IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE 

SHAREHOLDER REPRESENTATIVE 

SERVICES LLC, in its capacity as the 

Equityholders’ Representative for the 

former stockholders of FerroKin 

Biosciences, Inc., 

Plaintiff, 

v. 

SHIRE US HOLDINGS, INC. and 

SHIRE PHARMACEUTICALS LLC, 

Defendants. 

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C.A. No. 2017-0863-KSJM 

MEMORANDUM OPINION 

Date Submitted: July 31, 2020 

Date Decided: October 12, 2020 

Bradley R. Aronstam, Adam D. Gold, Roger S. Stronach, ROSS ARONSTAM & 

MORITZ LLP, Wilmington, Delaware; Stuart L. Gasner, Laurie Carr Mims, 

Jennifer A. Huber, Bailey W. Heaps, Christina Lee, KEKER, VAN NEST & 

PETERS LLP, San Francisco, California; Counsel for Plaintiff Shareholder 

Representative Services LLC. 

Peter B. Ladig, Emily A. Letcher, BAYARD, P.A., Wilmington, Delaware; Timothy 

W. Mungovan, Colin G. Cabral, Michael R. Hackett, James R. Anderson, Alexandra 

Bargoot, PROSKAUER ROSE LLP, Boston, Massachusetts; Counsel for 

Defendants Shire US Holdings, Inc. and Shire Pharmaceuticals LLC.

McCORMICK, V.C. 
This case arises from a merger agreement executed in 2012 under which 

Defendant Shire Pharmaceuticals LLC (“Shire”) acquired FerroKin BioSciences, 

Inc. (“FerroKin”) and its experimental iron chelation drug, deferitazole. The merger 

agreement required Shire to make a $45 million milestone payment to former 

FerroKin equityholders upon the initiation of Phase III clinical trials. It further 

deemed the relevant milestone achieved as of December 31, 2015, regardless of 

whether Phase III clinical trials had actually been initiated by that date. The merger 

agreement terminated Shire’s obligation to make the milestone payment if its failure 

to initiate Phase III clinical trials was “as a result of a Fundamental Circumstance,” 

defined as a circumstance in which material safety or efficacy concerns made it 

impracticable to produce and sell or to obtain regulatory approval for deferitazole. 

Shire did not make the $45 million milestone payment after it was deemed 

achieved on December 31, 2015. Instead, Shire declared the occurrence of a 

Fundamental Circumstance and terminated the deferitazole program. 

The plaintiff filed this lawsuit against Shire to recover the $45 million 

milestone payment plus interest and attorneys’ fees. This post-trial decision finds 

that Shire’s failure to initiate Phase III clinical trials by December 31, 2015 was not 

“as a result of” any Fundamental Circumstance but, rather, was “as a result of” a 

series of routine drug development delays and financially motivated business 

decisions. Judgment is therefore entered in favor of the plaintiff. 
2

I. FACTUAL BACKGROUND 

Trial took place over four days. As reflected in the Schedule of Evidence 

submitted by the parties,1 the record comprises 393 joint trial exhibits,2 trial 

testimony from five fact and five expert witnesses, deposition testimony from 

nineteen fact and five expert witnesses,3 and stipulations of facts in the pre-trial 

order.4 These are the facts as the court finds them after trial.5 

A. FerroKin Develops Deferitazole. 

In early 2007, Dr. Hugh Rienhoff, Jr. founded FerroKin for the purpose of 

developing an iron chelator called deferitazole.6 An iron chelator is a molecule with 

a “very high affinity for iron” that is used therapeutically to absorb excess iron in 

patients who are transfusion-dependent,7 such as patients diagnosed with various 

hematological diseases including beta thalassemia, sickle cell disease, and 

myelodysplastic syndrome (“MDS”).8 

 

1

 C.A. No. 2017-0863-KSJM, Docket (“Dkt.”) 180, Joint Schedule of Evid. 

2

Id. Ex. A. 

3

Id. Ex. B. 

4

 Dkt. 158, Pre-Trial Stipulation and Order (“PTO”). 

5

 This decision also cites to: trial exhibits (by “JX” number); the trial transcript, Dkts. 167–

70 (by “Trial Tr.” page, line, and witness); and the deposition transcripts of Ellis Neufeld, 

Evan B. Siegel, Armand F. Girard, and Paul Streck (by the deponent’s last name and “Dep. 

Tr.” page and line). 

6

 PTO ¶¶ 3, 13. 

7

 Trial Tr. at 16:1–6 (Rienhoff). 

8

 JX-498 at 6; Trial Tr. at 16:7–13 (Rienhoff). 
3

On September 3, 2009, FerroKin submitted an Investigational New Drug 

application to the FDA, seeking permission to begin its first clinical study for 

deferitazole in the United States.9 The clinical development process comprises three 

“phases” that can “take anywhere from five to fifteen years.”10 In Phase I, clinicians 

typically study “the disposition of the drug” in humans, aiming to “really understand 

blood concentrations and safety”11 and to “look[] for any acute safety issues.”12 In 

Phase II, clinicians assess the drug’s safety and efficacy, that is, its ability to affect 

disease in the body.13 In Phase III, clinicians conduct studies negotiated and 

designed with the FDA with the goal of getting the drug approved by the FDA and 

placed on the market.14 Clinicians also conduct non-clinical studies both before and 

during these three phases—where they typically administer the drug to animals 

rather than humans—in order to further assess the drug’s safety and support the 

continuation of the program in humans.15

 

9

 JX-1860 at 138. 

10 Trial Tr. at 308:10–12 (Henner). 

11 Id. at 30:18–31:2 (Rienhoff). 

12 Id. at 309:18–23 (Henner). 

13 Id. at 31:6–14 (Rienhoff); id. at 310:1–7 (Henner). 

14 Id. at 31:18–32:4 (Rienhoff); id. at 310:19–311:6 (Henner). 

15 Id. at 103:1–4 (Streck); id. at 977:20–978:5 (Ross); id. at 1049:9–11 (Popp). 
4

Around November 2009, the FDA gave FerroKin the green light to proceed 

with deferitazole’s Phase I and Phase II clinical development.16 Dr. Ellis Neufeld, 

who was the associate chief of hematology at Boston Children’s Hospital at the 

time,17 served as deferitazole’s lead clinical investigator.18 

B. Shire Conducts Due Diligence and the Parties Begin Circulating 

Drafts of a Merger Agreement. 

While deferitazole was in clinical development, FerroKin began reaching out 

to potential acquirers.19 FerroKin hired an investment bank, Seaview Securities LLC 

(“Seaview”), to advise in this process.20 In June 2010, Rienhoff contacted various 

pharmaceutical companies, including Shire, in order to gauge interest.21 Initially, 

Armand Girard, the senior director of business development for Shire, was 

Rienhoff’s primary point of contact.22 

At the time, Shire’s board of directors and senior leadership team sought to 

build a hematology business unit.23 While Shire had already amassed some assets 

in that unit, it did not yet have what Girard called a “corner property” for the 

 

16 JX-59 at 7–8; Trial Tr. at 29:12–30:4, 32:5–18 (Rienhoff). 

17 Neufeld Dep. Tr. at 17:23–18:17. 

18 Trial Tr. at 22:14–24 (Rienhoff); Neufeld Dep. Tr. at 63:5–7. 

19 Trial Tr. at 45:8–19 (Rienhoff). 

20 Id. at 46:12–18 (Rienhoff). 

21 Id. at 44:15–17 (Rienhoff). 

22 Id. at 44:20–45:7 (Rienhoff); id. at 733:4–7 (Girard). 

23 Girard Dep. Tr. at 61:5–62:10; Trial Tr. at 788:7–12 (Girard). 
5

program.24 Though optimally Shire would acquire an asset that “was marketed and 

driving revenues,” deferitazole was Shire’s “latest-stage opportunity.”25 Shire thus 

viewed deferitazole as a potential “corner stone” for its new hematology business 

unit.26

In early 2011, while deferitazole was in Phase II development, Shire began 

conducting due diligence regarding a potential acquisition of FerroKin.27 In May 

2011, Shire’s diligence team presented an update of its diligence efforts.28 It 

explained that iron overload was a “good first entry” for Shire’s hematology business 

unit and that the market for iron chelators—valued at more than $1 billion in the 

U.S. alone—was “[d]ominated by a single agent (Exjade).”29 The team observed 

that there was an “addressable unmet medical need” in the market due to the 

tolerability and safety concerns associated with Exjade.30 It further recognized that 

deferitazole was a “strong opportunity” capable of addressing that unmet medical 

need, as it could demonstrate “[s]uperior safety” and “comparable efficacy” to 

 

24 Girard Dep. Tr. at 62:2–10. 

25 Id. at 62:13–20. 

26 Id. at 62:16–19; Trial Tr. at 789:2–4 (Girard). 

27 PTO ¶¶ 19–20. 

28 JX-84 at 2. 

29 Id. at 3. 

30 Id.
6

Exjade.31 Noting development and commercial risks, the team concluded that 

deferitazole was a “[h]igh risk / high reward opportunity.”32

By February 2012, Shire’s diligence had revealed several clinical risks 

affiliated with deferitazole, including “[p]otential drug interactions,” a lack of data 

concerning an “appropriate safe or efficacious dose” in MDS patients, the potential 

for a black box warning,33 and the unknown effect of deferitazole on cardiac iron.34 

Shire’s diligence also revealed several commercial risks affiliated with 

deferitazole, including the release of generic Exjade.35 At times relevant to this 

litigation, Exjade was the most popular, “commonly used” iron chelator on the 

market,36 as it was the first iron chelator to come in the form of a dispersible tablet 

that patients can take orally.37 Yet, as its black box warning indicates,38 Exjade can 

cause many serious side effects, including renal impairment and failure, hepatic 

 

31 Id. 

32 Id. at 22. 

33 Black box warnings are “relatively rare among pharmaceuticals.” Trial Tr. at 253:24–

254:1 (Rienhoff). A drug affixed with a black box warning “has high risks associated with 

it.” Id. at 254:2 (Rienhoff); see also id. at 486:18–487:9 (Vickers) (explaining that there 

are “serious safety concerns” associated with black box warnings). 

34 JX-197 at 29, 41. 

35 Id. at 6; PTO ¶ 21. Exjade is also known by its generic name, “deferasirox.” PTO ¶ 14. 

36 PTO ¶ 15. 

37 Id. ¶¶ 14–15; Trial Tr. at 19:2–3 (Rienhoff) (explaining that Exjade was “revolutionary 

because it was orally available”). 

38 See generally JX-377. 
7

impairment and failure, and gastrointestinal hemorrhage, all of which can result in 

death.39 Shire’s diligence report explained: 

The key event affecting . . . commercial potential is the 

timing of generic competition for Exjade. Exjade loses 

patent protection in 2019. This is likely to push 

[deferitazole] into a second line position and limit further 

market share gains. It is important that [deferitazole] 

launches sufficiently ahead of 2019 to allow it to build [a] 

sufficiently strong formulary position and prescriber base 

in the US.40

The report recommended that Shire “proceed but ensure that the deal is structured 

to ensure confidence that the product can achieve differentiation from Exjade on the 

key features of renal toxicity and [gastrointestinal] side effects.”41

In June 2011, Shire submitted to Seaview a “preliminary, non-binding, 

expression of interest in acquiring FerroKin.”42 In that offer, Shire proposed to make 

a $10 million up-front payment and two milestone payments thereafter: a $30 

million payment upon successful completion of the Phase II trial FerroKin was 

conducting at the time and a $40 million payment upon the initiation of a Phase III 

study.43 

 

39 Id. at 3; PTO ¶ 15. 

40 JX-197 at 6; PTO ¶ 22. 

41 JX-197 at 10; PTO ¶ 24. 

42 JX-80 at 2; see Trial Tr. at 739:6–741:7 (Girard). 

43 JX-80 at 2–3. 
8

Seaview did not view Shire’s offer as competitive and it encouraged Shire to 

submit a revised one.44 On July 25, 2011, Seaview’s managing director, Joseph 

Dougherty, emailed Girard and stated: “As you know, Shire is not formally in our 

second round, but we understand that you continue to work towards participating, 

and in the interest of not putting you at a disadvantage we attach a draft merger 

agreement for the acquisition of FerroKin by Shire.”45 Dougherty asked for Shire’s 

revisions to the draft merger agreement by August 8, 2011, ahead of FerroKin’s final 

bid deadline of August 10, 2011.46 Internally, FerroKin “felt that a sales price of 

somewhere in the [$]300 to $500 million [range], including initial consideration and 

milestones, would be a price that [it] should consider.”47

 On July 26, 2011, Shire submitted its “revised, non-binding, expression of 

interest in acquiring FerroKin.”48 This time, Shire proposed to make a $75 million 

up-front payment and two milestone payments thereafter: a $30 million payment 

upon the initiation of a Phase III study and a $50 million payment upon deferitazole’s 

 

44 Trial Tr. at 744:8–14 (Girard). 

45 JX-99 at 1. 

46 Id. 

47 Trial Tr. at 319:12–22 (Henner). 

48 JX-98 at 3. 
9

first commercial sale in the U.S.49 In an email the same day, Rienhoff expressed his 

view that Shire’s offer was “[s]till too little.”50 

 On August 8, 2011, Shire sent its third offer to “stay in the game.”51 In an 

email to Seaview, Girard stated: “In light of our ongoing discussions, we have given 

further thought to the consideration Shire would be prepared to pay for 

FerroKin . . . .”52 Shire proposed to make a $100 million up-front payment and a 

$25 million milestone payment upon the initiation of a Phase III study.53 

 On August 25, 2011, Dougherty emailed Girard and stated that Shire’s $100 

million up-front offer was “close to market,” but that the “back end d[id] not near 

the value assigned by others.”54 By September 2011, the parties agreed in principle 

to a $100 million up-front payment but continued to disagree on the “back end” 

milestone earn-out structure.55 As Girard testified, there was a “yin and yang, if you 

will, of opposing goals.”56 FerroKin sought “to realize as much of [deferitazole’s] 

 

49 Id. at 3–4. 

50 Id. at 1. 

51 Trial Tr. at 745:21–22 (Girard); see JX-105. 

52 JX-105 at 1. 

53 Id.

54 JX-118 at 2. 

55 See, e.g., id. (email from Dougherty to Girard discussing milestone payments, dated 

August 5, 2011); JX-115 at 2 (email from Girard to Dougherty discussing milestone 

payments, dated September 7, 2011); id. at 1 (email from Dougherty to Girard discussing 

milestone payments, dated September 24, 2011). 

