Court Opinion

ID: 4587480
Source: CourtListenerOpinion
Date Created: 2020-11-18 20:03:04.680442+00
Date Added: 2024-06-11T13:50:07.988382
License: Public Domain

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

DAVID KABAKOFF, PH.D. and                  )
ARNOLD ORONSKY, PH.D., in their            )
capacity, collectively, as Stockholders’   )
Agent,                                     )
                                           )
                        Plaintiffs,        )
                                           )
               v.                          )   C.A. No. 2017-0459-JRS
                                           )
ZENECA, INC., a Delaware                   )
corporation, and MEDIMMUNE, LLC,           )
a Delaware limited liability company,      )
                                           )
                        Defendants.        )

                         MEMORANDUM OPINION

                       Date Submitted: August 5, 2020
                      Date Decided: November 18, 2020

Blake A. Bennett, Esquire and Dean R. Roland, Esquire of Cooch and Taylor, P.A.,
Wilmington, Delaware and Todd M. Schneider, Esquire, Joshua G. Konecky,
Esquire, Kyle G. Bates, Esquire, Nathan B. Piller, Esquire of Schneider Wallace
Cottrell Konecky LLP, Emeryville, California, Attorneys for Plaintiffs.

Michael P. Kelly, Esquire, Daniel M. Silver, Esquire, Benjamin A. Smyth, Esquire
of McCarter & English LLP, Wilmington, Delaware and Dane H. Butswinkas,
Esquire, Sarah F. Kirkpatrick, Esquire, Jessica L. Pahl, Esquire and Joseph M.
Piligian, Esquire of Williams & Connolly LLP, Washington, DC, Attorneys for
Defendants.

SLIGHTS, Vice Chancellor
      In the realm of commercial pharmacology, the fight against cancer is as

competitive as it is promising. An area of particular promise is the development of

so-called PD-1 and PD-L1 inhibitors as anti-cancer therapies. These therapies do

not directly attack cancer cells, like traditional chemotherapies (with all the

attendant, frequently severe side-effects), but instead enable the body’s own immune

system more effectively to interfere with the mechanisms that allow cancer cells to

grow and spread within the body. This new class of immuno-oncology therapies has

the potential to revolutionize cancer treatment, spurring intense competition among

pharmaceutical companies.

      By the spring of 2013, Defendant, MedImmune, LLC, had established a

competitive presence in certain areas of cancer pharmacology but was eager to

accelerate its development of an anti-PD-1 therapy.       With this goal in mind,

MedImmune began to search for acquisition targets that already had a PD-1 drug in

development. This search led it to Amplimmune, Inc., a company founded by

physicians and scientists and funded by venture capital firms to study and develop

cutting edge cancer therapies. Amplimmune had several molecules in development

when it was approached by MedImmune, but its PD-1 inhibitor, AMP-514, was

among the most promising. Eager to add AMP-514 to its pipeline, MedImmune

began negotiating with senior executives of Amplimmune regarding a possible

acquisition.

                                         1
        Negotiations moved quickly, culminating in the execution of an Agreement

and Plan of Merger (“Merger Agreement”) whereby MedImmune’s parent company,

Defendant, Zeneca Inc., agreed to acquire Amplimmune (the “Acquisition”) for an

upfront purchase price of $225 million, followed by three contingent milestone

payments: (1) $100 million for the “Successful Completion of a Phase 1 Study” of

AMP-514 as a monotherapy (the “Monotherapy Milestone”); (2) $50 million for the

“Successful Completion of a Phase 1 Study” of AMP-514 in combination with any

MedImmune molecule (the “Combination Therapy Milestone”); and (3) $50 million

for the “Successful Completion of a Phase 1 Study” of AMP-514 in combination

with a second MedImmune molecule.1

        The Acquisition closed on October, 4, 2013. 2 As frequently occurs in

acquisition agreements containing so-called “earn-out” provisions, the parties now

dispute whether (and when) several of the Merger Agreement’s milestones were

achieved.

        “Successful Completion” is defined in the Merger Agreement as the

occurrence of three prongs, all of which must be satisfied before a milestone

1
 Joint Pre-Trial Stipulation (“PTO”) ¶¶ 40–42. I cite to the Joint Pre-Trial Stipulation and
Order as “PTO ¶ __,” the joint trial exhibits as “JX__,” the trial transcript as “Tr.__ (witness
name)”; and depositions lodged as evidence as “(Name) Dep. __.”
2
    PTO ¶ 46.

                                               2
payment is owed.       Two of those prongs are at issue in this case.3             For the

Monotherapy Milestone, the parties dispute whether there was a regulatory filing for

“additional     clinical   development”       of    AMP-514       as    a    monotherapy

(the “Monotherapy”) under the third prong.             For the Combination Therapy

Milestone, the disagreement centers on when a “study report” for the Phase 1 study

of the first Combination therapy (the “Combination”) was completed under the

second prong.

