A couple of things before I go. Thanks to CSMCLEMORE for providing a civil, stimulating and thought provoking debate on the merits and legal arguments of the case. While I have a biased against SIGA as it pertains to the case, I have an absolute bias for the prospects of ST-246. SIGA has options under the contract that would enable it to manage the debt it should owe to PIP at the end of the appeals process. The existence of these options gives hope that SIGA shareholders may not be completely wiped out and that PIP would have opportunity to collect the full amount of the damage award. PIPs strategy should be to focus on delaying BK process, and demonstrating to BK judge SIGA's likely ability to pay full amount of the debt if its liabilities are restructured as opposed to eliminated.
The appeal should not take nearly as long as the first because DSC is now well aware of the facts and circumstances and as many of you have seen played out in the debates on the merits, there are just a few points to consider. In the end, there is significant value still remaining on existing contract with BARDA (even after considering damages SIGA owes PIP). It is this issue, that makes SIGA's decision to move so quickly to file BK so surprising, and especially without better communication with their own shareholders. No where along the line have they attempted to reiterate the potential value that remains on base contract (at least $220 mln) and potential for options to significantly increase the value beyond on that amount (MYMYGBYE you still need to do your research on 2nd option). Problem for everyone is not being able to get past management, litigation overhang, and now BK, to see to real value that exists.
I've been quite clear in my view that SIGA is in position to get at least 50% of remaining amount (12 million) courses govt wants and needs to stockpile, but that is still at least a couple years away.
It has been fun! Goodbye and good luck!
Right, from the standpoint that they used language pertaining to the legal basis for dismissing the claims as speculative. Now did try to dig deeper. There are 844,531 race horses in the United States (source American Horse Council) and there are at least 50,000 races in the U.S. per year (NYT Mangled Horses Maimed Jockeys 3-24-12). Are you getting the picture on how the facts of that case do not compare remotely to the facts of two maybe three antivirals competing in a single race to win U.S. Government contract.
Now have you taken the time to find and read the contract SIGA already has with BARDA? Performance under the contract is what SIGA is trying to secure without risk of losing control of the asset ST-246. Look at terms of the contract, timing for what we know they have begun execution and contract terms for additional options BARDA has under the contract. You should be able to draw a straight line through the steps and reach a logical conclusion as to why BARDA has not yet exercised those options and when they might consider doing so.
Might be an important investment consideration for holders of both PIP and SIGA don't you think? Or should I say, do you?
Right it's silly to look at case deemed "speculative" and grasp onto the conclusion as being comparable when facts of the case are far from comparable.
Do the fundamental research! You are SIGA supporter and shareholder. You looked up case law on a horse and tried to compared to case on biodefense. I laid out arguments from case to demonstrate why there is vast difference in facts and as a result likely vast difference in conclusions.
Let's get back to fact. SIGA has contract with BARDA. It is a base contract with future milestones tied to performance and then there are two primary options. One of which I detailed for you, the other I did not.
What is the second option and its value to SIGA if BARDA exercises that option? How might that play into outcome of BK reorg process?
Forget luck. Lets deal in facts. Can't find the contract? What is the second option and its value to SIGA? Come on, you are a SIGA holder you should know this!
This fact is likely to have bearing and the finding of the BK court and the ultimately outcome of that process for both PIP and SIGA. I''m sure you have seen my postings on PIP's board as it relates to this issue. We both know the final decision from Chancery is not final chapter in the story.