56 Girard Dep. Tr. at 127:18–22. 
10

value upfront,” while Shire sought to “defer as much of that value until future 

decision points.”57

Meanwhile, FerroKin’s clinical trials of deferitazole had progressed. In 

November 2011, FerroKin had an “End of Phase [II]” meeting with the FDA.58 At 

that meeting, the FDA and certain FerroKin representatives, including Rienhoff and 

Neufeld, discussed deferitazole’s overall clinical development and the design for the 

drug’s Phase III clinical studies.59 

Generally, clinicians testing an investigational drug must compare that drug’s 

results against a control in order to demonstrate its efficacy.60 There are at least two 

ways to make such a comparison: a non-inferiority trial and a superiority trial.61 In 

a non-inferiority trial, clinicians “are looking to see if the drug is not much worse 

than the control.”62 In a superiority trial, “the objective is to test whether [the] 

investigational drug is significantly better . . . than [the] control.”63 

Although FerroKin had initially proposed a non-inferiority trial with Exjade 

as the control, the FDA rejected that proposal and informed FerroKin that it would 

 

57 Trial Tr. at 790:17–22 (Girard). 

58 PTO ¶ 16; JX-129 at 1, 3. 

59 PTO ¶ 16; JX-129 at 3. 

60 Trial Tr. at 987:17–22 (Ross). 

61 See id. at 987:14–989:11 (Ross). 

62 Id. at 988:5–8 (Ross). 

63 Id. at 987:23–988:3 (Ross); Siegel Dep. Tr. 131:24–132:3. 
11

instead require a superiority trial with Exjade as the control, effectively increasing 

the difficulty associated with drug approval.64 

Negotiations between FerroKin and Shire progressed in the ensuing months, 

with these risks known.65 Those negotiations centered on two issues: the structure 

of the milestone payments and the degree to which Shire would be obligated to 

pursue development of deferitazole. On December 22, 2011, Shire circulated a draft 

reflecting five potential milestone payments totaling $220 million.66 In that draft, 

Shire also proposed that it have “the right, in [its] sole and absolute discretion, to 

direct and control the development, commercialization, manufacture, marketing, 

distribution and selling of [deferitazole] in all respects.”67 

FerroKin did not react favorably to the “sole and absolute discretion” 

language inserted by Shire. As Rienhoff testified at trial, FerroKin wanted the 

agreement to contain “something that would compel [Shire] to go forward and not 

just can the program . . . at [its] whim.”68 To that end, in a draft dated December 30, 

 

64 PTO ¶ 18; JX-129 at 6; see Trial Tr. at 988:13–18 (Ross) (responding “[y]es” when asked 

whether “superiority [is] a higher standard than noninferiority” and whether “the 

superiority standard is typically harder to achieve”). 

65 While negotiations were ongoing, Rienhoff provided Girard with the minutes of 

FerroKin’s November 2011 End of Phase II meeting with the FDA. See JX-135 at 4. 

66 JX-159 at 23. 

67 Id. at 24. 

68 Trial Tr. at 50:12–17 (Rienhoff); see JX-163 at 1 (email from Rienhoff to Shire’s Chief 

Corporate Development Officer Barbara Deptula, identifying several “issues” with Shire’s 

December 22 draft, including “the dollar amount of the milestones” and “the defined efforts 
12

2011, FerroKin replaced the provision affording Shire sole and absolute discretion 

with the requirement that Shire “use Commercially Reasonable Efforts to develop 

and commercialize [deferitazole] until achievement of each Milestone.”69 FerroKin 

also proposed a total of $230 million in milestone payments and added two 

automatic milestone payment provisions.70 

The first automatic payment provision applied to the first milestone, which 

would become payable upon initiation of a Phase III clinical trial: “[I]n the event 

that [Shire] has not [initiated a Phase III clinical trial] on or before the date that is 

545 days after the Closing Date, then the [milestone] shall be deemed to have been 

achieved on such date.”71 The second automatic payment provision required Shire 

to pay any outstanding milestones if, “at any time prior to December 31, 2020,” Shire 

“substantially abandoned efforts to develop and commercialize [deferitazole] other 

than as a result of the occurrence of a Fundamental Circumstance,” as defined in the 

draft.72

 

Shire must make to progress product development”); see also Girard Dep. Tr. at 199:12–

14 (“What I do recall is [Rienhoff] wanting some sort of assurance that Shire devoted 

resources to develop this asset.”). 

69 JX-166 at 29. 

70 Id. at 27–29. 

71 Id. at 29. 

72 Id. 
13

 Shire rejected FerroKin’s changes in a draft dated January 17, 2012, and 

reverted to the majority of the terms in its earlier draft of December 22.73 Rienhoff 

viewed Shire’s latest draft as “very disappointing.”74 In an email to Deptula dated 

January 20, 2012, Rienhoff explained: “[A] transaction so heavily dependent on the 

achievement of milestones . . . must be accompanied by Shire commitments to 

diligently pursue clinical development and commercialization assuming the product 

is safe and effective.”75

 The parties met on January 27, 2012 to discuss the terms of the merger and 

resolve their differences.76 On February 1, 2012, FerroKin circulated another draft 

“incorporat[ing] the [parties’] solutions.”77 FerroKin accepted the provision giving 

Shire “sole and absolute discretion” to direct the development of deferitazole,78 but 

it reinserted the automatic payment provision relating to the first milestone.79 

FerroKin also added the “Fundamental Circumstance” language to that automatic 

payment provision: 

 

73 See generally JX-184. 

74 JX-189 at 2. 

75 Id. at 2–3. 

76 JX-196 (summarizing the parties’ discussions at the January 27 meeting); see Trial Tr. 

at 759:4–11 (Girard). 

77 JX-196 at 1; JX-198. 

78 JX-198 at 26. 

79 Id. at 25. 
14

Notwithstanding anything else in this Agreement to the 

contrary, in the event that the Company has not achieved 

Initiation of the Pivotal Clinical Trial on or before 

December 31, 2015, other than as a result of a 

Fundamental Circumstance, then the Initiation of Pivotal 

Clinical Trial Milestone shall be deemed to have been 

achieved on such date.80

FerroKin defined the term “Fundamental Circumstance” as 

a material safety or efficacy concern related to the Product 

that would reasonably be expected to make production and 

sale of [deferitazole], or receipt of applicable Regulatory 

Approvals, impracticable.81 

After receiving the draft, Shire developed an “issues list” indicating that it 

agreed with FerroKin’s position concerning the automatic payment provision, 

“except that Shire would use its formulation of ‘Fundamental Circumstance.’”82 

Shire proposed that the term “Fundamental Circumstance” be defined as “any safety 

or efficacy concerns that Shire determines in its sole and absolute discretion would 

have any of the effects described in [FerroKin’s] formulation.”83 FerroKin 

disagreed, opining that Shire’s definition of the term “Fundamental Circumstance” 

 

80 Id. As the parties exchanged drafts, the definition of the first milestone in the agreement 

flip-flopped from Shire’s desired language, “Initiation of Phase III Clinical Trial,” to 

FerroKin’s desired language, “Initiation of Pivotal Clinical Trial.” See JX-184 at 25; JX198 at 24. Ultimately, Shire’s desired language prevailed. JX-241 § 2.9(f), at 27. 

81 JX-198 at 11. 

82 JX-201 at 5. 

83 Id. at 4. 
15

would “gut[] the protection afforded by” the automatic payment provision.84 Shire 

ultimately agreed to FerroKin’s definition of “Fundamental Circumstance” that is 

block-quoted above.85

C. The Merger Agreement 

On March 14, 2012, the parties executed an Agreement and Plan of Merger 

(the “Merger Agreement”) that named Plaintiff Shareholder Representative Services 

LLC (“Plaintiff”) as the representative of former FerroKin equityholders.86 The 

economic terms of the Merger Agreement called for the former FerroKin 

equityholders to receive an up-front payment of approximately $95 million and 

provided for up to $225 million in contingent milestone payments.87 

Several provisions of the Merger Agreement are relevant to the parties’ 

dispute. The first is Section 2.9(g), which memorializes the “sole and absolute 

discretion” provision Shire sought to include throughout negotiations.88 Section 

 

84 JX-207 at 6; Trial Tr. at 65:21–66:10 (Rienhoff). 

85 JX-214 at 13. 

86 JX-241; PTO ¶¶ 2, 25. 

87 PTO ¶ 26. 

88 JX-241 § 2.9(g), at 28 (providing that, “[f]ollowing the Closing, [Shire] shall have the 

right, in [its] sole and absolute discretion, to direct and control the development, 

commercialization, manufacture, marketing, distribution and selling of [deferitazole] in all 

respects”); PTO ¶ 27. 
16

2.9(g) also disclaims any obligation, duty, or expectation of Shire to develop 

deferitazole in any way.89 

The second provision is Section 2.9(a), which requires that Shire make certain 

milestone payments upon the occurrence of defined “Milestone Trigger Event[s].”90 

The milestone payment at issue in this litigation is a $45 million payment due upon 

the occurrence of the “Initiation of Phase III Clinical Trial Milestone.”91 The 

relevant language of this provision appears in the Legal Analysis, infra. 

The third provision is Section 2.9(f), which provides that “the Initiation of the 

Phase III Clinical Trial Milestone will be “deemed achieved” on or before 

December 31, 2015, unless the failure to achieve the milestone was “as a result of a 

Fundamental Circumstance.”92 The relevant language of this provision appears in 

the Legal Analysis, infra. 

Internal Shire post-closing communications reflect that Shire understood that 

“[t]he only scenario” in which the Initiation of Phase III Clinical Trial Milestone 

 

89 JX-241 § 2.9(g), at 28 (providing that “[n]one of this Agreement or the other Transaction 

Documents or any other fact, circumstance or matter relating hereto or thereto (including 

the process of negotiation, execution and implementation hereof or thereof) shall be 

construed to impose upon [Shire] any express or implied obligation, duty or expectation to 

test, develop, pursue, market, make any regulatory filings or seek any Regulatory 

Approvals with respect to, or otherwise advance [deferitazole]”). 

90 Id. § 2.9(a), at 24–25; PTO ¶ 29. 

91 JX-241 § 2.9(a), at 25; PTO ¶ 29. 

92 JX-241 § 2.9(f), at 27; PTO ¶ 30. 
17

payment “would not be made [was] for a Fundamental Circumstance.”93 It viewed 

a Fundamental Circumstance as a “rare occurrence where [it] would terminate 

development prior to initiation of [Phase III].”94

D. Shire Begins to Encounter Obstacles in Phase II Studies. 

By the time Shire acquired FerroKin, FerroKin had already initiated nonclinical and clinical studies related to deferitazole.95 These included a non-clinical 

104-week long rat carcinogenicity study (the “RatCarc Study”), in which 

FerroKin—with commentary and permission from the FDA96—administered 

deferitazole to rats that were fed a normal, non-iron overloaded diet.97 They also 

included the first Phase II clinical trial, referred to as “Study 201,” in which 

clinicians administered 16 and 32 milligrams per kilogram of deferitazole to patients 

for a total of 96 weeks with the goal of testing the drug’s ability to remove cardiac 

iron.98 

 

93 JX-268 at 1 (email dated July 9, 2012 from Susan Drexler, Shire’s Director of Corporate 

Finance). 

94 JX-564 at 3; see also JX-271 at 26. Defendant Shire US Holdings, Inc. is the successorin-interest to Shire under the Merger Agreement. PTO ¶ 7. To simplify things, this 

decision refers to Shire US Holdings, Inc. and Shire as “Shire” or “Defendants.” 

95 PTO ¶ 19. 

96 Id. ¶ 16; JX-129 at 4. 

97 PTO ¶ 19. Rat carcinogenicity studies are commonplace in the drug development 

industry. They “expose[] rats to the drug for an extended period of time, looking for 

development of tumors . . . that could be potentially indicative of what would happen in 

humans.” Trial Tr. at 113:16–114:1 (Streck). 

98 PTO ¶ 19; JX-723 at 24; Trial Tr. at 107:12–108:4 (Streck). 
18

After acquiring FerroKin, Shire initiated two additional Phase II clinical 

studies: “Study 202,” which was conducted in pediatric patients, and “Study 203,” 

which was conducted in adult patients.99 Shire also contemplated a “follow-on 

study” to Study 203 that it would call “Study 204.”100 Initially, Study 204—a “headto-head” trial against Exjade101—was scheduled to begin in early 2014 before Study 

203 was complete.102 

Immediately after closing in April 2012, Shire desired to pursue an 

“[a]ggressive development and filing strategy” and was “[f]ocused on getting to 

market [as soon as possible]” with a target launch date set for some time in 2016.103 

Shire’s initial goal was to achieve FDA conditional (or “accelerated”) approval104

 

99 JX-723 at 7; Trial Tr. at 103:5–17 (Streck). 

100 Trial Tr. at 103:18–21 (Streck). 

101 Id. at 165:10–14 (Streck). 

102 JX-723 at 7; Trial Tr. at 165:21–166:1 (Streck); see id. at 400:5–12 (Vickers). 

103 JX-253 at 10. 

104 The FDA provides drug development programs with two “approval routes”: traditional 

approval and accelerated approval. Trial Tr. at 984:15–20 (Ross). As Shire’s regulatory 

expert explained, “the FDA requires that an adequate and well-controlled study measure 

outcomes, known as endpoints, demonstrating that a drug imparts a tangible clinical 

benefit, such as improved survival or . . . decreases in symptoms.” JX-1698 ¶ 61. If 

clinicians can demonstrate that the drug affects such an endpoint, the drug is qualified to 

receive traditional approval. Trial Tr. at 985:1–6 (Ross). “For many chronic conditions, 

however, direct demonstration of a clinical benefit may require a prohibitively long, large, 

and expensive clinical trial.” JX-1698 ¶ 61. In such cases, to “allow more rapid 

development of effective therapies, [the] FDA has allowed the use of surrogate endpoints

in clinical trials.” Id. ¶ 62. A surrogate endpoint is the “measurement of a laboratory 

value or physical sign, such as blood pressure, as a proxy for a clinical endpoint, such as 

death or stroke.” Id. If the drug has an effect on the surrogate endpoint, clinicians “have 
19

for the treatment of iron overload in MDS patients, with an eye toward achieving 

“full” FDA approval for the treatment of iron overload in other patients thereafter.105 

Shire planned to begin Phase III clinical trials in late 2013.106 

In early 2013, Shire received data from Study 201 indicating that a switch 

from once-daily to twice-daily dosing would help to achieve deferitazole’s target 

efficacy, particularly as to cardiac iron.107 Study 201 had revealed an increase in 

 

the hope that that will turn out to translate into a real clinical benefit,” and they may seek 

accelerated approval. Trial Tr. at 985:11–20 (Ross). Shire’s regulatory expert provided a 

useful illustration at trial: 

[I]f you have a patient with cancer, we’re interested in 

preventing that patient from dying prematurely. That would be 

the clinical endpoint. If you give a drug that shrinks the tumor 

size for the patient and you look at tumor shrinkage, that’s a 

surrogate endpoint; and that is frequently a basis for 

accelerated approval. And the hope is that that will turn out to 

translate into what you’re really interested in, which is keeping 

the patient from dying prematurely. 