       Plaintiffs, David Kabakoff, Ph.D, and Arnold Oronsky, Ph.D., acting as

representatives of Amplimmune’s former stockholders as designated by the Merger

Agreement, brought this suit in 2017 claiming the Monotherapy Milestone and

Combination Therapy Milestone were both met in early 2016. Plaintiffs also

maintain that the Merger Agreement’s acceleration clause (the “Acceleration

Clause”) requires Defendants to make all milestone payments related to AMP-514

if the Court determines that Defendants breached their obligations as to any one

milestone payment. Because they allege Defendants failed to make two milestone

payments in breach of the Merger Agreement, Plaintiffs seek an order compelling

Defendants to make all milestone payments, totaling $200 million, plus interest.

3
  Plaintiffs voluntarily dismissed before trial claims for unpaid milestone payments related
to a separate Amplimmune molecule acquired by MedImmune in the Acquisition.
D.I. 111.

                                             3
      Defendants respond that the Monotherapy Milestone has not been, and never

will be, achieved because there was no regulatory filing seeking to advance the

Monotherapy for additional clinical development. According to Defendants, the

Monotherapy performed poorly in clinical trials and all parties appreciated that there

was no purpose to be served by pursuing further development after the Phase 1 trial.

As for the Combination, Defendants maintain the Combination Therapy Milestone

was accomplished only upon the filing with the Food and Drug Administration

(“FDA”) of a Clinical Study Report (“CSR”) in the spring of 2020, at which time

they promptly made the Combination Therapy Milestone payment in compliance

with the Merger Agreement. Finally, Defendants argue that Plaintiffs misread the

Merger Agreement’s Acceleration Clause and, even if their reading is correct, the

clause cannot be enforced under Plaintiffs’ construction because to do so would

impose an unenforceable penalty.

      In this post-trial opinion, I find that Plaintiffs have not met their burden of

proving the Monotherapy Milestone has been met. I also find that Plaintiffs have

not met their burden of proving the Combination Therapy Milestone was owed

before that milestone payment was actually made earlier this year. Because I find

in favor of Defendants on both of these claims of breach, I need not construe the

Acceleration Clause. Judgment will be entered in favor of Defendants on all

remaining claims.

                                          4
                                  I. BACKGROUND

          The Court held a five-day trial between February 14–20, 2020. The following

facts were proven by a preponderance of the competent evidence.

      A. The Parties and Relevant Non-Parties

          Plaintiffs, David Kabakoff, Ph.D, and Arnold Oronsky, Ph.D., bring this

action in their capacity as agents for the former stockholders of Amplimmune. 4

          Defendant, Medimmune, is a Delaware limited liability company. At the time

the Merger Agreement was executed, MedImmune was the global biologics research

and development arm of AstraZeneca plc, a multinational pharmaceutical company.5

          Defendant, Zeneca, is a privately held Delaware corporation that operates as

a subsidiary of AstraZeneca.6

          Prior to the Acquisition, Amplimmune was a privately-held Delaware

corporation.7 Its primary focus was on the development of immuno-oncology

therapies. 8

4
    PTO ¶ 23.
5
    Id. ¶¶ 24–26.
6
    Id. ¶ 25.
7
    Id. ¶ 24.
8
    Id.

                                            5
      B. The Mechanics of PD-1 and PD-L1 Immuno-Oncology Therapies

         The body’s immune system has natural tools for identifying and fighting

cancer cells.9 Relevant here, white blood cells known as lymphocytes are able to

make contact with a cancer cell, identify it as such and kill the cancer cell by

injecting it with antibodies. 10 This system, when functioning correctly, can be highly

effective at combatting cancer, but it can also be extremely dangerous.11

Uncontrolled lymphocytes will attack healthy cells as well as cancer cells, posing a

potentially lethal threat to the body. This threat can be moderated by genetic

mechanisms acting either to disable lymphocytes or make them difficult to

activate.12

         One of these genetic mechanisms is known as the PD-1 pathway. 13 This

pathway can be conceptualized as a “key-hole” on the surface of an immune cell.14

Molecules known as “ligands,” which form as protein on the cell surface, can bond

9
    Tr. 548:8–550:16 (Bradley).
10
     Id. at 548:10–15 (Bradley).
11
   An uncontrolled immune response will lead to chronic, sometimes fatal “autoimmune
diseases.” See generally Autoimmune Diseases, U.S. Nat’l Libr. of Medicine,
https://medlineplus.gov/autoimmunediseases.html (last visited October 30, 2020).
12
     Tr. 548:15–19 (Bradley).
13
     Id. at 548:20–21 (Bradley).
14
     Id. at 548:20–549:2 (Bradley).

