If you read the language in the contract, SIGA is guaranteed a price without FDA approval by simply meeting stability requirement and delivering doses that are accepted by National Stockpile. Unless they have failed to meet stability requirements (which could be grounds not to accept into stockpile), then they should be recognizing revenue at that price for each course delivered under BARDA contract. They should only be deferring the difference between this price and the price they would be awarded for all courses (even those previously delivered) once they receive FDA approval. These conditions are clearly spelled out in the contracts. I think a decision from Chancery Court (regardless of outcome), will likely remove any remaining uncertainty, triggering revision to accounting treatment, and restatement of prior results. In interest of full disclosure, I'm long SIGA calls but only as hedge to my long position in PIP. Consider it a synthetic straddle.
If the Chancery Court decision goes against SIgA (see: Parsons), they will appeal to the Supreme Court again without a single doubt. The Chancery Court decision will not remove any remaining uncertainty. The Supreme Court decision will.
Would agree that appeal to Delaware Supreme Court would be likely regardless whose favor decision seems to support; however, the elements of the case that can be appealed or reargued have narrowed significantly. As a result, it would be possible for Supreme Court to quickly review and dismiss the appeal, affirming Chancery Court ruling. Several times Parsons made reference to his expectation of an appeal regardless how he rules. I think that is part of the reason decision is taking so long. The more well reasoned, and documented his decision is based on prior case history and the facts of this case, the less likely the subsequent appeal will strike down or reverse his decision. I do not expect PIP to prevail with "specific performance" request, nor do I expect SIGA to prevail with "reliance damage" award. These are opposite, extreme ends of the potential outcome. I think decision would look similar from an economic standpoint to Parson's prior decision.
However, Supreme Court has given him room to support this decision based upon "expectation damages" rather than promissory estoppel as he did previously. Moreover, he "allowed" for movement away from LATS (by raising profit bar to $40 million for SIGA from what could have been $16 million under LATs). This kind of shift is only worth about $0.50/share to either company.
Bigger issue is the 10-year limit he had place on PIP's participation in commercial sales of the product. In reality, if they had expected to "own" the asset as they clearly did based on agreement to negotiate a license in good faith in which they controlled, developed and marketed the product; then, they would have participated in the full commercial life of the product and not be limited to a 10-year period. This has far greater long-term implications for SIGA/PIP as I expect the government will eventually rebid the full amount order originally placed for ST-246 and it will be split with CMRX in some fashion.
Well, I guess nothing has changed around here. Anyway, do know that the Supreme Court can make a firm ruling that essentially splits the value, or greatly extends the timeline for our understanding of the final distribution in this particular case. Also, that decision could occur 4 or 5 year from now… Just saying...
Hi Kage. Just came back ‘cause I’m considering selling what little SIGA have left.