Id. at 985:21–986:7 (Ross). Accelerated approval is a process whereby the FDA “will 

conditionally approve [a drug using a surrogate endpoint], but the sponsor must then 

perform a confirmatory trial verifying that the drug in question does in fact provide a true 

clinical benefit.” JX-1698 ¶ 62 (citing 21 C.F.R. § 314.500); see 21 C.F.R. § 314.510 

(“FDA may grant marketing approval for a new drug product on the basis of adequate and 

well-controlled clinical trials establishing that the drug product has an effect on a surrogate 

endpoint . . . . Approval under this section will be subject to the requirement that the 

applicant study the drug further . . . .”). Only “new drug products that have been studied 

for their safety and effectiveness in treating serious or life-threatening illnesses and that 

provide meaningful therapeutic benefit to patients over existing treatments” can qualify for 

accelerated approval. 21 C.F.R. § 314.500. 

105 JX-253 at 10. 

106 Id. at 11. 

107 JX-1813 at 49. 
20

cardiac iron upon administration of deferitazole.108 The data caused Shire’s 

development team to grow concerned that the ongoing Study 203—originally 

designed to test 50 and 75 milligrams of deferitazole per kilogram in patients once 

daily—would be “unlikely to generate the required efficacy for a Go into 

[Phase III].”109 Thus, in February 2013, it proposed an amendment to Study 203 

whereby clinicians would change the once-daily dose in Study 203 to the “same total 

daily dose given [twice daily].”110 It proposed a similar switch to twice-daily dosing 

for the anticipated Study 204.111 Shire eventually approved the switch to twice-daily 

dosing in Study 203,112 and this decision delayed the projected initiation of Phase III 

clinical trials to early 2015.113 To Shire, “it was important to demonstrate [that] a 

reduction in cardiac iron . . . could be achieved” because most patients suffering 

from iron overload “die of cardiovascular events.”114

 

108 JX-723 at 24 (summarizing Study 201 results); Trial Tr. at 107:7–108:4 (Streck). 

109 JX-1813 at 47. At trial, Mr. Girard explained that a go/no-go decision is “a common 

term” in the pharmaceutical industry used to describe the decision to “continue the 

development of the program,” typically “based off of new information.” Trial Tr. at 781:2–

8 (Girard). 

110 JX-1813 at 49. 

111 Id. 

112 Trial Tr. at 212:13–18 (Streck). 

113 JX-1817 at 5; JX-493 at 9; see Trial Tr. at 463:21–465:6 (Vickers). 

114 Trial Tr. at 107:12–21 (Streck); see Neufeld Dep. Tr. at 25:10–26:14, 28:7–14. 
21

Around April 2013, ongoing Phase II studies had revealed that deferitazole 

had caused some “treatment emergent Adverse Events” in patients, including a 

numbness sensation called “hypoesthesia” and a pins and needles sensation called 

“paresthesia.”115 Clinicians commonly categorize these conditions as symptoms of 

“peripheral neuropathy,” a broad term used to refer to damage to the peripheral 

nervous system.116 At the time, “[i]nvestigators deemed the intensity” of these 

peripheral neuropathies “mainly as mild/moderate, and some as . . . severe.”117 As 

of March 28, 2013, twelve of the fifty-seven patients enrolled in Study 201 and Study 

203 experienced fourteen episodes of peripheral neuropathy.118 Of those fourteen 

episodes, twelve were “described as mild to moderate.”119 None of the twelve 

patients had a documented history of peripheral neuropathy prior to their enrollment 

in the deferitazole Phase II clinical program.120 Although Shire could identify no 

“clear trends . . . in terms of dose relationship and treatment duration,” it found that 

the onset of peripheral neuropathy in some patients occurred after a “recent dose 

 

115 JX-498 at 17; see JX-666 at 9; JX-522 at 31. 

116 Neufeld Dep. Tr. at 197:5–12. 

117 JX-498 at 17; JX-666 at 9 (“The majority of these symptoms have been mild to moderate 

in nature.”). 

118 JX-522 at 29. 

119 Id.

120 Id. 
22

increase” of deferitazole.121 Shire did conclude, however, that symptoms of 

peripheral neuropathy were “reversible within weeks of withholding [deferitazole] 

in some cases.”122

Shire viewed these instances of peripheral neuropathy as “[s]erious and 

unexpected suspected adverse reaction[s]” worthy of reporting to the FDA at various 

times throughout Phase II.123 

By May 2013, eight additional cases of peripheral neuropathy “were reported 

which showed similar features as seen before,”124 and Shire identified “a potential 

trend to increased frequency and an earlier onset at higher doses” of deferitazole.125 

Shire’s Executive Safety Review Committee—a group of “the most senior 

individuals within the organization”126 to whom “issues and challenges related to the 

safety . . . of programs would be presented”127—determined that, while “a 

benefit:risk assessment could not be clearly determined” at the time, “demonstrated 

 

121 Id. at 31. 

122 Id. at 13. 

123 E.g., JX-308; JX-462; JX-463; JX-767; see 21 C.F.R. § 312.32(c)(1)(i) (“The sponsor 

must report any suspected adverse reaction that is both serious and unexpected. The 

sponsor must report an adverse event as a suspected adverse reaction only if there is 

evidence to suggest a causal relationship between the drug and the adverse event . . . .”). 

124 JX-552 at 5. 

125 Id.

126 Trial Tr. at 117:14–21 (Streck). 

127 Id. at 389:1–8 (Vickers). 
23

declines in [liver iron concentration] and appropriate measures put in place to assess 

and manage patients who develop signs and symptoms of peripheral neuropathy . . . 

justified the continuation of the development program for [deferitazole].”128 In late 

2013, Shire formed a “group of external . . . neurologic experts”129 called the 

Peripheral Neuropathy Adjudication Committee (“Peripheral Neuropathy 

Committee”) in order to “assess whether the signs and symptoms observed match 

the diagnosis of [peripheral neuropathy] and to evaluate the potential relationship to 

[deferitazole].”130 

E. Shire Establishes the Pipeline Committee and Makes Additional 

Changes to the Deferitazole Program. 

On April 30, 2013, Shire’s Science and Technology Committee—a “subteam” 

of the board131—met to discuss, among other things, Shire’s research and 

development structure and portfolio strategy.132 At that meeting, the committee 

discussed “[d]ownward changes in Shire revenue forecasts” that had “resulted in a 

2017 projected revenue gap of $700 [million].”133 “To increase the value of Shire 

[research and development] long term and to address this gap medium term,” the 

 

128 JX-552 at 6. 

129 Trial Tr. at 108:22–109:2 (Streck). 

130 JX-802 at 4. 

131 Trial Tr. at 456:22–23 (Vickers). 

132 JX-493 at 1, 3. 

133 Id. at 50. 
24

committee proposed that Shire “establish a company-wide Pipeline Committee and 

adopt a more holistic approach to prioritize pipeline investment” and “rebalance 

spend near term toward late stage assets” while “selectively decreas[ing] investment 

in early stage programs.”134 In the committee’s overall breakdown of Shire’s 

research and development costs for 2013, deferitazole was depicted as Shire’s most 

expensive pre-proof of concept drug with clinical expenditures of $44 million.135 

The newly created Pipeline Committee considered the deferitazole 

development program throughout the next few months. Dr. Phillip Vickers chaired 

the Pipeline Committee.136 At a meeting on May 15, 2013, the Pipeline Committee 

discussed the status of the program, including findings from Study 201, the switch 

to twice-daily dosing in Study 203, and the projected start date for Phase III clinical 

trials in February of 2015.137 The presentation given at that meeting indicated that 

 

134 Id.

135 Id. at 56. The term “proof of concept” was defined as “having clinical data showing 

that the compound works as intended in patients.” Id. At the time, Shire “hadn’t shown 

the safety and efficacy that [it] would need . . . in order to say [deferitazole] had clinical 

proof of concept.” Trial Tr. at 476: 3–6 (Vickers). Even though deferitazole was in the 

midst of Phase II studies, safety and efficacy concerns associated with the drug caused 

Shire to categorize it as pre-proof of concept. Id.; JX-493 at 56.

136 Vickers described the Pipeline Committee at trial as a “cross-functional team” of “very 

senior people . . . who played an important role in making decisions on [Shire’s research 

and development programs],” including “clinical, regulatory, commercial, manufacturing, 

[and] legal” decisions. Trial Tr. at 386:20–387:3 (Vickers). The Pipeline Committee 

reported directly to the Executive Committee, “the most senior committee within Shire.” 

Id. at 387:6–13 (Vickers). 

137 JX-534 at 100–03. 
25

deferitazole’s “R&D cost in 2013” totaled $41 million, and that its “Total R&D cost 

(to 2026)” was $257 million.138 

In August 2013, the Pipeline Committee discussed deferitazole “due to its 

high 2014 cost” but concluded that Shire “should wait until [P]hase II data is 

available in 2014 before considering changing course.”139 On September 26, 2013, 

the Pipeline Committee discussed that “delay in the [deferitazole] program could 

impact its commercial value due to the future genericization of Exjade.”140 

 In an email dated September 27, 2013, Pipeline Committee member 

Dr. Howard B. Mayer wrote to other Pipeline Committee members explaining that 

the deferitazole program was “a complex program” that had not yet been 

“extensively discussed at the [Pipeline Committee] from a technical standpoint.”141 

He further stated that there were “several issues with the program,” including safety, 

efficacy, and the release of generic Exjade.142 Vickers responded the next day, 

agreeing with Mayer and further stating: “[F]rom a budget perspective this is a very 

expensive program. . . . [W]e should consider what will be go/no go criteria- both 

 

138 Id. at 100. 

139 JX-657 at 235. 

140 JX-677 at 64. 

141 JX-665 at 3; see Trial Tr. at 493:16–20 (Vickers) (confirming that the individuals to 

whom the email was sent served on the Pipeline Committee). 

142 JX-665 at 3. 
26

from a pipeline and budget perspective. We plan to move forward, but should all be 

aligned.”143 

On October 21, 2013, Vickers asked members of Shire’s finance team to send 

him a presentation showing Shire’s budget breakdown for 2014, “including a 

breakdown by program.”144 In that email, he stated: “I would like to have with me 

the cost of the [deferitazole] program.”145 The presentation indicated that the 

deferitazole program had the highest projected “Total External Spend” for 2014 out 

of approximately fifty-five programs, as it was valued at $58 million.146 On 

October 22, 2013, Vickers emailed the presentation to Mayer, calling it a “[g]ood 

reminder on cost vs risk for [deferitazole].”147 Vickers then observed: “One of us 

can flag that this is the most expensive program in 2014!”148 

By late October and early November 2013, deferitazole had been able to 

demonstrate control of liver iron concentration but had not been able to demonstrate 

control of cardiac iron concentration.149 The drug had a “[p]romising renal safety 

and [gastrointestinal] tolerability profile,” but there was a “high incidence” of 

 

143 Id. at 2; Trial Tr. at 493:21–494:7 (Vickers). 

144 JX-693 at 1; Trial Tr. at 494:12–495:3 (Vickers). 

145 JX-693 at 1. 

146 Id. at 12. 

147 JX-695 at 1. 

148 Id. 

149 JX-707 at 6. 
27

peripheral neuropathy.150 Half of the patients in the ongoing studies had “mild 

residual symptoms.”151 At the time, the deferitazole program had an expected net 

present value of negative $21 million.152 

On October 31, 2013, a Shire executive emailed Mayer, expressing his view 

that the instances of peripheral neuropathy were “a big concern in particular as there 

are ‘residual symptoms’.”153 He stated: “This is a challenging program. . . . I am 

wondering why we continue working on this with a clearly negative [expected net 

present value].”154 Mayer responded: “I completely agree but the analysts 

apparently love this program!”155

On November 13, 2013, Vickers emailed Flemming Ornskov—Shire’s new 

CEO as of April 2013—to update him on numerous programs, including 

deferitazole.156 Vickers stated: “Personally, I think that the full risks of this program 

have not been shared in full previously . . . now that we have had a chance to review 

the data this program has higher risk than I was aware of.”157 He noted clinical risks 

 

150 Id.; see Trial Tr. at 503:5–10 (Vickers). 

151 JX-707 at 12. 

152 Id. at 33. 

153 JX-710 at 1. 

154 Id.

155 Id. 

156 See generally JX-749. 

157 Id. at 2. 
28

affiliated with cardiac iron concentration and peripheral neuropathy and commercial 

risks affiliated with the release of generic Exjade, and the program’s “negative 

NPV.”158 He also noted—just as he had to Mayer previously—that deferitazole “is 

the sole most expensive program in [research and development] next yearapproximately $58 [million].”159

On November 15, 2013, the Pipeline Committee met to discuss the 

deferitazole program.160 It again discussed the drug’s efficacy in decreasing liver 

iron concentration, but noted that cardiac iron concentration control was still “To Be 

Achieved.”161 And although it noted that deferitazole had a “[f]avourable renal and 

[gastrointestinal adverse effect] profile,”162 it discussed the “[n]eed to define the 

Therapeutic Window” for the drug, or the “appropriate dose for each patient to 

achieve a sufficient net negative iron balance” without symptoms of peripheral 

neuropathy.163 Overall, Shire’s “[e]fficacy [and] safety targets” for the drug were 

not yet met, which meant potential “[d]elays for clinical trials.”164 These delays, in 

 

158 Id. 

159 Id.

160 JX-723 at 2; see Trial Tr. at 393:5–23 (Vickers). 

161 JX-723 at 11. 

162 Id. 

163 Id. at 9. 

164 Id. at 20. 
29

turn, could hinder deferitazole’s commercial opportunity, as the release of generic 

Exjade was rapidly approaching. 

