Delaware Court upholds original ruling in favor of PharmAthene

PharmAthene, Inc.Dec 19 2011

PharmAthene, Inc. (NYSE Amex: PIP) today announced that the Delaware Court of Chancery has denied SIGA Technologies' motion for reargument filed on October 4, 2011, upholding the Court's original September 22, 2011 decision awarding PharmAthene 50% of the net profits over ten years from all sales of SIGA's smallpox antiviral therapeutic, ST-246, and related products, after SIGA receives the first $40 million in net profits.  In addition, under the original September 22nd Opinion, the Court awarded PharmAthene one-third of its reasonable attorney's fees and expert witness costs. 

"We are pleased by the Court's decision to uphold its original ruling in favor of PharmAthene," commented Eric I. Richman, President and Chief Executive Officer. "The Court's decision to award 50% of the net profits of ST-246 to PharmAthene represents a tremendous victory for our Company," continued Mr. Richman.  "The significant economic interest and near-term revenue we expect to recognize following this decision will enable us to accelerate our path to profitability and generate immediate value for investors.  Coupled with potential future revenue from our current programs, which continue to make exciting progress, PharmAthene is positioned to become one of the nation's premier biodefense innovators." 

In its motion filed on October 4, 2011, SIGA had requested that the Court vacate the "equitable payment stream" or "equitable lien relief" it awarded to PharmAthene.

In its opinion denying the motion for re-argument, the Court notes that "SIGA . . .  denied PharmAthene the benefit of its bargain by conducting those negotiations in bad faith and, thus, is liable for breach of contract and under the doctrine of promissory estoppel . . . .  [T]he underlying purposes of a constructive trust and equitable lien [are] applicable to the circumstances of this case . . . ."

The Court further notes that "PharmAthene would have accepted the use of a 50/50 profit split . . . [and] SIGA wrongfully deprived PharmAthene of its expectation of a major role in controlling the pace of the ST-246 development and expenditures."

"We are currently in the process of developing a proposed form of final judgment for submission to the Court.  Among other things, it will outline a definition of 'net profits,' based upon which the Court will render its final order," continued Mr. Richman. 

In May 2011, SIGA estimated that if the government were to purchase an additional 12 million treatment courses of smallpox antiviral, as outlined in BARDA's "justification for other than full and open competition" notification issued that same month, the total value for the current U.S. civilian market, including the initial base contract, could be approximately $2.8 billion.

SIGA was awarded a base contract from the Biomedical Advanced Research and Development Authority (BARDA) under the Department of Health and Human Services (HHS) for the initial procurement of 1.7 million treatment courses of ST-246.  The five-year base contract award is valued at $433 million, of which approximately $412.5 million is for purchase of the product.  

A copy of the Court's opinion regarding the motion for reargument, as well as the initial Sept. 22 opinion in the case, is available on the Company's website at http://www.pharmathene.com/ under the "Investor Relations" tab.