Siga Liable Over PharmAthene Contract; Damages Set Aside

Biological warfare defense firms Siga Technologies Inc. (SIGA) and PharmAthene Inc. soared after a mixed ruling by the Delaware Supreme Court affirmed Siga’s liability over a smallpox medicine licensing agreement while setting aside a potential multibillion-dollar damages ruling for PharmAthene.

The court’s decision yesterday mirrored Delaware Chancery Judge Donald Parsons Jr.’s 2011 ruling on liability while ordering him to reconsider the amount of damages. Siga rose as much as 41 percent after the close to $5.15 before it was halted at $4.40. PharmAthene rose as much as 53 percent to $2.45 before falling back to $2.37.

PharmAthene, a developer of biological and chemical defense products based in Annapolis, Maryland, sued New York-based competitor Siga in 2006, claiming it had a licensing agreement for the medicine. PharmAthene said it should share in as much as $5 billion in potential sales, mostly from government contracts for ST-246. The antiviral drug is intended for use in case of a biological attack.

Parsons ruled in 2011 that PharmAthene was entitled to 50 percent of profit from sales of ST-246 once Siga earned a profit of $40 million. The state high court yesterday affirmed his decision that Siga is liable for breaking its contractual obligations to negotiate a licensing agreement in good faith.

Siga officials said last year that the company won a five-year U.S. government contract for 2 million doses of ST-246 in a deal that could be worth as much as $2.8 billion.

In its lawsuit, PharmAthene argued it had a claim to ST-246’s profits because it helped fund the drug’s development and Siga reneged on promises to grant a licensing agreement.

Stephen Lamb, a lawyer for Siga, and Stacey Jurchison, a spokeswoman for PharmAthene, didn’t immediately respond to phone and e-mail messages yesterday after regular business hours seeking comment on the decision.

The case is Siga Technologies v. PharmAthene, 12-00314, Delaware Supreme Court. The Chancery Court case is PharmAthene Inc. (PIP) v. Siga Technologies Inc., CA2627, Delaware Chancery Court (Wilmington).

To contact the reporter on this story: Joel Rosenblatt in San Francisco at jrosenblatt@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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