In a meeting the same day, the Pipeline Committee recognized “the 

competitive risks of further delay,” but nonetheless “concluded that [Shire] should 

wait for the results from [S]tudy 203 before initiating further clinical studies,” 

including Study 204.165 The data from a completed Study 203, the Pipeline 

Committee observed, would “inform the decision whether [the] program is 

viable.”166 In an email to deferitazole’s development team, the Pipeline Committee 

expressed: “Although we recognize that this will delay the overall timeline (and 

carries some competitive risk), we believe that this is the prudent course given the 

risks and complexities inherent in the program, and the information that [S]tudy 203 

will provide.”167

As the Pipeline Committee discussed the future of the deferitazole program, 

the Peripheral Neuropathy Committee continued to assess the patient risk affiliated 

with symptoms of peripheral neuropathy. More than one month after the Pipeline 

Committee decided to delay the start of Study 204, on December 18, 2013, the 

Peripheral Neuropathy Committee submitted a preliminary report to Shire in which 

 

165 JX-732 at 3. 

166 Id.

167 JX-731 at 1. 
30

it identified peripheral neuropathy as a “dose limiting toxicity” for deferitazole 

because its frequency was higher at higher doses.168 The Peripheral Neuropathy 

Committee recommended that Shire halt dosing at 75 milligrams per kilogram per 

day, both once daily and twice daily total.169 On January 10, 2014, the Executive 

Safety Review Committee “agreed on the decision to discontinue the 75 [milligrams 

per kilogram per day] . . . dosing in all ongoing clinical trials,” but also agreed to 

continue with “50 and 60 [milligrams per kilogram per day] dosing.”170 

These changes to the deferitazole program—the delay of Study 204 pending 

the results of Study 203 and the termination of the 75 milligrams per kilogram 

dose—resulted in a delay of Phase III clinical trials. By January 17, 2014, Shire’s 

internal records indicated that Phase III clinical trials would not begin until 

May 27, 2016.171 This “planned program delay” would “reduce [deferitazole’s] 

2014 budget” by approximately $28.5 million.172 Nonetheless, Dr. Paul Streck—the 

vice president of clinical development for Shire at the time173—testified in his 

 

168 JX-802 at 4; PTO ¶ 48. “Virtually all drugs have some kind of limitation in terms of 

how much you can give until you see some side effect.” Trial Tr. at 82:16–24 (Rienhoff). 

This concept is referred to as a “dose limiting toxicity.” Id. 

169 JX-802 at 13. 

170 Id. at 5; PTO ¶ 48. See generally JX-856. 

171 JX-805 at 7; Trial Tr. at 173:24–74:4 (Streck); see also PTO ¶ 51. 

172 JX-805 at 8. 

173 Trial Tr. at 102:5–10 (Streck). 
31

deposition that as of early 2014, the deferitazole program remained just as promising 

as “[a]ny other early Phase II program”174 and had the “opportunity to be as 

successful as any other Phase II program that Shire was involved with.”175 

F. The RatCarc Study Reveals Tumors in the Kidneys of Male Rats, 

and Shire Halts Dosing. 

As discussed above, FerroKin had commenced the RatCarc Study before the 

Merger Agreement was executed. On February 19, 2014, Shire was advised that the 

pathologist’s preliminary review of the tissues from the RatCarc Study indicated an 

increased incidence of tumors—both benign and malignant—in the kidneys of male 

rats.176 In response, Shire’s Director of Toxicology, Dr. Richard Pfeifer, noted that, 

if Shire could show that the tumors “were related to the well-documented rat-specific 

tumorigenic response . . . described in the literature, . . . [Shire would] be in a better 

position to discuss the findings as ‘noteworthy’ rather than ‘adverse,’ i.e., that the 

tumors are of no consequence to human health.”177 

One such “rat-specific tumorigenic response” is a condition called chronic 

progressive nephropathy (“CPN”). CPN is a “disease of rat kidneys”178 whereby 

 

174 Id. at 161:11–17 (Streck). 

175 Streck Dep. Tr. at 133:24–134:11. 

176 PTO ¶ 52; JX-862 at 3. The RatCarc Study revealed two types of tumors: tubule cell 

adenomas and carcinomas. JX-862 at 3. “[A]denomas are benign tumors[,] 

and . . . carcinomas are malignant tumors.” Trial Tr. at 1062:14–17 (Popp). 

177 JX-862 at 2. 

178 Trial Tr. at 1065:15–16 (Popp). 
32

“rats will spontaneously develop . . . benign tumors” because their “cells grow very 

quickly for various reasons associated with their genetics.”179 Because CPN is a 

progressive condition, the incidence and severity of the tumors increases over 

time.180 By the time male rats are two years old, there is “about a hundred percent 

incidence.”181 Though CPN is not specific to male rats, its severity and incidence in 

female rats is much lower.182 Because CPN can “compromise some of the 

interpretation of data related to carcinogenicity” in rats,183 Shire had to figure out if 

the tumors in the RatCarc Study emerged as a result of CPN or as a result of 

deferitazole. To Shire, this question was a “very big deal,” as there are ethical 

problems with exposing humans to a drug that could potentially cause cancer.184

Shire sought advice from an independent expert pathologist in order to 

determine whether it should continue dosing in the deferitazole program.185 On 

February 25, 2014, Streck emailed Mayer and stated: “Based on expert feedback, 

the team will recommend continuing dosing in [the deferitazole program].”186 This 

 

179 Id. at 123:7–11 (Streck). 

180 Id. at 1065:8–1066:4 (Popp). 

181 Id. at 1065:20–22 (Popp). 

182 Id. at 1066:6–9 (Popp). 

183 Id. at 412:8–11 (Vickers). 

184 Id. at 114:4–15 (Streck). 

185 JX-888 at 1. 

186 Id.
33

recommendation was made in part because there was a less than ten percent 

incidence of tumors in the RatCarc Study and because the tumors were found toward 

the end of the study’s two-year duration, presumably when the incidence of tumors 

in rats with CPN would be at its highest.187 Streck explained that “[t]he team will 

recommend reporting the finding to regulatory agencies, put together a rationale to 

continue dosing based on animal and human data collected thus far and performing 

[sic] additional pathologic analyses.”188 He further explained: “There was team 

consensus to move forward in this way recognizing regulatory agencies may still put 

us on clinical hold.”189

Meanwhile, news of the rat carcinogenicity signal did not sit well with at least 

one member of the Pipeline Committee. In an email to Ornskov dated 

February 23, 2014, Vickers summarized the high-level issues with deferitazole, 

including the drug’s ability to control cardiac iron, symptoms of peripheral 

neuropathy, and the newly-surfaced rat carcinogenicity signal.190 He stated: “We 

ha[d] already thought that this program was on[] the ropes and at the end of this 

coming week we may need to make a more drastic decision on the program.”191

 

187 Id. 

188 Id. 

189 Id. 

190 JX-871 at 1. 

191 Id. 
34

On February 25, 2014, the clinical development team presented its 

recommendations to the Executive Safety Review Committee.192 At the February 

25 meeting, the committee discussed “whether . . . the evidence to date was robust 

enough to suggest a rat-specific mechanism of action, such as progressive CPN.”193 

The committee noted, among other things, that there was no “clear evidence” that 

deferitazole “exacerbates CPN to the most advanced stages or that the observed 

tumors are associated with advanced CPN.”194 It also noted that the incidence of 

malignant tumors was higher than expected.195 

The Executive Safety Review Committee also expressed concern about the 

lack of a safety margin for deferitazole.196 A safety margin is a “zone of comfort” 

meant to assure clinicians that “exposing patients [to the drug] in the short term [will] 

not cause any ill effects.”197 In essence, it is “a comparison between the exposure of 

a drug in animals [and] the exposure [of] the drug in human subjects.”198 “Where 

the exposure is greater in animals than in humans, the safety margin is positive,” and 

“[a] higher safety margin generally provides greater confidence that adverse events 

 

192 See generally JX-1321 at 8–10. 

193 Id. at 10. 

194 Id.

195 Id. 

196 Id. at 9–10; see Trial Tr. at 127:4–14 (Streck). 

197 Trial Tr. at 115:5–13 (Streck). 

198 JX-1697 ¶ 32; PTO ¶ 69. 
35

seen in animals will not translate to human subjects, who receive significantly lower 

exposures.”199 Because the exposure of deferitazole in the rats was “significantly 

lower than that achieved in patients [enrolled] in the clinical trials,” deferitazole had 

no safety margin, and the Executive Safety Review Committee grew concerned.200

Ultimately, although “the potential relevance of the [rat carcinogenicity] 

finding to humans, if any, [was] unknown at [the] time,” the Executive Safety 

Review Committee “voted in favor of suspending dosing in the clinical studies” 

pending further investigation.201 That evening, Vickers wrote to Ornskov and stated: 

“As you will see . . . the teams [sic] recommendation was to continue with the 

program. However, the view of the [Executive Safety Review Committee] was that 

based on the information [at] hand we feel it appropriate to halt dosing in the clinical 

study.”202

G. The FDA Places the Deferitazole Development Program on Full 

Clinical Hold, and Shire Investigates the RatCarc Study Results 

Further. 

On March 4, 2014, Shire informed the FDA of the rat carcinogenicity signal 

and that Shire had “taken the precautionary measure of implementing a temporary 

 

199 JX-1697 ¶ 32; PTO ¶ 69. 

200 JX-1321 at 10. The parties stipulated to the fact that “[t]here was no safety margin 

between the exposure at which tumor[s] were observed in the male rats in the [RatCarc 

Study] and the clinical exposure [i.e., exposure in humans].” PTO ¶ 70. 

201 JX-1321 at 10. 

202 JX-878 at 1. 
36

halt to the global clinical development program with the discontinuation of dosing 

of all subjects in all studies across all countries with immediate effect.”203 Upon 

receiving Shire’s submission, the FDA requested a meeting with Shire on March 6, 

2014.204 The FDA explained that it “fully agree[d] with Shire’s approach and path 

forward.”205 It further explained that, “[t]o acknowledge this and as a formality, we 

are putting the [deferitazole] program on a Full Clinical Hold with an official letter 

to follow within 7 days.”206 

The official letter (the “Clinical Hold Letter”) came on March 7, 2014.207 In 

it, the FDA explained that the deferitazole program was “on clinical hold and all 

clinical trials must be stopped.”208 The Clinical Hold Letter confirmed that the FDA 

placed deferitazole on full clinical hold pursuant to 21 C.F.R. § 312.42(b)(2)(i), 

which authorizes the FDA to impose such a hold if it finds that “[h]uman subjects 

are or would be exposed to an unreasonable and significant risk of illness or 

injury.”209 The Clinical Hold Letter explained that Shire was required to submit 

certain information in order to address the clinical hold, including a final report for 

 

203 See generally JX-914. 

204 JX-955 at 4; PTO ¶ 57. 

205 JX-955 at 4. 

206 Id. 

207 PTO ¶ 58. See generally JX-937. 

208 PTO ¶ 58; JX-937 at 1. 

209 PTO ¶ 58; JX-937 at 1. 
37

the RatCarc Study, certain human data to facilitate the interpretation of the RatCarc 

Study results, and other items.210 Until Shire submitted this “Clinical Hold Complete 

Response” and received the green light from the FDA, it could not “legally initiate 

or resume clinical studies” for deferitazole.211

In late March 2014, Rienhoff and Plaintiff’s Managing Director Christopher 

Letang met with Streck and other Shire representatives to discuss the status of the 

deferitazole program.212 Letang later described the meeting in an email, explaining 

that Shire was “grappling with how to respond to the neuropathy and carcinogenicity 

findings from the recent studies.”213 Letang’s impression was that Shire was “hoping 

to be able to lift the clinical hold by the end of the year” but that this would “require 

‘clear and compelling evidence’ for a rat specific mechanism on the carcinogenicity 

findings.”214 Letang stated: “[Shire] assured us that they are not losing enthusiasm 

for the program.”215 Rienhoff had a similar impression, as he testified at trial that it 

was his “understanding that [Shire was] going to make every effort [it] possibly 

 

210 JX-937 at 1. 

211 Id. 

212 JX-1011; Trial Tr. at 85:3–12 (Rienhoff). 

213 JX-1011. 

214 Id.

215 Id.
38

could to lift the hold”216 and that Shire “appeared to be enthusiastic” about the 

continuation of the program.217

In response to the results of the RatCarc Study, Shire engaged a Pathology 

Working Group composed of recognized experts in renal pathology, renal toxicity, 

CPN, and rodent carcinogenicity studies.218 The working group examined the 

RatCarc Study results and confirmed the study pathologist’s finding that the tumors 

appeared only in the kidneys of male rats.219 In late June 2014, the working group 

concluded: “The human clinical relevance of the findings in male rats is most likely 

to be potential renal toxicity. Since there is no comparable renal disease to CPN in 

man . . . , these findings are unlikely to indicate a carcinogenic risk for humans in 

the absence of renal toxicity.”220 The working group recommended that Shire 

conduct two additional rodent studies: a study in iron-loaded rats and a study in 

mice.221 Pfeifer believed that the working group’s findings “put [Shire] in a better 

position than anticipated,” in part because they were “unlikely to indicate a 

carcinogenic risk to man.”222

 

216 Trial Tr. at 86:17–18 (Rienhoff). 

217 Id. at 86:23–24 (Rienhoff). 

218 PTO ¶ 60. 

219 JX-1179 at 22. 

220 Id. at 23. 

221 Id. at 2. 

222 JX-1066 at 1. 
39

On July 7, 2014, the Executive Safety Review Committee met in order to 

discuss the working group’s recommendations.223 The deferitazole clinical 

development team suggested that the Executive Safety Review Committee close out 

the ongoing clinical studies (including Study 202 and Study 203) and move forward 

with the two additional rodent studies “to ensure that carcinogenicity findings are 

male rat-specific and are not relevant to humans.”224 They also suggested that Shire 

continue monitoring patients who had already been exposed to the drug “for renal 

tumor development until data from the [two additional rodent studies] confirm the 

current assessment.”225 The Executive Safety Review Committee agreed, adopted 

these recommendations, and additionally endeavored to “[e]ngage [r]egulatory 

consultants to endorse [Shire’s] strategy.”226 The Executive Safety Review 

Committee noted: “It would be advisable to understand that the suggested trials 

would be sufficient from a FDA . . . perspective to conclude that the carcinogenicity 

findings are male rat-specific and are not relevant to humans, and that this evidence 

would have a good probability of success in lifting the current clinical hold.”227 

 

223 See generally JX-1321 at 5–7. 

224 Id. at 6. 

225 Id. This monitoring study would come to be known as Study 206—a five-year safety 

follow-up study in which patients who had participated in previous deferitazole studies 

would not receive any dose of deferitazole. PTO ¶ 64. 

226 JX-1321 at 6. 

227 Id. at 6–7. 
40

At the time, Shire’s internal development plan documents showed that Phase 

III clinical trials were not expected to begin until at least mid-2017 and that 

deferitazole would not receive approval before mid-2020—after the release of 

generic Exjade.228 

H. Shire Sends Plaintiff a Notice of Fundamental Circumstance and 

Does Not Make the Initiation of Phase III Clinical Trial Milestone 

Payment. 

