SIGA Techs., Inc. v. PharmaAthene, Inc.

Facts

In 2004, SIGA acquired an antiviral drug for treating smallpox (ST-246). SIGA experienced difficulty developing the drug and by late 2005 was struggling financially. Konatich, SIGA’s Chief Financial Officer, began discussing the possibility of collaboration with another biodefense company, PharmaAthene. Richman, PharmaAthene’s Vice President of Business Development and Strategies, wanted the two companies to merge, but SIGA was resistant. SIGA insisted on outlining a licensing agreement before any merger discussions. The parties exchanged drafts of the licensing agreement term sheet (LATS), but by mid-January 2006 PharmAthene’s Board of Directors decided it preferred a merger. SIGA requested bridge financing and PharmAthene agreed to make the loan if it would obtain a license to ST-246 in the event the merger fell through. The parties continued their negotiations of the merger, and the LATS was attached and incorporated into the March 2006 Bridge Loan Agreement and the June 2006 Merger Agreement. After entering into the agreements, SIGA received two multi-million dollar grants and ST-246 was approved for its first human clinical trial. The Merger Agreement had a drop-dead due date of September 30, 2006, however the due date was extended because the SEC had not approved the draft proxy statement. On October 4, 2006, SIGA’s Board of Directors met and decided to terminate the Merger Agreement. On November 21, 2006, SIGA sent PharmAthene a 102-page Draft LLC Agreement with terms that drastically varied from the LATS in favor of SIGA.