* Judge asks SIGA to share 50 pct of smallpox drug profit
* SIGA to challenge court's decision
* SIGA shares sink 43 pct, touch 2-year low
(Adds PharmAthene CEO comment, analyst comment, background on
smallpox drug, byline)
By Anand Basu
Sept 22 A Delaware judge ordered biotechnology
company SIGA Technologies Inc SIGA.O to share 50 percent of
the profit from its smallpox drug with PharmAthene (PIP.A) for
the next 10 years following a failed merger between the
The ruling sent SIGA shares down 43 percent to a 2-year
low, while PharmAthene rose 19.5 percent before being halted on
the American Stock Exchange.
SIGA's ST-246 smallpox drug works by blocking the ability
of the virus to spread to other cells and is seen as a
protection against a potential biodefense threat. It also has a
fast-track status by the U.S. health regulators, according to
the company's website.
In May, SIGA was awarded a $433 million contract to supply
1.7 million doses of its drug for the strategic national
stockpile by the U.S. Department of Health and Human Services.
Last year, its annual revenue was under $20 million.
"Fifty percent is a significant amount of profit for SIGA
to hand over," said Noble Financial Capital Markets analyst
Nathan Cali, who recommends buying PharmAthene stock. "It is
significantly positive for PharmAthene."
In a statement, SIGA said it will appeal the court's
decision. Cali, who had expected the ruling to favor
PharmAthene, said the likelihood for SIGA to win in an appeal
PharmAthene is testing its anthrax vaccine and anthrax drug
in clinical trials.
"The addition of ST-246 royalties firmly establishes
PharmAthene as a leading biodefense contractor with a fully
integrated development and commercial portfolio," Chief
Executive Eric Richman said.
In December 2006, PharmAthene filed a case against SIGA
after they scrapped their merger deal in October of that year.
PharmAthene had also been in talks with SIGA about
licensing ST-246. It claimed that after the failed merger, SIGA
proposed a licensing deal with less lucrative economic terms
than in the previously discussed merger agreement.
A Delaware Chancery Court judge ruled that SIGA breached
the contractual obligation of negotiating a license agreement
in good faith.
However, the judge denied PharmAthene's contention that
SIGA breached a binding license agreement. It also denied
PharmAthene's claim for a lump sum award.
(Reporting by Anand Basu in New York; Editing by Michele
Gershberg and Richard Chang)