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Chancery Determines Pharmaceutical Company Complied with Merger Agreement’s Requirement To Use Commercially Reasonable Efforts

Posted In Chancery, Efforts Clauses, M&A

Himawan v. Cephalon, Inc., C.A. No. 2018-0075-SG (Del. Ch. Apr. 30, 2024)
Stockholder representatives of an acquired corporation brought claims alleging that defendants had failed to use contractually-required commercially reasonable efforts to commercialize an acquired drug asset for a particular use. Under the terms of the merger agreement, the acquirer had paid $250 million in immediate consideration, agreed to a framework for milestone payments following regulatory approval for two separate uses, and retained discretion for operating the post-merger business, subject to a requirement that it use defined “commercially reasonable efforts” to develop and commercialize the drug for each use. Ultimately, after engaging regulatory authorities and deeming there to be dim prospects for success for one use, the acquirer did not persist in securing regulatory approval and bringing the drug to market for that purpose, and therefore did not reach the milestones associated with that use. More ›

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