As Shire continued to wrestle with the RatCarc Study findings, members of 

the Pipeline Committee discussed the implications of “any plans to announce 

discontinuation” of the deferitazole program, including those arising from the 

Merger Agreement.229 In an email dated April 30, 2014, Mayer explained to 

Vickers: “My understanding is that there is a significant milestone 

payment . . . based on termination of the program in the absence of a clear 

efficacy/safety reason and this could be an issue from the perspective of Hugh 

Rienhoff and other legacy Ferro[K]in investors.”230 

Mayer’s concern resurfaced later on in a June 8, 2014 Pipeline Committee 

“Priority Programs Update.”231 The update noted that the Pathology Working 

Group’s evaluation of the RatCarc Study results was “favorable” and estimated that 

 

228 PTO ¶ 62. 

229 JX-1041 at 1. 

230 Id. 

231 See generally JX-1854. 
41

the clinical hold “potentially could be lifted in ~ 1 year.”232 The update went on to 

discuss the Merger Agreement, stating that payment of the Initiation of Phase III 

Clinical Trial Milestone was “required even if [the deferitazole program were] 

terminated, absent the occurrence of a Fundamental Circumstance.”233 It explained: 

“If FDA declines to lift Clinical Hold after considering Shire’s complete response, 

this would likely be a Fundamental Circumstance (depending on FDA’s actual 

response).”234 And if the problems the program faced thus far were to be “considered 

together,” the update explained, a Fundamental Circumstance may also be said to 

have occurred—but this outcome was “not as clear cut.”235 The update recognized 

that termination of the deferitazole program “due to changes in Shire’s business 

model or financial forecasts (in and of themselves) would not qualify as a 

Fundamental Circumstance.”236

The Pipeline Committee met on July 8, 2014—the day after the Executive 

Safety Review Committee adopted the recommendation that Shire continue 

monitoring patients and move forward with two additional rodent studies. During 

 

232 Id. at 23. The update explained that the two additional rodent studies—the study in 

iron-loaded rats and the study in mice—would take thirteen weeks and six months, 

respectively. PTO ¶ 63. The study in iron-loaded rats began in late 2014, and the study in 

mice began in mid-2015. Id. 

233 JX-1854 at 26. 

234 Id.

235 Id. 

236 Id. 
42

the July 8 meeting, the Pipeline Committee formally terminated the deferitazole 

clinical studies subject to the full clinical hold, but it neither formally terminated the 

deferitazole program nor made a determination that a Fundamental Circumstance 

had occurred.237 

It was only following the July 8 Pipeline Committee meeting that Streck 

“began to assemble information in terms of what had happened with the clinical 

development program . . . from the time it started until the time it was put on clinical 

hold by the FDA.”238 That exercise culminated in a September 2014 document titled 

“[deferitazole] Fundamental Circumstance Justification Outline.”239 By October 

2014, that outline had evolved into a detailed document that would “likely be used 

for discussions and legal proceedings with FerroKin.”240 The same month, Mayer 

expressed: “At the moment, I think we can safely say we have no plans to resurrect 

this program but we are doing . . . our due diligence in understanding the safety 

findings and the risks to humans.”241

 

237 JX-1107 at 6; Trial Tr. at 148:15–19 (Streck). 

238 Trial Tr. at 149:14–18 (Streck). 

239 JX-1131; see Trial Tr. at 193:23–194:13 (Streck). The document’s unaltered name is 

“602 Fundamental Circumstance Justification Outline.” JX-1131. Internally, Shire used 

variations of the number 602 to refer to the deferitazole program. Trial Tr. at 35:6–8 

(Rienhoff). 

240 JX-1178. 

241 JX-1287 at 145. 
43

At meetings in February 2015, the Pipeline Committee and the Executive 

Committee made the decision to terminate development of deferitazole completely 

and to send a Notice of Fundamental Circumstance to Plaintiff.242 Section 2.9(b) of 

the Merger Agreement required that, “[i]n the event that [Shire] believes that a 

Fundamental Circumstance has occurred, [Shire] shall promptly provide notice 

thereof to [Plaintiff] together with reasonable detail (based upon the information 

then possessed by [Shire]) of the material facts known to [Shire] giving rise to such 

belief.”243

On February 25, 2015, Shire sent Plaintiff a “Notice of Fundamental 

Circumstance.”244 It cited several safety concerns with deferitazole, including “renal 

carcinogenicity in animals and peripheral neuropathy, as well as undesirable drugdrug interactions.”245 It noted that “[t]he observation of renal carcinogenicity in 

preclinical studies resulted in the current FDA-issued full clinical hold.”246 “Taken 

together,” the notice explained, “these observed dose-dependent adverse effects 

make it improbable that [deferitazole] would demonstrate an improved safety profile 

compared to Exjade” and even that, “like Exjade, [deferitazole] may carry a ‘black 

 

242 PTO ¶ 71. 

243 JX-241 § 2.9(b), at 25; PTO ¶ 33. 

244 JX-1294 at 57–61. 

245 Id. at 58. 

246 Id.
44

box’ or similar warning, meaning that [it] would have no meaningful competitive 

advantage over Exjade in regard to safety.”247

The notice also cited certain efficacy concerns with deferitazole, stating: “The 

clinical and commercial success of [deferitazole] further requires that [it] 

demonstrate efficacy at least comparable to Exjade, including with respect to its 

effects on both hepatic and cardiac iron.”248 It explained that the results from “one 

Phase 2 dose-finding study”—Study 201—“raised a signal that [deferitazole] failed 

to demonstrate adequate control of cardiac iron overload.”249 It also asserted that 

deferitazole “demonstrated questionable and, at best, dose-dependent iron chelation 

capacity for managing liver iron overload.”250 The notice went on to explain that 

“the prospect of finding a dosage level that is effective for managing both liver and 

cardiac iron overload without seriously compromising [deferitazole]’s safety 

profile . . . appears remote.”251

The notice states that these safety and efficacy concerns “rendered the receipt 

of applicable Regulatory Approvals impracticable” and also meant that deferitazole 

“could not be launched within the required window for [it] to be commercially 

 

247 Id. 

248 Id. 

249 Id. 

250 Id. at 59. 

251 Id. 
45

viable.”252 The receipt of Regulatory Approvals would be impracticable because 

Shire would have to convince the FDA to lift the full clinical hold and “re-initiate 

Phase II clinical studies.”253 And the commercial viability of deferitazole was no 

longer, in light of the “substantial delay stemming from the FDA-issued full clinical 

hold and the stoppage of the previous Phase II clinical trials” as well as deferitazole’s 

“potential[] inferior[ity] to the current standard of care.”254

The notice concluded that the Initiation of Phase III Clinical Trial Milestone 

“shall not be deemed to have been achieved on December 31, 2015.”255 Shire did 

not make the $45 million Initiation of Phase III Clinical Trial Milestone payment 

with Plaintiff on December 31, 2015, and has not done so since then.256 Shire did 

not submit a Clinical Hold Compete Response to the FDA in order to attempt to lift 

the full clinical hold.257 

 

252 Id. at 59–60. 

253 Id. at 59. 

254 Id. at 60. 

255 Id. at 61 (emphasis added). 

256 PTO ¶ 75. 

257 Id. ¶ 74. 
46

I. This Litigation 

Plaintiff filed the Verified Complaint in this action on December 4, 2017.258 

Trial took place over four days in October 2019.259 Post-trial briefing concluded on 

February 19, 2020,260 and the Court heard post-trial arguments on March 2, 2020.261 

Thereafter, the parties made supplemental submissions, which were complete by 

July 31, 2020.262

II. LEGAL ANALYSIS 

Plaintiff asserts two causes of action. In its First Cause of Action, Plaintiff 

claims that Shire breached its obligation to make the Initiation of Phase III Clinical 

Trial Milestone payment.263 In its Second Cause of Action, Plaintiff claims that it is 

entitled to its attorneys’ fees in connection with this lawsuit.264

A. Breach of Contract 

In its First Cause of Action, Plaintiff claims that Shire breached its obligation 

to make the Initiation of Phase III Clinical Trial Milestone payment under Sections 

 

258 Id. ¶ 81. 

259 Dkts. 167–170. 

260 Dkt. 171, Pl.’s Opening Post-Trial Br.; Dkt. 174, Defs.’ Post-Trial Br.; Dkt. 177, Pl.’s 

Reply Post-Trial Br. 

261 Dkt. 181, Post-Trial Oral Arg. (“Oral Arg. Tr.”). 

262 Dkt. 185, Shire’s Post-Trial Suppl. Opening Br. (“Defs.’ Opening Suppl. Br.”); Dkt. 

187, Pl.’s Opening Suppl. Post-Trial Br. (“Pl.’s Opening Suppl. Br.”); Dkt. 193, Pl.’s 

Answering Suppl. Post-Trial Br.; Dkt. 194, Shire’s Reply Post-Trial Suppl. Br. 

263 Dkt. 1, Verified Compl. for Breach of Contract ¶¶ 59–64. 

264 Id. at ¶¶ 65–70. 
47

2.9(a) and 2.9(f) of the Merger Agreement. “To prevail on a breach of contract 

claim, the plaintiff must prove: 1) the existence of a contract; (2) the breach of an 

obligation imposed by the contract; and (3) damages suffered because of the 

breach.”265 

Section 2.9(a) of the Merger Agreement provides: 

Upon the first occurrence of any of the events set forth in 

the table below under “Milestone Trigger Event” (each a 

“Milestone”), [Shire] shall promptly . . . deliver a notice to 

the Equityholders’ Representative of such occurrence, 

and, within fifteen (15) Business Days of such notice, 

deposit or cause to be deposited the amount of cash in U.S. 

dollars set forth in the table below under “Milestone 

Payment” opposite such Milestone . . . with the 

Equityholders’ Representative . . . .266

The table referenced in the above language lists the “trigger event” for the 

milestone payment at issue in this litigation as the “Initiation of Phase III Clinical 

Trial Milestone.”267 Section 1.1 defines “Initiation of Phase III Clinical Trial 

Milestone” as “the earlier to occur of (i) the first dosing of the first patient in the first 

Phase III Clinical Trial or (ii) the filings of an NDA or an MAA with respect to a 

Covered Product.”268

 

265 Zayo Gp., LLC v. Latisys Hldgs., LLC, 2018 WL 6177174, at *10 (Del. Ch. 

Nov. 26, 2018).

266 JX-241 § 2.9(a), at 24–25. 

267 Id. § 2.9(a), at 24. 

268 Id. § 1.1, at 11. 
48

Section 2.9(f) provides that 

Notwithstanding anything else in this Agreement to the 

contrary, in the event that the Company has not achieved 

the Initiation of the Phase III Clinical Trial Milestone on 

or before December 31, 2015, other than as a result of a 

Fundamental Circumstance, then the Initiation of Phase III 

Clinical Trial Milestone shall be deemed to have been 

achieved on such date.269

Neither the first dosing of the first patient in the first Phase III clinical trial 

nor the filings of an NDA or an MAA with respect to a Covered Product occurred 

on or before December 31, 2015. The Initiation of Phase III Clinical Trial Milestone 

is therefore “deemed achieved” under Section 2.9(f) unless the failure to achieve the 

milestone was “as a result of a Fundamental Circumstance.” Plaintiff’s claim thus 

hinges on the clause “other than as a result of a Fundamental Circumstance,” which 

this decision refers to as the “Fundamental Circumstance Clause.” 

1. Shire Bears the Burden of Proof. 

Typically, the party seeking to enforce the contract must prove each element 

of its breach of contract claim by a preponderance of the evidence.270 Contracts that 

 

269 Id. § 2.9(f), at 27; PTO ¶ 30. 

270 Dermatology Assocs. of San Antonio v. Oliver St. Dermatology Mgmt. LLC, 2020 WL 

4581674, at *19 n.214 (Del. Ch. Aug. 10, 2020); Braga Invs. & Advisory, LLC v. Yenni 

Income Opportunities Fund I, L.P., 2020 WL 3042236, at *8 (Del. Ch. June 8, 2020); 

Simon-Mills II, LLC v. Kan Am USA XVI Ltd. P’ship, 2017 WL 1191061, at *36 (Del. Ch. 

Mar. 30, 2017); Zimmerman v. Crothall, 62 A.3d 676, 691 (Del. Ch. 2013); 23 Williston 

on Contracts § 63:14 (4th ed. 2020). 
49

contain conditions, however, require another layer of analysis when allocating the 

burden of proof. 

Where a contractual obligation is subject to a “condition precedent,” that 

obligation will only mature on satisfaction of a contractually specified condition.271

In that situation, the party seeking to enforce that obligation bears the burden of 

proving that the condition has been satisfied in order to establish the first element of 

a claim for breach of contract—the existence of a contractual obligation.272 

 

271 SLMSoft.com, Inc. v. Cross Country Bank, 2003 WL 1769770, at *12 (Del. Super. 

Apr. 2, 2003) (“A term rendering performance by one party contingent upon a 

condition . . . is generally a condition precedent.”); 13 Williston on Contracts § 38:7 (“A 

condition precedent is either an act of a party that must be performed or a certain event that 

must happen before a contractual right accrues or a contractual duty arises.”); Restatement 

(Second) of Contracts § 224 & cmt. e (Am. Law Inst. 1981) (“A condition [precedent] is 

an event, not certain to occur, which must occur . . . before performance under a contract 

becomes due.”); 2 Farnsworth on Contracts § 8.02, at 8-5 & n.2 (4th ed. 2019) (same 

(quoting Restatement (Second) of Contracts § 224)); 8 Corbin on Contracts § 30.7, at 14 

(rev. ed. 1999) (defining conditions precedent as “those facts and events occurring after the 

making of a valid contract, that must exist or occur before there is a right to immediate 

performance, before there is a breach of contract duty and before the usual judicial 

remedies become available” (emphasis removed)). 

272 Ewell v. Those Certain Underwriters of Lloyd’s, London, 2010 WL 3447570, at *3 (Del. 

Super. Aug. 27, 2010) (“The burden of allegation and proof of a condition precedent is on 

the plaintiff . . . .”); 13 Williston on Contracts § 38:26 (“[T]he ultimate burden of proof 

with regard to conditions precedent . . . remains on the plaintiff.”); see, e.g., El Paso Nat. 

