BTG International, Inc. v. Wellstat Therapeutics Corporation, CA 12562-VCL

Background

Wellstat licensed exclusive U.S. distribution of Vistogard to BTG in a 2011 Distribution Agreement: BTG to market, distribute, and sell; Wellstat to pursue FDA approval and studies. BTG paid upfront fees and agreed to 20–40% royalties.
Agreement required BTG to use “Diligent Efforts” (industry-standard personnel and financial resources) and to prepare, in good faith, an initial Commercial Plan specifying minimum commitments of resources, personnel, and financing; a joint Committee would oversee commercialization.
After signing, BTG’s CEO Makin refocused BTG toward interventional medicine and constrained investment in the Pharmaceuticals Division; cost-cutting directives limited staffing and budgets for Vistogard.
Consultants (TGaS, ZS Associates) and BTG’s own commercial team advised substantially larger oncology sales forces (19–30 reps) and investment; BTG constrained hiring, launched with effectively ~3 FTEs, later increasing to 12 then 16 reps with poor training and phased hires.
BTG prepared a thin, hastily assembled Commercial Plan and later internally cut budgeted spending, and it manipulated a sales model (hard-coded a large growth blip) to misrepresent a higher forecast to Wellstat.
Wellstat sued for breach after BTG’s under-investment; the Court found BTG breached (failure of Diligent Efforts and bad-faith Commercial Plan), awarded Wellstat $55.8 million in expectation damages plus compound interest and costs, and authorized a limited attorneys’ fees remedy.

Issues

Issue	Wellstat (Plaintiff/Counterclaim Plaintiff)	BTG (Defendant/Counterclaim Defendant)	Held
Did BTG breach the Distribution Agreement by failing to use Diligent Efforts to commercialize Vistogard?	BTG failed to provide industry-typical personnel and funding (undercapitalized sales force, minimal promotion), contrary to Diligent Efforts clause.	BTG claims other marketing efforts sufficed and that phased hiring was reasonable given corporate strategy and timing.	Held: BTG breached — senior management’s strategic reallocation and cost cuts produced an inadequate sales force and underinvestment; consultants and internal data contradicted BTG’s defenses.
Did BTG prepare and comply in good faith with the required Commercial Plan?	BTG’s plan was a perfunctory, misleading PowerPoint lacking binding minimum commitments; BTG later cut its internal budget below plan without disclosure.	BTG asserts the plan and later budgeting were reasonable and flexible internal decisions.	Held: BTG breached — plan was not prepared in good faith and BTG materially deviated from it, violating the Agreement.
Did Wellstat breach first, excusing BTG’s performance?	(BTG’s defense) Wellstat delayed NDA filing and withheld clinical data, which impaired BTG’s commercial preparations.	Wellstat contends any early data-sharing issues were cured and delays due to external causes; no prejudicial breach occurred.	Held: Wellstat did not materially breach; its conduct did not excuse BTG.
Measure of damages and appropriate assumptions (patient population, access rates, status‑quo forecast)?	Wellstat sought expectation damages (loss of bargain) using expert inputs (Patel survey for patient pool incl. moderate/severe, Brock access rates, corrected BTG model), totaling >$112M; trial expert scenarios supported $55.8M.	BTG argued smaller patient pool, lower access rates, and reliance on lower forecasts (or no damages); raised mitigation, early-termination, and renewal uncertainty defenses.	Held: Court adopted a conservative mix: excluded mild/toxicities outside indication, used plaintiff’s expert access-rate, and used BTG’s corrected model (removing hard-coded bump); awarded $55.8M (to be specified to cents), plus 1% monthly compounded interest from Sept 15, 2015, costs, and limited attorneys’ fees.

Key Cases Cited

VLIW Tech., LLC v. Hewlett-Packard Co., 840 A.2d 606 (Del. 2003) (elements of breach of contract under Delaware law)
Duncan v. Theratx, Inc., 775 A.2d 1019 (Del. 2001) (expectation damages principle)
Genecor Int’l, Inc. v. Novo Nordisk A/S, 766 A.2d 8 (Del. 2000) (contract damages framework)
Comrie v. Enterasys Networks, Inc., 837 A.2d 1 (Del. Ch. 2003) (timing for measuring expectation damages)
Paul v. Deloitte & Touche, LLP, 974 A.2d 140 (Del. 2009) (limitations on awarding windfall profits)
Siga Techs., Inc. v. PharmAthene, Inc., 132 A.3d 1108 (Del. 2015) (resolving uncertainties in damages against breaching party)
Beard Research, Inc. v. Kates, 8 A.3d 573 (Del. Ch. 2010) (courts may make wrongdoer bear uncertainty in damages calculus)
Brandywine Smyrna, Inc. v. Millenium Builders, LLC, 34 A.3d 482 (Del. 2011) (prejudgment interest as matter of right)