341 A.3d 513
Del. Ch.2025Background
- Alexion Pharmaceuticals acquired Syntimmune, promising earnout payments to former Syntimmune stockholders contingent on drug development milestones (milestones 1-8) related to a monoclonal antibody drug ALXN1830 meant to treat rare diseases.
- The agreement required Alexion to use "commercially reasonable efforts" (CREs) over seven years to achieve these milestones and to make corresponding lump sum payments upon each milestone's achievement.
- Alexion terminated the ALXN1830 program in December 2021, shortly after it was acquired by AstraZeneca, allegedly to meet synergy commitments from the merger.
- SRS, acting as the representative for former Syntimmune stockholders, sued Alexion for breaching the CRE obligation by unreasonably terminating the program, and for separately breaching a non-avoidance covenant (not to act primarily for the purpose of avoiding milestones).
- After an earlier finding of liability, the present decision resolves the quantum and method of damages for the breach, centering on the appropriate calculation of expectation damages for contingent milestone payments.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Damages for Breach of CRE Obligation | SRS argued for expectation damages calculated by the lost expected value of each milestone, using probabilities of achievement at the time of breach. | Alexion argued damages should only be awarded if SRS could prove each milestone's achievement was more likely than not. | Court awarded expectation damages based on expected value methodology, finding SRS proved nonzero probabilities for each milestone at breach. |
| Appropriate Method for Calculating Probabilities | SRS advocated using their expert's (Kinch) database and probabilities at time of breach. | Alexion challenged the reliability of SRS’s probabilities and the databases used. | The court used Alexion’s own pre-breach PTRS estimates, finding them the most reliable and contemporaneous. |
| Whether SRS is entitled to full milestone payments under the prevention doctrine | SRS argued any breach of the non-avoidance clause should result in full payouts, not just lost expected value. | Alexion argued this would create an improper windfall and SRS is only entitled to proven expectation damages. | Court rejected the windfall argument, limiting damages to proven expectation damages only. |
| Entitlement to Attorneys’ Fees | SRS claimed fees and expenses under the merger agreement’s indemnification clause. | Alexion countered SRS did not comply with the notice procedures required for indemnification. | Court held SRS was not entitled to fees at this time due to failure of proper notice. |
Key Cases Cited
- Duncan v. Theratx, Inc., 775 A.2d 1019 (Del. 2001) (Expectation damages put promisee in same position as performance)
- SIGA Technologies, Inc. v. PharmAthene, Inc., 132 A.3d 1108 (Del. 2015) (Expectation damages require fact of injury proved with reasonable certainty)
- Paul v. Deloitte & Touche, LLP, 974 A.2d 140 (Del. 2009) (Contract damages should not produce a windfall)
- Cede & Co. v. Technicolor, Inc., 884 A.2d 26 (Del. 2005) (Lost profit damages must use appropriate discount rate to present value)