Laughable Silent Billy Comparison Continued
3RD Nature of horse racing vastly different from market for ST-246. Silent Billy's owners had hundreds of races from which to choose to compete and thousands of horses that would serve as competition in those races. In 2006, there were very few options for Govt to consider in its desire to create a stockpile of an antiviral that could be effective at treating those that do not respond to smallpox vaccine (or are contraindicated) and may as a result become infected at time of biologic attach. In fact, even today, there are only two serious competitors ST-246 and CMX-001. In horse terms, CMX-001 was a foal unable to compete (too early, no evidence of effectiveness in either monkeypox or smallpox) and ST-246 was a two year old thoroughbred that had broken course records in training (proven effectiveness in both monkeypox and smallpox trials, initial human safety established). There was in 2006, and is now, only one race. And that is race to secure U.S. government funding for development and manufacture of the drug. AS ANYONE CAN PLAINLY SEE THE ODDS OF WINNING FOR ST-246 ARE VASTLY DIFFERENT. Clearly the 'odds of winning' for ST-246 were greater than 50%. Especially if it gets to the starting gate, where it was, and there are no other horses entered into the race. That is reasonable expectation and it is not speculative. These facts have been presented and established at a level determined by Delaware Chancery Court to be reasonably certain and not speculative.
So do I think it is speculative to prove damages for a horse where there is no proven injury and the odds of winning are extremely difficult to calculate, because there are hundreds of races and thousands of horses against which Silent Billy must compete and win? Absolutely.
HOW FUNNY! Silent Billy the race horse that was winning $30k per year, was in a trailer hit by a car and not reported as injured at the scene of the accident, nor were any people involved in the accident reported injured. Silent Billy goes on to come to race two days later, twice more the next month. Then after a four month period of rest Silent Billy comes in second, at which point his owners decide to race him 9 times in 3 months. Sadly, after apparently not finishing high enough to win an prize money the owners decide to retire Silent Billy due to "lameness". Only after retiring Silent Billy did the owners decide to file suit for alleged damages.
SO "LAME" ITS LAUGHABLE
1ST Billy's case was heard in Superior Court not Chancery Court. Recall that it is Chancery Court that has jurisdiction for PIP/SIGA case. The Chancery Court "unique competence in and exposure to issues of business law are unmatched."
2ND There is no medical evidence provided in the case record that there was any injury to Silent Billy. While there is reference to examination by two veterinarians, there is no report from veterinarian describing nature of the injury that would link that injury to horse's lack of performance and expectation that such an injury is permanent. In other words there is no connection of the facts of the case to alleged damages. The only "evidence" was a decline in winnings from prior years to the one in which "supposed" injury occurred and owners decided to cease racing the horse. This alone leads to huge leap and speculation that decline was due to supposed injury as opposed to race selection, training, or frequency of racing that may have contributed to this supposed decline in performance.
Too difficult to deal with fact? You have invested in SIGA and claim to know the ins and outs of the market and what may or may not be reasonable to expect. We all know that SIGA has an existing contract with BARDA. This is fact. It is fact that option to increase supply under the contract was terminated. Your are right! The original contract, with options, called for 14 million doses. I wonder how BARDA got to that figure? Might it be the 5% number from medical literature that established minimum number for whom there would be no-take with vaccinations years before the breach. How speculative is that number?
Now lets move on to other points of fact having to do with the existing contract. What is the second option and the value of that option that BARDA has under the existing contract?
So what does that lawyer think the likelihood is that BK court would limit writeoffs of liabilities if it can be shown that SIGA has contract for which it will perform and receive an additional $84 million (in addition to $99 mln in cash on balance sheet now) in the next 12 months. That alone seems to make the $90 million estimate far too low. And, there are performance incentives under the base contract that would enable SIGA to earn an additional $120 million once it receives FDA approval. Under those facts and circumstances, how does that change the lawyers view of what might happen as a result of BK filing?
That is $200 mln that has yet to come in under the existing contract, not counting any additional options BARDA might exercise that would significantly enhance that figure. While I can see SIGA's desire to limit requirement for immediate demand for payment following final judgment/loss on appeal, I cannot see how SIGA can avoid making full and complete payment over time. In other words, given time, SIGA could pay off a $230 million judgment, why should they be allowed to eliminate full liability especially if creditors are willing to "restructure" liability (changing from current to long term, with payments on debt tied to performance under contract) to allow for this scenario?
