The Delaware Supreme Court on Monday upheld a $71 million award against a Pennsylvania-based pharmaceutical company that failed to live up to its obligation to market a drug used to treat exposure to certain types of chemotherapy.
An en banc panel of the high court agreed with a Delaware Court of Chancery judge that BTG International Inc. had breached a contract to distribute and sell Vistogard after the drug’s creator, Wellstat Therapeutics Corp., secured regulatory approval to bring it to market.
The ruling left intact Vice Chancellor J. Travis Laster’s $55.8 million damages ruling in favor of Wellstat and made only a minor adjustment to the date he used to calculate the amount of prejudgment interest the Conshohocken, Pennsylvania-based firm would have to pay.
“As to all issues that were fairly raised below, we conclude, with one exception, that the Court of Chancery’s rulings were supported by the factual record, within its remedial discretion, and consistent with the applicable legal principles,” Chief Justice Leo E. Strine Jr. wrote in a two-page order.
In a statement, Wellstat’s Susman Godfrey attorneys said they expected to recover the “full amount of the original judgment, if not more” for their client, “given that eight months of post-judgment interest have now accrued since the original award.”
In September, Laster ruled that BTG failed to use “diligent efforts” to market Vistogard to patients and doctors. At the time, Laster found, BTG was shifting its focus away from specialty drugs and toward intravenous medications, leaving few funds and personnel in place to meet its obligations to Wellstat.
According to Laster’s opinion, BTG “did nothing” to create a commercial plan for the drug and then “falsified” the data it showed to Wellstat to convince its partner that the company was still on track.
“BTG did not prepare a commercial plan in good faith,” Laster wrote in a 60-page opinion. “It prepared a disingenuous and misleading plan that BTG never took seriously. BTG then failed to market Vistogard in accordance with its commercial plan. These acts constituted further breaches of the distribution agreement.”
On appeal, BTG said it disagreed “with many of the trial court’s conclusions,” but the company did not challenge Laster’s findings as to its contractual breaches. Instead, BTG’s attorneys argued that the damages award was based on a flawed study of Vistogard’s patient population and failed to account for an “escape-hatch right” that allowed BTG to terminate the agreement five years after the U.S. Food and Drug Administration approved the drug.
“It is a fundamental principle of contract law that remedies for a breach should compensate for lost expectation caused by the breach but not go further,” BTG said in a court filing. “Contract remedies must not overcompensate or punish. Unfortunately, the trial court disregarded this principle in at least four separate ways—and in doing so awarded super-compensatory and improperly punitive damages and interest.”
Strine’s order, however, raised only the “comparatively small issue” of when prejudgment interest was supposed to begin. Laster’s opinion, Strine said, had imposed interest from the time of the breach, on Sept. 15, 2015, instead of the following March, when the company said it had first suffered damages.
“Given that [Wellstat] did not argue for this date, and given the applicable legal principles, we reverse in this minor respect and remand to have the final judgment run prejudgment interest from March 2, 2016, rather than Sept. 15, 2015. In all other respects, we affirm the Court of Chancery’s final judgment,” Strine wrote.
Attorneys for Wellstat and BTG were not immediately available to comment, and BTG’s press shop did not immediately return a call seeking comment on the case.
On appeal, the suit was captioned BTG International v. Wellstat Therapeutics.