on the discussions between the parties after the merger was terminated, including PharmAthene's willingness to consider other deal structures, the court found that PharmAthene likely would have accepted a 50-50 profit split with an upfront payment of approximately $40 million. Using principles of constructive trust and equitable lien, the court ordered SIGA to pay PharmAthene 50 percent of profits in excess of $40 million from sales of ST-246 and related products for a period of 10 years after first commercial sale of any product derived from ST-246.
The PharmAthene v. SIGA case serves as a pointed reminder that obligations to negotiate in good faith are enforceable and should not be taken lightly. While the specific facts and circumstances of each case will be of critical importance, parties should recognize that a showing of bad faith and potentially substantial damages may follow from a party's attempted negotiation of materially different and more favorable terms compared to terms previously agreed upon by the parties. The more terms that are agreed upon in advance by the parties, the stronger will be an obligation to negotiate an agreement consistent with those terms. Of course, each factual situation may differ and requires careful consideration. Practitioners and companies should exercise caution in agreeing to obligations to negotiate in good faith where there may not be a serious commitment to reach agreement or where an intervening change in circumstances may materially alter the relative benefit or burden of predetermined terms.
As far as the $50 million in "Net Profit" versus my statement of $50 million in net revenue, I stand corrected, and I commend you for catching this overssight. The actual language is as follows:
"Instead, I awarded, among other remedies, an ―equitable payment stream in the vein of a constructive trust or equitable lien as follows: ― once SIGA earns $40 million in net profits or margin from net sales of ST-246, PharmAthene shall be entitled to 50% of all net profits from such sales thereafter for a period from entry of this judgment until the expiration of ten years following the first commercial sale of any product derived from ST–246. As a court of equity, I concluded that this remedy reasonably compensates PharmAthene for its lost expectancy (i.e., what PharmAthene would have received had a license agreement been negotiated in good faith),3 was necessary to provide ―such relief as justice and good conscience may require,‖4 and was consistent with my ― broad discretion to form an appropriate remedy for a particular wrong."
Sentiment: Strong Buy