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SIGA Technologies, Inc. v. PharmAthene, Inc. | 67 A.3d 330 (Del. 2013)

SIGA Technologies versus PharmAthene features two pharmaceutical companies wrangling over the rights to a potential blockbuster drug.

SIGA Technologies was working on an antiviral drug for the treatment of smallpox. In desperate need of funding, SIGA sought a collaboration with PharmAthene.

The two companies outlined the details of a licensing agreement in a license-agreement term sheet.

PharmAthene then decided that it would prefer a merger. SIGA and PharmAthene entered a bridge-loan agreement, under which PharmAthene loaned SIGA three million dollars, and a merger agreement. The agreements stated that the parties would negotiate a license agreement if the merger was terminated.

Before the merger could consummate, SIGA received two large grants from the National Institutes of Health. The drug research was going well, and SIGA’s stock price was rising. SIGA decided to terminate the merger agreement with PharmAthene.

When the merger agreement fell through, PharmAthene proceeded with negotiating the license agreement. SIGA suggested terms that were radically different from the original term sheet, with PharmAthene paying higher fees and otherwise favoring SIGA.

PharmAthene sued SIGA in the court of chancery, alleging that SIGA had breached its contractual obligation to negotiate in good faith.

The Vice-Chancellor found that the parties had set the basic terms of the transaction in the license-agreement term sheet and expressly agreed in the bridge loan and merger agreements that they’d negotiate a final transaction in accordance with those terms. The parties would’ve finalized a license agreement but for SIGA’s bad faith. Concluding that SIGA was liable on the basis of promissory estoppel, the Vice-Chancellor held that the proper remedy was payment approximating the terms of the license agreement to which the parties would have agreed under the license-agreement term sheet.

SIGA appealed to the Delaware Supreme Court.

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