Gas Co. v. Amoco Prod. Co., 1994 WL 148263, at *9 (Del. Ch. Mar. 29, 1994) (explaining 

that the plaintiff had “met its burden of proving” that certain events “satisfied the condition 

precedent” in the agreement the plaintiff sought to enforce); 2 Farnsworth on Contracts

§ 8.02, at 8-13 (“[T]he plaintiff ha[s] the burden of pleading and proof as to a condition 

precedent to the defendant’s duty . . . .”); 8 Corbin on Contracts § 30.7, at 13 & n.19 (noting 

that the plaintiff bears the burden of proof with regard to conditions precedent). 
50

Where a contractual obligation is subject to what was traditionally referred to 

as a “condition subsequent,” or what the Restatement (Second) of Contracts § 230 

refers to as “Event that Terminates a Duty,” that obligation exists unless it is 

extinguished by the occurrence of a contractually specified event.273 In that 

situation, the party seeking to avoid a finding of breach bears the burden of proving 

that the event has occurred and its obligation was extinguished.274 

For the purpose of allocating the burden of proof, Shire contends that the 

Fundamental Circumstance Clause creates a condition precedent and that Plaintiff 

 

273 Restatement (Second) of Contracts § 230 cmt. a (“Parties sometimes provide that an 

obligor’s matured duty will be extinguished on the occurrence of a specified event, which 

is sometimes referred to as a ‘condition subsequent.’”); id. § 224 cmt. e (“Parties 

sometimes provide that the occurrence of an event . . . will extinguish a duty after 

performance has become due, along with any claim for breach. Such an event has often 

been called a ‘condition subsequent’ . . . .”); 13 Williston on Contracts § 38:9 (“A condition 

subsequent has been defined as a future event, the happening of which discharges the 

parties from their otherwise binding agreement.”); 2 Farnsworth on Contracts § 8.02, at 8-

12 (“[A]n event that extinguishes a duty that has already arisen . . . has traditionally been 

called a ‘condition subsequent.’”); 8 Corbin on Contracts § 30.7, at 14 (“‘Conditions 

subsequent’ are traditionally those facts and events that . . . terminate both the right to 

immediate performance and also the right to a judicial remedy.”); see also Redux, Ltd. v. 

Com. Union Ins. Co., 1995 WL 88251, at *3 n.7 (D. Kan. Feb. 7, 1995) (“There is no 

reason to believe that the semantic change [in Section 230] affected the viability of the law 

concerning burden of proof which developed around ‘conditions subsequent.’”). 

274 Ewell, 2010 WL 3447570, at *3 (“[T]he burden of proof and allegation of a condition 

subsequent is on the defendant.”); 16 Williston on Contracts § 49:87 (“[T]he burden of 

proof with respect to conditions subsequent is on the defendant . . . .”); 2 Farnsworth on 

Contracts § 8.02, at 8-13 (“[T]he defendant ha[s] the burden as to a condition 

subsequent.”); 8 Corbin on Contracts § 30.7, at 13 & n.19 (noting that the defendant bears 

the burden of proof with regard to a condition subsequent). 
51

must prove the absence of a Fundamental Circumstance in order to prevail.275 Shire 

relies solely on syntax, arguing that “[t]he basic structure of Section 2.9(f) is one of 

if-then conditionality”: “if Shire did not start Phase III Clinical trials by December 

31, 2015 as a result of a Fundamental Circumstance, then the milestone was never 

achieved and any resulting milestone payment obligation never arose.”276 

Shire is technically correct that the structure of Section 2.9(f) uses conditional 

language, but this observation does not resolve the parties’ dispute. Conditions 

subsequent are often expressed using conditional language.277 For this reason, the 

difference between a condition precedent and a condition subsequent “is one of 

substance and not merely of the form in which the provision is stated.”278 “If 

performance under the contract is not to become due until occurrence of an event,” 

that event is a condition precedent.279 But if “an obligor’s matured duty will be 

 

275 Defs.’ Post-Trial Br. at 17, 59–62. 

276 Id. at 60; accord. PTO ¶ 97; see also Defs.’ Opening Suppl. Br. at 4.

277 See, e.g., Restatement (Second) of Contracts § 230 cmt. a, illus. 1 (describing conditions 

subsequent and providing the following illustration: “A, an insurance company, insures 

the property of B under a policy providing that no recovery can be had if suit is not brought 

on the policy within two years after a loss. A loss occurs and B lets two years pass before 

bringing suit. A’s duty to pay B for the loss is discharged and B cannot maintain the action 

on the policy.” (emphasis added)). 

278 Restatement (Second) of Contracts § 230 cmt. a. 

279 Id. 
52

extinguished on the occurrence of a specified event,” that event is a condition 

subsequent.280 

In substance, the Fundamental Circumstance Clause provides for an event that 

terminates Shire’s duty rather than a condition precedent to Shire’s duty. Section 

2.9(a) provides that Shire’s payment obligations arise “[u]pon the first occurrence” 

of the earliest of the two events listed in the definition of the Initiation of Phase III 

Clinical Milestone.281 Section 2.9(f) automatically deems the Initiation of Phase III 

Clinical Trial Milestone to have occurred on December 31, 2015. At that point, the 

Merger Agreement imposes a mandatory obligation, providing that Shire “shall 

promptly . . . deposit or cause to be deposited”282 the Initiation of Phase III Clinical 

Trial Milestone payment with Plaintiff. That mandatory obligation could be 

extinguished only upon the occurrence of the specific “event” set forth in the 

Fundamental Circumstance Clause. The Fundamental Circumstance Clause is thus 

a condition subsequent that Shire must prove. 

The same outcome is reached when drawing by analogy from decisions 

allocating the burden of proof on parties asserting material adverse effect and similar 

 

280 Id. 

281 JX-241 § 1.1, at 12; id. § 2.9(a), at 24–25. 

282 Id. § 2.9(a), at 24–25 (emphasis added). 
53

contractual provisions as a basis for termination.283 In Hexion, for example, this 

court allocated the burden to prove the existence of a material adverse effect on the 

party seeking to excuse performance. The court explained that “[t]ypically, 

conditions precedent are easily ascertainable objective facts, generally that a party 

performed some particular act or that some independent event has occurred.”284 The 

court further observed that “[a] material adverse effect clause does not easily fit into 

such a mold,” and concluded that it was preferable to allocate the burden on the party 

seeking to avoid its contractual obligation.285 In this case, as in Hexion, the relevant 

provision does not call for “easily ascertainable objective facts” and thus does not 

 

283 Hexion Specialty Chems., Inc. v. Huntsman Corp., 965 A.2d 715, 739 (Del. Ch. 

Sept. 29, 2008) (finding that “the burden of proof with respect to a material adverse effect 

rests on the party seeking to excuse is performance under the contract”); see also Channel 

Medsys., Inc. v. Boston Sci. Corp., 2019 WL 6896462, at *16 (Del. Ch. Dec. 18, 2019) 

(observing that the terminating party “bears the burden of ‘proving by a preponderance of 

the evidence the facts supporting the exercise of its termination rights’” (quoting Akorn, 

Inc. v. Fresenius Kabi AG, 2018 WL 4719347, at *4 (Del. Ch. Oct. 1, 2018), aff’d, 198 

A.3d 724 (Del. 2018))); Akorn, 2018 WL 4719347, at *47 (“Because [the buyer] seeks to 

establish a General MAE to excuse its performance under the Merger Agreement, [the 

buyer] bore the burden of proving that a General MAE had occurred.”); Frontier Oil Corp. 

v. Holly Corp., 2005 WL 1039027, at *25 (Del. Ch. Apr. 29, 2005) (“[T]he expectation of 

the parties, as reflected in the Merger Agreement and as informed by the case law, was that 

the burden of demonstrating that [a material adverse effect occurred] falls on [the party 

seeking to terminate the agreement].”); cf. In re IBP, Inc. S’holders Litig., 789 A.2d 14, 

68–71 (Del. Ch. 2001) (applying New York law and placing the burden of proving the 

existence of a material adverse effect on the terminating party). 

284 965 A.2d at 739. 

285 Id.
54

fit the mold of a condition precedent.286 As the party seeking to avoid its contractual 

obligation, Shire bears the burden of proof. 

2. Shire Has Not Proven That Its Failure to Initiate Phase III 

Clinical Trials Was “as a Result of” a Fundamental 

Circumstance. 

To escape its obligation to make the Initiation of Phase III Clinical Trial 

Milestone payment, Shire must prove that its failure to initiate Phase III trials by 

December 31, 2015 was “as a result of a Fundamental Circumstance.” This clause 

requires Shire to prove two things: (i) the existence of a “Fundamental 

Circumstance” and (ii) that the failure to initiate Phase III trials was “as a result of” 

that Fundamental Circumstance. 

To demonstrate the first element, Shire points to the RatCarc Study results 

and subsequent FDA clinical hold, which Shire says “caused the early termination 

of all ongoing human clinical trials” and therefore prevented Shire from initiating 

Phase III clinical trials by December 31, 2015.287 This opinion assumes for the sake 

of argument that either of these events constituted a Fundamental Circumstance. 

Nevertheless, Shire has not met its burden of proving the second element—that its 

failure to initiate Phase III clinical studies before December 31, 2015 was “as a result 

 

286 Id. 

287 Defs.’ Post-Trial Br. at 2, 18–45; see id. at 21 (“The cancer finding injected years of 

delay to Shire’s projected development timeline and caused an expectation of huge 

monetary losses should development continue.”). 
55

of” any Fundamental Circumstance it claims occurred. The record reflects that, postclosing, Shire altered deferitazole’s development timeline such that Shire’s failure 

to initiate Phase III clinical studies by December 31, 2015, was inevitable, 

notwithstanding any Fundamental Circumstance that later occurred. 

Immediately after closing in April 2012, Shire desired to pursue an 

“[a]ggressive development and filing strategy” and was “[f]ocused on getting to 

market [as soon as possible]” with a target launch date set for some time in 2016.288 

At that time, Shire planned to begin Phase III clinical trials in late 2013—

approximately two years ahead of the December 31, 2015 automatically-deemed 

date.289 But Shire made two primary decisions in 2013 that collectively prevented 

the initiation of Phase III clinical trials by December 31, 2015. 

 The first decision that delayed deferitazole’s overall development timeline 

was Shire’s choice to switch to twice-daily dosing in Study 203. That decision was 

made in early 2013, after Shire received data from Study 201, which indicated that 

deferitazole’s ability to decrease cardiac iron concentration was not as strong as its 

ability to decrease liver iron concentration.290 As Neufeld testified, it takes longer 

to see a decrease in cardiac iron than it does to see a decrease in liver iron—in fact, 

 

288 JX-253 at 10. 

289 Id. at 11. 

290 JX-1813 at 49; see JX-723 at 24 (summarizing Study 201 results); Trial Tr. at 107:7–

108:4 (Streck). 
56

“it really can take a year longer to get the heart to move in the same direction [as] 

the liver.”291 Shire was aware that “[c]ardiac iron can take longer to really 

adequately come down,”292 but did not feel as though the Study 201 data was enough 

for it to “walk away from the program.”293 It was thus “somewhat optimistic” that 

switching from once-daily dosing to twice-daily dosing in Study 203 would “be the 

key to appropriately controlling iron concentrations in various tissues.”294 As Streck 

testified at trial, Shire “felt that the benefit associated with [the switch to twice-daily 

dosing in Study 203] outweighed risks” and therefore elected to move in that 

direction.295 The switch to twice-daily dosing in Study 203 delayed the projected 

initiation of Phase III clinical trials from late 2013 to early 2015.296 

Decisions like the one Shire made to switch to twice-daily dosing in Study 

203 are routinely made in the drug development context. Streck testified at trial that 

 

291 Neufeld Dep. Tr. at 117:22–118:6; id. at 263:1–9. 

292 JX-1014 at 8. 

293 Id. at 8–9. 

294 Id. at 9; id. at 9–10 (Mayer stating: “The cardiac iron in the first study was . . . not a 

reason necessarily to walk away from the program, but there was concern that it was 

trending in the wrong direction and so one of the things we were hoping to get out of this 

study . . . is to see whether that [was] going to happen again or is this something that could 

actually control cardiac iron.”); Trial Tr. at 215:7–11 (Streck) (“We felt that increasing the 

dosing frequency to twice daily would certainly increase the amount of time the drug was 

in the bloodstream and, subsequently, hoped that it would have impact on the outcome of 

the trial.”). 

295 Trial Tr. at 215:12–14 (Streck).

296 JX-1817 at 5; JX-493 at 9; see Trial Tr. at 463:21–465:6 (Vickers). 
57

Shire’s experience with Study 203 “was very classic drug development in terms of 

things coming up, questions about efficacy.”297 He went so far as to agree that it 

could be called “progress.”298 This testimony is consistent with the general purpose 

of Phase II clinical studies. Phase II studies are exploratory in nature—they seek to 

better understand the efficacy of the drug while addressing any safety issues patients 

might encounter.299 They are typically called “dose-range-of-findings” or “doseranging” studies.300 Clinicians might therefore “change the criteria for the patients 

[they]’re treating, . . . drop particular doses or add particular doses, or chang[e] 

[their] dosing strategy during Phase II.”301 Shire did just that. 

The second decision that delayed deferitazole’s overall development timeline 

was the Pipeline Committee’s decsion to delay the start of Study 204 until 

completion of Study 203. Around April 2013, instances of peripheral neuropathy 

began to emerge in Phase II clinical studies.302 By May 2013, the Executive Safety 

Review Committee determined that “demonstrated declines in [liver iron 

 

297 Trial Tr. at 217:21–23 (Streck). 

298 Id. at 217:24–218:3 (Streck). 

299 Id. at 310:15–17 (Henner); id. at 31:6–14 (Rienhoff). 

300 Id. at 31:6–14 (Rienhoff); id. at 310:8–9 (Henner). 

301 Id. at 310:8–17 (Henner); Siegel Dep. Tr. at 38:13–23 (explaining that it is “very 

common” for “a sponsor to make changes to dosing or frequency of dosing based on the 

emergence of new clinical data”). 

302 JX-498 at 17; see JX-666 at 9; JX-522 at 31. 
58

concentration] and appropriate measures put in place to assess and manage patients 

who develop signs and symptoms of peripheral neuropathy . . . justified the 

continuation of the development program for [deferitazole].”303 But at its 

November 15, 2013 meeting, the Pipeline Committee hedged the continuation of 

deferitazole’s development plan and “concluded that [Shire] should wait for the 

results from [S]tudy 203 before initiating further clinical studies,” including Study 

204.304

Two aspects of the Pipeline Committee’s decision are particularly striking. 