While we debate definition of speculative, have you ever taken the time to go figure out what the existing contract says about BARDA second option and what that would be worth to SIGA?
I gave you the first option, which is to extend shelf life from 60 months to 84 months and for which SIGA would receive about $7 million for doing validation testing and $50 million for success. That's on top of the $120 million SIGA will get as part of the base contract for gaining FDA approval.
Now I ask you, what is the second option and its potential value to SIGA?
Once you have that figure, please share it so that we can discuss how its existence raises further questions as to how BK courts might feel about SIGA's business outlook in light of its pleadings for protection from creditors.
In your world everything, including sun rising tomorrow, is speculative. There is a difference between uncertain and yet reasonable, and a level of uncertainty that is speculative. My point has been consistently that there is ample, independent evidence that existed prior to the breach to suggest that the findings by Parsons, while uncertain (in that nothing can ever be 100% certain regarding expectations because we will never know with certainty what woud have happened if PIP had controlled ST-246) yet are still reasonable.
Dispute all goes back to language in license agreement term sheet on the bottom of each page that stated "non-binding"; however the LATS was included in agreements (loan agreement and merger agreement) that were both binding. The latter included a provision that required parties to negotiate an agreement in good faith in accordance with the terms of the LATS if the merger was not completed. The merger was not completed and there is no dispute about reasons for action to terminate. The dispute arises because after the merger terminated SIGA refused to negotiate in good faith, offering terms to agreement that were vastly different from those outlined in the LATS. PIP filed suit and an 8-year process of litigation and appeals began that is still not complete. For more info read the decisions of Delaware Chancery Court and Delaware Supreme Court that can be found on PIP website. But be forewarned Chancery Courts initial decision is over 100 pages, and its latest is over 40 pages.
From Henkel Corp v. Innovative Brands
"When a contract is breached, the Court determines damages “as if the parties
had fully performed the contract.”51 “Historically, damages for breach of contract
have been limited to the non-breaching party’s expectation interest.”52
Expectation damages are calculated as the amount of money that would put the non-breaching
party in the same position that the party would have been in had the breach never
As the Delaware Supreme Court has explained:
[T]he standard remedy for breach of contract is based upon the
reasonable expectations of the parties ex ante. This principle of
expectations damages is measured by the amount of money that would
put the promisee in the same position as if the promisor had
performed the contract. Expectation damages thus require the
breaching promisor to compensate the promisee for the promisee’s
reasonable expectation of the value of the breach of contract, and,
hence, what the promisee lost.54
The Court elaborated:
[T]he non-breaching party is entitled to recover damages that arise
naturally from the breach or that were reasonably foreseeable at the
time the contract was made. Contract damages are designed to place
the injured party in an action for breach of contract in the same place
as he would have been if the contract had been performed.55"
It says non-breaching party entitled to damages that were "reasonably forseeable" a the time contract was made. That does not require "proof" that expectation actually occurred after the contract was made, nor does it require "completely certainty" in arriving at the value.
I will take this up on other thread, but suffice it to say there is a distinction between proof of damages, which means that PIP can establish that it suffered a real economic loss and proof of the amount of damages, which do not have to be certain and by definition are subject to some degree of uncertainty.
Simple, Parsons tossed all the models relied upon by the expert during testimony (remember the $1-$3 billion both PIP and SIGA expected at that time). Well he thought that was to speculative and tossed baby out with the bathwater during his initial decision.
After remand, he re-reviewed expert testimony of both parties. And rather than make a decision based off of a single model, he examined the supporting evidence for underlying assumptions that had been presented. He only dismissed those assumptions where there was not adequate evidence to reasonably expect (for example reorders, international orders) and kept assumptions where he felt there was enough supporting evidence upon which to reasonably rely (5%=14-15mln courses, price/course, discount rate, etc). Then he ordered expert to take those assumptions that could be reasonably relied upon and build a model to calculate damages.
