Former shareholders of a Shire PLC merger partner told a Delaware vice chancellor Monday the company tried to put its own spin on contract terms in a $325 million merger agreement in an effort to avoid a $45 million post-merger "milestone" payment for an acquired drug prospect.
Laurie Carr Mims of Keker Van Nest & Peters LLP, counsel to Shareholder Representative Services LLC — representing past FerroKin BioSciences Inc. shareholders — told Vice Chancellor Kathaleen S. McCormick during post-trial arguments that Shire breached its contract when it missed a Dec. 31, 2015, deadline to begin a new drug trial phase for deferitazole, a prospective treatment for excess iron in blood. The trial was halted more than a year earlier.
Shire bought deferitazole when it bought FerroKin for $325 million in 2012. But concern over nervous system effects and ties to cancer in rats led to the U.S. Food and Drug Administration putting an early stage trial on hold in 2014. The company blamed those potentially high-risk complications for the shutdown, while acknowledging that the expected availability of a cheaper generic substitute could wipe out returns on the investment.
"Shire told the FDA that deferitazole was discontinued based on portfolio prioritization, not on safety concerns," Mims told the vice chancellor. "It had a right to make that decision, but it also must pay the price for the bargain it struck."
Mims said that Shire assembled a "made for litigation" argument that stretched the meaning of an exception to the milestone payment requirement if a "fundamental circumstance" emerges, making compliance with study deadlines practically impossible.
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