The first striking aspect is that it was made before the Pipeline Committee received 

the Peripheral Neuropathy Committee’s preliminary conclusions. By 

November 15, 2013, the Peripheral Neuropathy Committee had not yet had its first 

meeting—its first meeting was scheduled for December 2, 2013.305 And it was not 

until December 18, 2013, that the Peripheral Neuropathy Committee preliminarily 

concluded that peripheral neuropathy was a “dose limiting toxicity” for 

deferitazole.306 Prior to December 18, 2013, peripheral neuropathy had not yet been 

identified as a dose limiting toxicity—and the Peripheral Neuropathy Committee 

 

303 JX-552 at 6. 

304 JX-732 at 3; Trial Tr. at 493:7–11 (Vickers). 

305 JX-723 at 9. 

306 JX-802 at 4, 10. 
59

had not yet recommended that Shire terminate the 75 milligrams per kilogram per 

day dose.307

The second striking aspect of the Pipeline Committee’s decision was that it 

was made in the context of a company-wide effort to shift corporate spending to 

products in later stages of development. On April 30, 2013, Shire’s Science and 

Technology Committee discussed “[d]ownward changes in Shire revenue forecasts” 

that had “resulted in a 2017 projected revenue gap of $700 [million].”308 It was from 

this projected revenue gap that the idea of the Pipeline Committee sprang.309 The 

Pipeline Committee’s purpose would be “to prioritize pipeline investment” and 

“rebalance spend near term toward late stage assets” while “selectively decreas[ing] 

investment in early stage programs.”310 The Pipeline Committee would “[a]dvance 

the cross-Shire prioritization process to define which programs should be included 

in [Shire’s] 2013 and 2014 plans/budgets.”311

 

307 In briefing, Defendants suggest that the Peripheral Neuropathy Committee’s 

conclusions and recommendation to terminate higher doses of deferitazole played some 

role in the Pipeline Committee’s decision to delay the start of Study 204. Defs.’ Post-Trial 

Br. at 9–10. But the record does not support this assertion. 

308 JX-493 at 50. 

309 Id.; see Trial Tr. at 472:19–24 (Vickers) (confirming that the Pipeline Committee had 

not been a committee at Shire prior to April 30, 2013). 

310 JX-493 at 50. 

311 JX-538 at 28. 
60

At a meeting on August 20, 2013, the Pipeline Committee identified a “target 

budget” for 2014 R&D spending and noted that it would “require[] significant 

savings to be identified.”312 The minutes of that meeting explain that “[p]otential 

levers were discussed including further portfolio refinement (focus on reducing early 

stage).”313 They also explain, under the heading “Portfolio Prioritization Refresh,” 

that Shire’s then-current “pipeline dr[ove] sub-optimal growth” and that this suboptimal growth was “the fundamental driver for the need to rebalance the pipeline 

toward later-stage opportunities.”314 In the same section, the minutes reflect that the 

Pipeline Committee reviewed “[r]evised prioritization of [Shire’s] development 

programs” and that “several programs [were] selected for reassessment.”315 The 

Pipeline Committee discussed deferitazole “due to its high 2014 cost” but concluded 

that Shire “should wait until [P]hase II data is available in 2014 before considering 

changing course.”316 

Approximately one month later, on September 26, 2013, the Pipeline 

Committee discussed that “delay in the [deferitazole] program could impact its 

 

312 JX-657 at 233. 

313 Id. 

314 Id. at 235. 

315 Id. 

316 Id. 
61

commercial value due to the future genericization of Exjade.”317 The Pipeline 

Committee resolved to “[o]btain commercial perspective on the impact of the 

delay.”318

The next day, on September 27, 2013, Mayer emphasized the need for the 

Pipeline Committee to discuss the deferitazole program “from a technical 

standpoint.” 319 In response, Vickers stated: “[F]rom a budget perspective this is a 

very expensive program. . . . [W]e should consider what will be go/no go criteriaboth from a pipeline and budget perspective. We plan to move forward, but should 

all be aligned.”320

On October 21, 2013, Vickers asked certain members of Shire’s finance team 

to send him a presentation showing Shire’s budget breakdown for 2014, “including 

a breakdown by program.”321 In that email, he stated: “I would like to have with 

me the cost of the [deferitazole] program.”322 The presentation indicated that the 

 

317 JX-677 at 64. 

318 Id.; see Trial Tr. at 492:18–493:6 (Vickers) (confirming that, at the September 26, 2013 

Pipeline Committee meeting, “[t]here was a review of the timelines of the program and the 

fact that it would take it to that time point”). 

319 JX-665 at 3; see Trial Tr. at 493:16–494:5 (Vickers). 

320 JX-665 at 2. At trial, Girard explained that a go/no-go decision is “a common term” in 

the pharmaceutical industry used to describe the decision to “continue the development of 

the program,” typically “based off of new information.” Trial Tr. at 781:2–8 (Girard). 

321 JX-693 at 1; see Trial Tr. at 494:12–18 (Vickers). 

322 JX-693 at 1. 
62

deferitazole program had the highest projected “Total External Spend” for 2014 out 

of approximately fifty-five programs, valued at $58 million.323 On 

October 22, 2013, Vickers emailed the presentation to Mayer, calling it a “[g]ood 

reminder on cost vs risk for [deferitazole].”324 Vickers then observed: “One of us 

can flag that this is the most expensive program in 2014!”325 

By late October 2013, the deferitazole program had an expected net present 

value of negative $21 million.326 On October 31, 2013, a Shire executive emailed 

Mayer and stated: “This is a challenging program. . . . I am wondering why we 

continue working on this with a clearly negative [expected net present value].”327 

Mayer responded: “I completely agree but the analysts apparently love this 

program!”328

On November 1, 2013, Jeremy Chadwick—Shire’s Vice President of Clinical 

Development Operations—emailed Mayer and Vickers, stating that he “struggle[d] 

to see the justification for the [deferitazole] program.”329 He explained that, in light 

of the issues facing the program, “[e]ven the best case appear[ed] totally 

 

323 Id. at 12. 

324 JX-695 at 1. 

325 Id.

326 JX-707 at 33. 

327 JX-710 at 1. 

328 Id.

329 JX-715 at 2. 
63

unconvincing.”330 In response, Mayer identified several “reasons for concern” with 

the deferitazole program and explained: “[W]e could look at this program vs other 

programs in development.”331

On November 13, 2013, Vickers emailed Ornskov and again noted—just as 

he had to Mayer previously—that deferitazole was “the sole most expensive 

program in [research and development] next year- approximately $58 [million].”332

 Collectively, this evidence demonstrates that, in the months leading up to the 

November 15, 2013 meeting, the Pipeline Committee was actively engaged in an 

effort to reduce the deferitazole program’s budget in light of its sheer expense and 

its “tight squeeze with generic Exjade.”333 The Pipeline Committee’s decision to 

delay the start of Study 204 until the end of Study 203 was made in the midst of that 

effort. It was also made before the Peripheral Neuropathy Committee met for the 

first time or provided Shire a preliminary conclusion concerning the severity of the 

peripheral neuropathies observed in patients and deferitazole’s correlation with 

those peripheral neuropathies. The Pipeline Committee also knew that the decision 

would “delay the overall timeline” for deferitazole’s development program334 and 

 

330 Id. 

331 Id. at 1. 

332 JX-749 at 2. 

333 Trial Tr. at 493:12–15 (Vickers); see JX-677 at 64. 

334 JX-731 at 1. 
64

specifically delay the initiation of Phase III clinical trials “until after [Study] 204 

reports.”335

By January 2014—after Shire made decisions to switch to twice-daily dosing 

in Study 203 and to delay the start of Study 204—Shire’s internal records indicated 

that Phase III clinical trials would not begin until May 2016.336 This delay fulfilled 

the Pipeline Committee’s reprioritization goal, reducing deferitazole’s 2014 budget 

by approximately $28.5 million.337 May 2016 was of course several months past the 

December 31, 2015 automatically-deemed date, but Shire’s potential contractual 

obligation to pay $45 million as of that date was not raised in the budgeting 

discussions leading up to the November 15, 2013 meeting. 

The delay in the initiation of Phase III clinical trials to May 2016 occurred 

before even the preliminary results of the RatCarc Study were announced. It was 

not until February 19, 2014, that the study pathologist’s preliminary review of the 

data indicated an increased incidence of tumors in the kidneys of male rats.338 And 

 

335 JX-750 at 2 (email from Streck to Mayer dated November 21, 2013, confirming that 

there would be an 18 month delay in deferitazole’s projected launch and stating, “[t]he 18 

month delay is accurate and predicated on delaying the 204 program until completion of 

203, and then delay of the phase 3 programs until after 204 reports”). 

336 JX-805 at 7; see also PTO ¶ 51. 

337 JX-805 at 8; Trial Tr. at 401:8–14 (Vickers) (testifying that, in the year the decision was 

made to postpone Study 204, “there was . . . cost saving . . . that was a consequence of the 

decision”). 

338 PTO ¶ 52; JX-862 at 3. 
65

it was not until February 25, 2014, that the Executive Safety Review Committee 

“voted in favor of suspending dosing in the clinical studies” pending further 

investigation.339 Before these events occurred, however, the deferitazole program 

remained just as promising as “[a]ny other early Phase II program”340 and had the 

“opportunity to be [just] as successful.”341 

Defendants respond to this timeline with two points. Defendants first argue, 

on the factual record, that the May 2016 projection was conjectural and not actual, 

such that the decisions to switch to twice-daily dosing in Study 203 and to delay the 

start of Study 204 did not necessarily result in the relevant delay. Defendants next 

argue, as a matter of law, that the delay in the initiation of Phase III clinical trials to 

May 2016 “did not foreclose the possibility that a Fundamental Circumstance could 

occur and prevent the initiation of Phase III clinical trials on or before December 31, 

2015.”342 

For their first argument—that the May 2016 date was not firm—Defendants 

cite only Vickers’ testimony at trial that the delay was not “set in stone.”343 But the 

documentary and other testimonial evidence presented at trial tell a contrary story. 

 

339 JX-1321 at 10. 

340 Trial at 161:11–17 (Streck). 

341 Streck Dep. Tr. at 133:24–134:11. 

342 Defs.’ Post-Trial Br. at 46. 

343 Id. at 45–46. See generally Trial Tr. at 429:3–31:22 (Vickers). 
66

Delay in the initiation of Phase III clinical trials to May 2016 was more than mere 

projection. The record reflects that, as of January and early February 2014, the 

initiation of Phase III clinical trials simply would not occur until May 2016—it was 

a “planned” and inevitable delay, not a projected or estimated one.344 This was most 

evident in a “Progress Memo” dated February 3, 2014, in which Streck explained to 

Plaintiff that the “[f]irst patient first visit in a Phase [III] study [is] currently planned

as May 2016.”345 At his deposition, Streck explained that, as of the date he authored 

this Progress Memo on February 3, 2014, it “seem[ed] to be the case” that Shire’s 

plan was to begin Phase III clinical trials in May 2016.346 This conclusion is further 

 

344 JX-805 at 8 (draft presentation in which Shire refers to the “[i]mplementation of delay” 

to the deferitazole program and identifies the program delay as “[p]lanned”); JX-789 at 5 

(minutes of the deferitazole development team’s meeting dated January 7, 2014, stating: 

“It was confirmed that the amendment to study 204, and consequent delays, will go ahead

regardless of any decision on the conduct of study 203, ie there will not be a reversion to a 

quick start for study 204.” (emphasis added)); JX-750 at 2 (email from Streck to Mayer 

dated November 21, 2013, confirming that there would be an 18-month delay in 

deferitazole’s projected launch and stating, “[t]he 18 month delay is accurate” (emphasis 

added)); see also Trial Tr. at 173:24–174:4 (Streck) (counsel asking Streck whether the 

development timeline in JX-805 indicated that Phase III clinical trials were “not even 

scheduled to start . . . until May of 2016,” and Streck responding, “[y]es, that’s correct”); 

Trial Tr. at 111:2–9 (Streck) (testifying that “there was going to be a delay with not starting 

the 204 at the same time that the 203 study was running” (emphasis added)).

345 JX-831 at 50 (emphasis added). 

346 Streck Dep. Tr. at 172:15–23. This testimony is consistent with Plaintiff’s own 

interpretation of the Progress Memo at the time it was sent. In an email dated 

February 19, 2014, Letang explained his view that Shire was continuing to move forward 

with the deferitazole program, but that “timelines ha[d] slipped significantly.” JX-866 at 

1. He stated: “You’ll recall that the first milestone (initiation of a Phase 3 study, now 

planned for mid-2016) is deemed achieved on December 31, 2015 unless there has been a 

Fundamental Circumstance . . . . That provision is now implicated based on the current 

timelines.” Id. at 1–2 (emphasis added). Henner replied: “Drug development at Shire 
67

buttressed by general testimony that delays in drug development processes are 

commonplace.347

For their second argument—that a later Fundamental Circumstance could 

independently prevent the initiation of Phase III clinical trials—Defendants rely on 

the plain meaning of the phrase “other than as a result of a Fundamental 

Circumstance.” Defendants contend that this language compels the conclusion that, 

if “a Fundamental Circumstance occurred that would have been independently 

sufficient to result in a delay of the initiation of Phase III clinical trials . . . , it would 

extinguish Shire’s obligation to pay.”348 Taken to its logical extremes, under Shire’s 

interpretation, Shire could have done nothing to develop deferitazole, but if a 

Fundamental Circumstance precipitated, Shire would be excused from making the 

milestone payment. 

 

looks to be glacially slow.” Id. at 2. At trial, Henner explained: “Well, drug 

development . . . is an inherently risky process and goes through fits and starts, and 

sometimes things happen that make your initial plan change. But at this point, it appeared 

that the program was about two years behind what the initial estimates had been of when 

Phase III would have started.” Trial Tr. at 331:16–22 (Henner). 

347 See Trial Tr. at 467:11–13 (Vickers) (“Delay is common. Well, there are challenges 

associated with . . . drug development which you need to overcome.”); id. at 467:23–468:2 

(Vickers) (responding “[y]eah” when counsel asked whether he would “agree that the 

problems that cause and increase delays happen more often than the challenges that result 

in the program speeding up”); Siegel Dep. Tr. at 65:16–23 (testifying that delay in drug 

development processes are “very common” and that he has “seen programs delayed six 

months, a year, two years, three years”); Trial Tr. at 331:24–332:3 (Henner) (confirming 

that “delays such as those [he] observed in the development of deferitazole” were common 

in drug development). 