As for case history, recall that prior to this case there was no precedent in Delaware Law for expectation damages to be awarded from Type II agreement.
As for your assertion that the decision is forcing SIGA out of business, we all know that is not the case and was the reason for their BK filing.
SIGA never has to get 15 mln doses for that to be expected in 2006. That is the point of expectations damages, they look at what could reasonably be expected.
MYMYGBYE, you asked where in DSC its says control? Well look with me at page 26 and 27
"Although the LATS itself is not signed and contains a footer on each page stating “Non Binding Terms,” the record supports the Vice Chancellor’s factual conclusion that “incorporation of the LATS into the Bridge Loan and Merger Agreements reflects an intent on the part of both parties to negotiate toward a license agreement with economic terms substantially similar to the terms of the
LATS if the merger was not consummated.”63
Footnote 63 states "As support for his factual conclusions, the Vice Chancellor credited, among other things, “the testimony and documentary evidence PharmAthene adduced that it would not have loaned $3 million to SIGA without an assurance from SIGA that PharmAthene reasonably could expect to control ST–246 through either a merger or a license agreement in accordance with the terms of the LATS.”
Then on page 29 "Evidence that 'SIGA began experiencing ‘seller’s remorse’ during the merger negotiations for having given up control of what was looking more and more like a multibillion dollar drug” bolsters the Vice Chancellor’s finding that SIGA failed to negotiate in good faith for a definitive license agreement in accordance with the terms of the LATS. Therefore, we affirm the Vice Chancellor’s conclusion that SIGA actedin bad faith when negotiating the license agreement in breach of its contractual obligations under both the Merger Agreement and the Bridge Loan Agreement."
The affirmation of DSC of view that LATS contemplated PIP controlling ST-246 seems pretty clear. There are several others, did you not read the decision?
Problem is that your assumption that Yard Stick is not applicable is directly refuted by the author of the article (or CSMCLEMORE if they are one and the same). The article from which the statements regarding this case actually come states the follow:
"he yardstick method is a comparative approach, relying on evidence of the performance of comparable companies in comparable industries to project what the plaintiff would have earned had it followed trends in the specific industry or market. It may be used when the company does not have a history of profitability, or when a plaintiff is driven out of business prior to establishing a sufficient earnings history."
Did you see that inconvenient little part in their that "It may be used when company does not have a history of profitability"
Either CSMCLEMORE is actually D. Mitchell McFarland or in copying the information from ABA article "The Standard of 'Reasonable Certainty' Proves Lost Profits" he just happened to leave off a couple of key paragraphs that obviously provide some points of consideration not all to positive for SIGA.
First "Restatement (Second) of Contracts § 352 (1981) states: “Damages are not recoverable for loss beyond an amount that the evidence permits to be established with reasonable certainty.” The comments note that this requirement relates to the recovery of lost profits and that proof by sophisticated economic and financial data and by expert opinion has made it easier to meet the requirement of certainty. The standard of “reasonable certainty” has been adopted for the proof of lost profits damages by almost every jurisdiction." Did you notice that it has become easier to meet the requirement?
Second "Reasonably certain evidence of lost profits is a fact-intensive determination. Holt Atherton Indus., Inc. v. Heine, 835 S.W.2d 80, 84 (Tex. 1992). In Holt Atherton, the court stated, “At a minimum, opinions or estimates of lost profits must be based on objective facts, figures, or data from which the amount of lost profits can be ascertained.” This concept cannot be understated." I have consistently relied upon objective facts and figures that existed in the literature prior to breach to establish 5% as minimum reasonable requirement U.S. government had and this is similar to evidence Parsons examined and with which he agreed. That gets you to 14-15 mln doses
Third article states "Your expert may use data from industry sources, comparable companies, market data, or any other source that could reasonably be expected to predict the company’s financial results." Notice, it says predict. It doesn't require that anyone ever have received a contract for the exact amount or value of expectation.