Holland & Knight LLP
MONTH-IN-BRIEF (Sep 2024)
Delaware Chancery Court Issues Ruling on Earnout Dispute: Did Alexion’s Efforts Meet ‘Commercially Reasonable’ Standard in Syntimmune Merger?
By Shawn Garrett, Garrett, PLLC
On September 5, 2024, the Delaware Court of Chancery issued a memorandum opinion and judgment on a case relating to a disputed earnout in a post-merger entity based on milestones contemplated in the merger agreement. In Shareholder Representative Services, LLC., v. Alexion Pharmaceuticals, Inc. (C.A. No. 2020-1069-MTZ (Del. Ch. Sept. 5, 2024)), the securityholders of the pre-merger entity known as Syntimmune, Inc. (“Syntimmune”), brought suit against the post-merger entity, Alexion Pharmaceuticals, Inc. (“Alexion”), to recover $130 million in damages, contending that the first milestone of the project had been achieved, triggering Syntimmune’s first of seven earnout payments.
In 2013, Syntimmune began developing a monoclonal antibody that was the target of a merger agreement by Alexion. Alexion acquired Syntimmune in 2018 with the progress of the antibody project at the forefront of merger discussions. The merger agreement contained a purchase price of $1.2 billion. The purchase price was to be distributed as $400 million paid at closing, with $800 million to be paid in earnout installments. The merger agreement required Alexion to use commercially reasonable efforts to continue the project’s research and development, with specified milestones to be achieved prior to further disbursement of the remaining earnout funds.
