James Hu

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This article follows up on our prior analysis of the Delaware Court of Chancery’s liability determination in the Alexion-Syntimmune case, available here.

In designing the earnout structure, parties should anticipate how expectation damages would be determined by a court using a discounted, probability-weighted mathematical method. 

On June 11, 2025, the Delaware Court of Chancery established an important framework for how courts may approach the calculation of earnout damages in pharma milestone disputes in its most recent decision in Shareholder Representative Services LLC v. Alexion Pharmaceuticals, Inc.[1]  In an earlier opinion (the “September Opinion”), the Court found that a buyer, Alexion, was liable for breach of contract for its failure to use commercially reasonable efforts to achieve milestones for which future earnout payments may have become due to the selling securityholders of Syntimmune, Inc.[2]  The June 11 opinion adopted a probability-based mathematical framework to determine the amount of damages owed and it provides a number of important takeaways:Continue Reading Calculating Pharma Earnout Damages: Strategic Lessons for Designing Milestone Frameworks

Earnout provisions in acquisition agreements can be a useful tool in bridging the valuation gap by deferring portions of the purchase price until certain post-closing milestones are achieved, and they are particularly common in developmental-stage pharmaceutical transactions.  Practitioners should take note of the September 5, 2024 opinion in Shareholder Representative Services LLC v. Alexion Pharmaceuticals, Inc., in which the Delaware Court of Chancery held a buyer, Alexion, liable for breach of contract both for its failure to use commercially reasonable efforts to achieve milestones for which future earnout payments may have become due and for its failure to pay an earned milestone payment to selling securityholders of Syntimmune, Inc.[1]Continue Reading Delaware Court of Chancery Finds Buyer Failed to Use Commercially Reasonable Efforts in Pharma Milestone Payment Case

On April 4, 2024, the Delaware Supreme Court issued its decision on a stockholder suit challenging the fairness of IAC/InterActiveCorp’s separation from its controlled subsidiary, Match Group, Inc.[1]  In this decision, the Delaware Supreme Court provided clarity and guidance on two important issues involving the application of the MFW framework.Continue Reading Delaware Supreme Court Provides Important Guidance on Application of MFW Framework to Controlling Stockholder Transactions