In just two weeks, biodefense firms - PharmAthene Inc. (PIP) and Siga Technologies Inc. (SIGA) are set to face off in court , four years after a dispute arose over a licensing agreement related to smallpox antiviral drug candidate , ST-246.
Investors who are new to PIP and SIGA, read on to find out how the two companies, which once entered into negotiations to merge and form a powerful biodefense company, came to be locked in a bitter legal battle.
In March 2006, Siga Technologies and then privately-held PharmAthene agreed to combine their businesses through a merger and operate under the name PharmAthene. The terms of the agreement also called for the two companies to negotiate a licensing agreement for ST-246, Siga's smallpox antiviral candidate drug, in good faith even if negotiations for a definitive merger agreement broke down.
PharmAthene even loaned Siga $3 million in March 2006 to be used for expenses directly related to the development of ST-246 and for expenses relating to the merger and corporate overhead. However, the companies failed to finalize the merger agreement, and the focus was shifted to the licensing agreement related to ST-246. By October 2006, ST-246 showed signs of great success in clinical trials and had passed some important milestones since PharmAthene and Siga negotiated the licensing agreement for the drug candidate.
In the meantime, when PharmAthene invited Siga to the table and requested for action on the license agreement, Siga said that the license agreement was not binding and also proposed some changes to it with an attempt to obtain much more favorable economic terms. According to the proposed changes, the upfront payment from PharmAthene to Siga required for a license of ST-246 increased from $6 million to $100 million; the milestone payments increased from $10 million to $235 million; and the royalty percentage to be owed to Siga doubled.
Challenging Siga's motives, PharmAthene took to legal recourse in December 2006. The lawsuit filed by PharmAthene against Siga in the court of Chancery of the State of Delaware, includes six counts. PharmAthene, which charged Siga for breach of contract, among other things, also sought damages.
In January 2007, PharmAthene went public through a reverse merger with Healthcare Acquisition Corp. (HAQ), a publicly-traded special purpose acquisition company, and began trading on the American Stock Exchange under the symbol "PIP" effective August 8, 2007.
Meanwhile, Siga's motion to dismiss PharmAthene's complaint was denied by the Court in mid-January 2008. A counterclaim was filed by Siga against PharmAthene in October 2009, wherein PharmAthene has been alleged for breach of duty to engage in good-faith negotiations. Siga also sought recovery of its reliance damages from this alleged breach.
The following year - in March 2010, Siga moved for summary judgment, and the oral argument for Siga's request was held in the Delaware Court of Chancery in July 2010. A summary judgment is a determination made by a court without a full trial. The court's final decision on Siga's motion has been reserved and the trial is all set to commence on January 3, 2011.
Too precious to lose?
Siga's ST-246 , an orally administered antiviral drug that targets orthopoxviruses, is considered an ideal complement for PharmAthene's Valortim, a monoclonal antibody in development for the prevention and treatment of anthrax infection, and Protexia, a recombinant bioscavenger in development for chemical nerve agent poisoning. In the fight against possible bio-terror and bio-warfare attacks using the smallpox virus, it is believed ST-246 can be the preferred antiviral options for defense.
In October of this year, Siga was selected for the procurement of smallpox antiviral drug for the strategic national stockpile by the U.S. Department of Health and Human Services. Meanwhile, Chimerix Inc., an unsuccessful contender for the strategic national stockpile, has questioned Siga's eligibility for award of the government contract. Only those companies that qualify as a small business concern are eligible for the award.
According to Chimerix, the SBA (Small Business Administration) has determined that Siga is not a small business concern. But Siga defends its position saying it is appropriately qualified as a small business concern to secure the award.
The base contract, if finalized, is expected to generate revenues of about $500 million, and the entire contract, if all options are exercised, is expected to generate revenues of approximately $2.8 billion.
There is no two opinion that Siga is sitting on a gold mine - ST-246, which is also the subject of contention. So Siga and PharmAthene are going to defend their case with all their might.
... Now as the trial goes to court next month, it will be interesting to watch how the events unfold. And that said it will be worth having both PharmAthene and Siga on the radar screen.
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December 19, 2025 15:10 ET U.S. inflation data and interest rate decisions by major central banks were the highlights of this busy week for economics news flow. Employment data and survey results on the housing markets also gained attention in the U.S. In Europe, the European Central Bank and Bank of England announced their policy decisions and macroeconomic projections.