348 Defs.’ Opening Suppl. Br. at 1. 
68

Plaintiff counters that the phrase “other than as a result of a Fundamental 

Circumstance” invites a but-for causation analysis and “means that Shire cannot be 

excused from its duty to pay . . . unless Shire demonstrates that, but for a 

Fundamental Circumstance, it would have initiated Phase III on or before 

December 31, 2015.”349 To Plaintiff, “[d]emonstrating only that a Fundamental 

Circumstance could have caused Phase III to be delayed beyond December 31, 2015 

is not enough,”350 and Defendants must demonstrate that the Fundamental 

Circumstance was the actual cause of the failure to initiate Phase III clinical trials. 

The analysis starts with the text of the Merger Agreement. “When interpreting 

a contract, the Court will give priority to the parties’ intentions as reflected in the 

four corners of the agreement.”351 “[B]ecause Delaware adheres to an objective 

theory of contracts, the contract’s construction should be that which would be 

understood by an objective, reasonable third party.”352 Accordingly, “[t]he Court 

will interpret clear and unambiguous terms according to their ordinary meaning.”353 

“Contract terms themselves will be controlling when they establish the parties’ 

 

349 Pl.’s Opening Suppl. Br. at 10. 

350 Id. at 12. 

351 GMG Cap. Invs., LLC v. Athenian Venture P’rs I, L.P., 36 A.3d 776, 779 (Del. 2012). 

352 Leaf Invenergy Co. v. Invenergy Renewables LLC, 210 A.3d 688, 696 (Del. 2019). 

353 GMG Cap., 36 A.3d at 780. 
69

common meaning so that a reasonable person in the position of either party would 

have no expectations inconsistent with the contract language.”354

The parties’ dispute again finds itself centered on the meaning of the clause 

“other than as a result of a Fundamental Circumstance.” For the purpose of this 

discussion, two portions of this clause inform its meaning: (i) “other than,” and (ii) 

“as a result of.” The plain meaning of the phrase “other than” is “with the exception 

of” or “except for.”355 Put differently, the phrase signals an exception. The plain 

meaning of the phrase “as a result” is “because of something.”356 

 

354 Id. (quoting Eagle Indus., Inc. v. DeVilbiss Health Care, Inc., 702 A.2d 1228, 1232 

(Del. 1997)). 

355 Other Than, Merriam-Webster, https://www.merriamwebster.com/dictionary/other%20than (last visited October 12, 2020); see, e.g., Bathla v. 

913 Market, LLC, 200 A.3d 754, 761 (Del. 2018) (interpreting a contract and explaining: 

“Section 2.3 requires [the defendant] to convey title ‘free and clear of all liens and 

encumbrances other than real and personal property taxes not yet due and payable and the 

Permitted Exceptions (hereinafter defined).’ In other words, [the defendant] must convey 

title without any liens or encumbrances on the property, except for certain liens and 

encumbrances that the parties have decided are acceptable.” (emphasis added)); Trunkline 

Gas Co. v. Miss. State Tax Comm’n, 119 So. 2d 378, 379 (Miss. 1960) (interpreting the 

words “other than” in a Mississippi statute “to have the identical meaning as the word 

‘except’”); Sullivan v. Ward, 24 N.E.2d 672, 673 (Mass. 1939) (interpreting a 

Massachusetts statute and observing that the words “‘other than’ . . . have the same legal 

effect” as the word “except”). 

356 As A Result, Merriam-Webster, https://www.merriamwebster.com/dictionary/as%20a%20result#:~:text=%3A%20because%20of%20somethin

g%20He%20sprained,of%20work%20for%20three%20months (last visited 

October 12, 2020); see, e.g., United States v. Sandlin, 589 F.3d 749, 757 (5th Cir. 2009) 

(interpreting a federal statute and analogizing the “as a result of” language therein to the 

phrase “because of”). 
70

Piecing it together, the phrase calls on the court to answer the following 

questions: Did Shire fail to initiate Phase III clinical trials on or before 

December 31, 2015 because of a Fundamental Circumstance? If the answer is yes, 

then Shire’s payment obligation is excused. Because the clause is cast as an 

exception, the converse question becomes equally informative: Did Shire fail to 

initiate Phase III clinical trials on or before December 31, 2015 because of anything 

except for a Fundamental Circumstance? If the answer to this question is yes, then 

Shire’s payment obligation is not excused. In other words, if the delay would have 

transpired notwithstanding the absence of the Fundamental Circumstance Shire 

claims to have occurred, Shire’s payment obligation remains intact.357

 

357 This interpretation is also supported by the “but-for” causation analyses applied by 

courts interpreting similar language, albeit in different contexts. See, e.g., Finocchiaro v. 

D.P., Inc., 2006 WL 3873257, at *2, *6 (Del. Super. Dec. 29, 2006) (interpreting a 

Delaware statute limiting an employee’s entitlement to workers’ compensation if the 

employee is “injured as a result of [his] own intoxication” and concluding that the statute 

required the employer to establish that “intoxication was a ‘but for’ cause of the accident 

which led to the injury”); State v. Richardson, 245 S.E.2d 754, 762–63 (N.C. 1978) 

(interpreting a North Carolina statute requiring the suppression of evidence “obtained as a 

result of” of police misconduct and concluding that such statutory language “require[s], at 

a minimum,” a but-for causal relationship between the police misconduct and the collection 

of the evidence sought to be suppressed); cf. Burrage v. United States, 571 U.S. 204, 214 

(2014) (interpreting the federal Controlled Substances Act and stating: “[I]t is one of the 

traditional background principles against which Congress legislate[s] that a phrase such as 

‘results from’ imposes a requirement of but-for causation.”). Under Delaware’s 

formulation of but-for causation, “[t]he defendant’s conduct is a cause of the event if the 

event would not have occurred but for that conduct; conversely, the defendant’s conduct is 

not a cause of the event, if the event would have occurred without it.” Culver v. Bennett, 

588 A.2d 1094, 1097 (Del. 1991). 
71

Three aspects of the contractual scheme further support this interpretation of 

Section 2.9.(f).358 First, the economic terms of the Merger Agreement called for 

former FerroKin equityholders to receive approximately $320 million in Merger 

consideration.359 That consideration was structured in terms of one up-front $95 

million payment and up to $225 million in post-closing milestone payments.360 

Under this scheme, approximately seventy percent of the total Merger consideration 

was deferred post-close. Second, Section 2.9(g) of the Merger Agreement broadly 

gave Defendants “the right, in their sole and absolute discretion, to direct and control 

the development, commercialization, manufacture, marketing, distribution and 

selling of [deferitazole] in all respects, including the determination . . . to make any 

strategic product portfolio decisions affecting [deferitazole].”361 Third, Section 

2.9(g) also emphasizes that no provision of the Merger Agreement “shall be 

construed to impose upon [Shire] any express or implied obligation, duty or 

 

358 GMG Cap., 36 A.3d at 779 (“In upholding the intentions of the parties, a court must 

construe the agreement as a whole, giving effect to all provisions therein.” (quoting E.I. du 

Pont de Nemours & Co. v. Shell Oil Co., 498 A.2d 1108, 1113 (Del. 1985))); HUMC 

Holdco, LLC v. MPT of Hoboken TRS, LLC, 2020 WL 3620220, at *6 (Del. Ch. 

July 2, 2020) (describing the “whole-text canon,” which “stems from the theory that 

context is the primary determinant of meaning”). 

359 PTO ¶ 26. 

360 Id.

361 JX-241 § 2.9(g), at 28 (emphasis added). 
72

expectation to test, develop, pursue, market, make any regulatory filings or seek any 

Regulatory Approvals with respect to, or otherwise advance [deferitazole].362 

Read together with the text of Section 2.9(f), these aspects of the Merger 

Agreement indicate that Section 2.9(f) is a FerroKin-friendly backstop. Section 

2.9(f) requires generally that the Initiation of Phase III Clinical Trial Milestone “be 

deemed to have been achieved” on December 31, 2015, even “in the event that 

[Shire] has not achieved [it].”363 Given that (i) payment of the bulk of the Merger 

consideration was deferred post-close, (ii) Shire wielded control over “all respects” 

of the drug development and commercialization process, and (iii) there was no 

obligation, duty or expectation imposed on Shire to advance deferitazole in any way, 

it makes sense that Section 2.9(f) provides Shire with only a narrow escape. 

Shire’s failure to initiate Phase III clinical trials by December 31, 2015 did 

not come “as a result of” a Fundamental Circumstance. As discussed above, the 

record reflects that by the time Shire received the RatCarc Study results, Shire had 

already made decisions—the decision to switch to twice-daily dosing in Study 203 

and the Pipeline Committee’s decision to delay the start of Study 204—that delayed 

the initiation of Phase III clinical trials to May 2016.364 In other words, even in the 

 

362 Id. 

363 Id. § 2.9(f), at 27. 

364 Defendants do not assert that a Fundamental Circumstance occurred prior to these 

decisions being made. 
73

absence of the Fundamental Circumstance Defendants claim to have occurred, Phase 

III clinical trials would still have been delayed past December 31, 2015. 

In support of a contrary outcome, Defendants claim that this reading of 

Section 2.9(f) would render Section 2.9(b) of the Merger Agreement 

“unworkable.”365 The portion of Section 2.9(b) upon which Defendants focus 

provides: 

[I]n the event that there occurs a Fundamental 

Circumstance, but [Shire] pursues development of an 

Alternative Covered Product that constitutes a Covered 

Product, then any remaining Milestone Payments that first 

become due and payable following the occurrence of such 

Fundamental Circumstance shall be one-half (1/2) the 

applicable amount set forth in the table above.366

 To Defendants, “if Shire elected to develop an Alternative Covered Product, 

as provided for in Section 2.9(b), [Plaintiff’s] . . . interpretation would require Shire 

to pay the full amount of the milestone payment regardless of whether Shire ever 

initiated Phase III clinical trials, as opposed to half of the amount upon initiation of 

Phase III clinical trials, as Section 2.9(b) specifies.”367

Defendants’ reading of Section 2.9(b) is unreasonable. If Shire’s failure to 

initiate Phase III clinical trials by December 31, 2015 was as a result of a 

 

365 Defs.’ Opening Suppl. Br. at 9. 

366 JX-241 § 2.9(b), at 25. 

367 Defs.’ Opening Suppl. Br. at 9. 
74

Fundamental Circumstance, then the Initiation of Phase III Clinical Milestone would 

not be deemed achieved under Section 2.9(f), regardless of whether Shire elected to 

develop an Alternative Covered Product. By contrast, if Shire’s failure to initiate 

Phase III clinical trials by December 31, 2015 was not as a result of a Fundamental 

Circumstance, then the Initiation of Phase III Clinical Milestone would be “deemed 

achieved” under Section 2.9(f), and one of two payment scenarios could kick in: 

(1) a scenario in which Shire elects to develop an “Alternative Covered Product,” or 

(2) a scenario in which Shire does not elect to develop an “Alternative Covered 

Product.” In the former scenario, Section 2.9(b) would require Shire to pay only 

one-half of the Initiation of Phase III Clinical Trial Milestone. In the latter 

scenario—which is the scenario here—Section 2.9(b) has no application, and Shire 

would be required to pay the full amount of the Initiation of Phase III Clinical Trial 

Milestone payment. Shire’s attempt to manufacture inconsistencies in the provisions 

of Section 2.9 fails.368 

Because Shire has not met its burden of proving that its failure to initiate Phase 

III clinical trials by December 31, 2015 was “as a result of a Fundamental 

 

368 In any event, Section 2.9(f) contains a “notwithstanding” clause. Its mandate survives 

“[n]otwithstanding anything else in [the Merger Agreement] to the contrary.” JX-241 

§ 2(f), at 25. Thus, even if it were to somehow conflict with Section 2.9(b)—it does not—

Section 2.9(f) would prevail. 
75

Circumstance,” Shire must make the $45 million Initiation of Phase III Clinical Trial 

Milestone payment pursuant to Section 2.9(a) of the Merger Agreement. 

Plaintiff is also entitled to interest on the First Milestone Payment calculated 

in accordance with Section 2.9(a) of the Merger Agreement. The parties shall confer 

on the precise calculation of the interest due and submit any disputes to the Court.369

B. Attorneys’ Fees 

In its Second Cause of Action, Plaintiff requests reasonable attorneys’ fees 

and costs in connection with this lawsuit under Section 10.3 of the Merger 

Agreement.370 Section 10.3 of the Merger Agreement, captioned “Costs and 

Attorneys’ Fees,” provides: 

 

369 Section 2.9(a) entitles Plaintiff to interest on the $45 million Initiation of Phase III 

Clinical Trial Milestone payment calculated as follows: 

[I]n the event that [Shire] fails to deliver timely notice of a 

Milestone Triger Event to the Equityholders’ Representative or 

fails to deposit any Milestone Payment, in each case in 

accordance with this Section 2.9(a), then the applicable 

Milestone Payment shall bear interest from the date upon 

which such Milestone occurred until the date of deposit with 

the Equityholders’ Representative or its designated agent at a 

rate per annum equal to (i) the prime rate as published in the 

Wall Street Journal, Eastern Edition in effect from time to time 

during such period plus (ii) one percent (1%). 

JX-241 § 2.9(a), at 25; accord. PTO ¶ 34; see also id. ¶ 82 (stipulating that “[a]pplying the 

interest rate set forth in Section 2.9(a) of the Merger Agreement, the interest on the $45 

million [Initiation of Phase III Clinical Trial Milestone] is approximately $9.0 million from 

January 1, 2016 through June 30, 2019, and is projected to be approximately $10.8 million 

from January 1, 2016 through December 31, 2019, assuming the applicable prime rate stays 

relatively stable”).

370 PTO ¶ 87; Pl.’s Opening Post-Trial Br. at 64 n.14. 
76

[I]n the event that any action, suit or other proceeding is 

instituted concerning or arising out of this Agreement, the 

prevailing party shall recover all of such party’s costs and 

reasonable attorneys’ fees incurred in connection with 

each and every such action, suit or other proceeding, 

including any and all appeals and petitions therefrom.371

In the Pre-Trial Order, the parties stipulated to the fact that Section 10.3 is 

implicated “in the event that litigation such as this lawsuit is instituted.”372 Because 

Plaintiff has prevailed in this action, Plaintiff is entitled to “recover all of [Plaintiff’s] 

costs and reasonable attorneys’ fees incurred in connection with” this action.373 

III. CONCLUSION 

For the foregoing reasons, judgment is entered in favor of Plaintiff. The 

parties shall confer on a form of order implementing this decision. If an agreement 

cannot be reached as to an amount of interest or fees to include in the form of order, 

the parties shall confer on an appropriate means of presenting those issues to the 

court for resolution. 

 

371 JX-241 § 10.3, at 71–72. 

372 PTO ¶ 35 (emphasis added). 

373 JX-241 § 10.3, at 71–72.