Apart from the ongoing legal proceedings described below, SIGA Technologies (NASDAQ: SIGA) has also experienced a significant amount of turnover in its executive suite and on the board. There have been 3 CFOs since Apr-09 and 6 director departures since 2007.
SIGA announced last Friday that the Delaware Chancery Court had denied its motion for reconsideration of certain aspects of an unfavorable ruling in litigation relating to the rights to ST-246. The ruling is yet another piece of bad news for a company facing the prospect of surrendering a significant chunk of profits for its most promising drug candidate.
On 22-Sep-11, SIGA disclosed that the Chancery Court had ruled against it on claims of a breach in its duty to negotiate in good faith with respect to a license agreement relating to ST-246, a smallpox drug. The Court awarded to PharmAthene, the plaintiff, an “equitable payment stream” consisting of 50% of net profits achieved in excess of $40 million for ten years following the first commercial sale of ST-246.
SIGA does not yet have an FDA-approved product, but in May-11 entered into a 5-year $435 million contract with the U.S. Biomedical Advanced Research and Development Authority to deliver 2 million courses of ST-246. Last week’s ruling was just another blow in the company’s attempt to fully reap the rewards of that contract.
SIGA disclosed that its next likely legal action is an appeal to the Delaware Supreme Court. The ever-mounting costs associated with the continued litigation could weigh heavily on a firm that lacks a consistent revenue source. The stock has tumbled more than 86% from its high in early March.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.