PharmAthene Inc. and Siga Technologies Inc. will begin a trial today over rights to a drug that could be used to treat smallpox outbreaks from a terrorist attack.

PharmAthene, of Annapolis, Maryland, sued New York-based Siga in 2006 asking a Delaware Chancery Court judge to affirm a purported licensing agreement for PharmAthene to make the drug, known as ST-246. Siga, which had worked with PharmAthene, contends there is no license, according to court papers.
PharmAthene is trying “to lay claim to the fruits of Siga’s skills and labor” in developing a treatment “crucial to this country’s national security,” Siga lawyer Andre Bouchard said in a pretrial brief.
In 2005, “Siga was out of cash and out of options,” and PharmAthene “lent Siga $3 million to fund their joint development” of the drug -- with PharmAthene “either to merge with Siga or else get an exclusive license,” PharmAthene lawyer Christopher Selzer told Judge Donald Parsons Jr. in his brief.
Shares of PharmAthene, with a net loss of $32.2 million on 2009 sales of $27.5 million, have more than doubled in a year to more than $4. Siga, with a $17.6 million net loss on $13.8 million in 2009 revenue, has risen about 140 percent to more than $13 in a year.
Both companies develop products used to combat biological warfare. In November 2010, Parsons denied a Siga request to limit the scope of the trial or to dismiss part of the case. License Negotiations
The companies never completed a merger agreement, and Siga contends negotiations for a licensing agreement were non- binding, according to Parsons’s opinion.
In October, Siga said the U.S. Health & Human Services Department selected it for a $500 million contract to produce 1.7 million treatments of its smallpox antiviral drug to protect the U.S. against a possible terrorist attack. In his brief, Selzer told Parsons that PharmAthene will prove it is entitled to either an “exclusive license” to the ST-246 technology or appropriate damages.
Bouchard, representing Siga, said “PharmAthene agreed only to negotiate a potential collaboration” and it’s “far from proving a mutual agreement.”
PharmAthene also wrongly claims Siga’s then-board chairman, Donald Drapkin, “orally guaranteed PharmAthene a license,” according to Bouchard’s brief.
The case is PharmAthene Inc. v. Siga Technologies Inc., CA2627, Delaware Chancery Court (Wilmington).
(Source: Bloomberg)