                                          6
with these pathways and thereby render the cell inactive.15 In other words, the

ligands act as keys that insert themselves into a cell’s keyhole and “lock” the immune

cell, permanently disabling it. PD-L1 is the ligand that functions as the key to lock

the PD-1 pathway. 16

         While these system shutoffs are essential for protecting the body from an

overactive immune system, cancer cells have developed mechanisms to hijack these

functions for their own benefit.17 Specifically, cancer cells “learn” to express the

PD-L1 ligand on their surface in order to lock immune cells and weaken the body’s

immune response. 18 Anti-PD-1 therapies seek to counteract this process by blocking

a lymphocyte’s PD-1 pathway so the lymphocyte remains activated to attack cancer

cells.19 Similarly, an anti-PD-L1 therapy seeks to block the ligand expressed on

cancer cells to prevent those cells from deactivating lymphocytes with unblocked

PD-1 pathways. 20

15
     Id. at 549:1–2 (Bradley).
16
     Id. at 549:3–4 (Bradley).
17
     Id. at 549:3–14 (Bradley).
18
     Id. at 549:7–14 (Bradley).
19
     Id. at 549:18–22 (Bradley).
20
     Id. at 550:11–16 (Bradley).

                                          7
           Because a cancer cell “locking” a lymphocyte renders that immune cell

perpetually incapable of killing cancer cells—and cancer cells far outnumber

lymphocytes—even a drug that achieves 95%–99% blockage is inadequate.21

Instead, something close to a 100% blockade is required for these drugs to have a

significant anti-cancer effect.22 Although anti-PD-1 and anti-PD-L1 drugs often

struggle to achieve this “complete pathway blockade,” MedImmune’s scientists

theorized that combining the two could operate “belt and suspenders” to achieve a

near 100% blockade.23

      C. MedImmune Acquires Amplimmune

           In 2013, MedImmune was in advanced development of an anti-PD-L1

molecule, known as durvalumab, but lacked an anti-PD-1 molecule in its pipeline.24

While the FDA had yet to approve an anti-PD-1 drug, Bristol-Myers Squibb Co.

(“BMS”) and Merck & Co. (“Merck”) were both nearing FDA approval of their

21
     Id. at 550:1–10 (Bradley).
22
     Id.
23
     Id. at 550:1–16 (Bradley).
24
     Id. at 552:10–18 (Bradley).

                                          8
respective PD-1 inhibitors. 25 To catch up, MedImmune sought to acquire a company

with an anti-PD-1 therapy already in development.26

         By 2013, Amplimmune’s anti-PD-1, AMP-514,27 had shown promising

results in preclinical trials, suggesting the drug would be “fully active” at

“extraordinarily low doses,” and Amplimmune was actively preparing the drug for

Phase 1 clinical trials. 28 Given the risk and expense of clinical trials, however,

Amplimmune was also exploring a possible partnership with a larger pharmaceutical

company, including preliminary discussions regarding a partnership with Celgene

Corporation which would have allowed Amplimmune to remain an independent

company. 29      MedImmune, by contrast, was interested in acquiring anti-PD-1

25
  PTO ¶¶ 49–50. BMS’s drug, nivolumab, was approved for patients with some
melanomas in the United States in December 2014, and Merck’s drug, pembrolizumab,
was approved for these same class of patients in September 2014. Id.
26
     Tr. 552:10–553:18 (Bradley); id. at 226:6–227:6 (Richman); PTO ¶¶ 29, 31.
27
  The molecule would become known as Medi0680 after the Acquisition, and is frequently
referred to as such in internal documents. For clarity and consistency, as the parties did in
their papers, I will refer to it exclusively as AMP-514.
28
    Tr. 246:14–24 (Richman); id. at 545:17–547:10 (Bradley); id. at 550:1–553:18
(Bradley); PTO ¶ 48. Drug trials in the United States are generally separated into Phase 1,
Phase 2 and Phase 3 trials. See 21 C.F.R. § 312:21. Phase 1 trials typically focus on
determining a drug’s safety at various doses, but also attempt “to gain early evidence of
effectiveness.” 21 C.F.R. § 321.21(a). Phase 2 trials involve “controlled clinical studies
conducted to evaluate the effectiveness of the drug . . . .” 21 C.F.R. § 321.21(b). Phase 3
trials are large-scale efficacy trials. 21 C.F.R. § 312.21(c).
29
     PTO ¶ 30; Tr. 226:6–227:12 (Richman); id. at 414:16–415:10 (Kabakoff).

                                             9
capabilities through a traditional acquisition. In pursuit of this goal, AstraZeneca’s

CEO, Pascal Soriot, approached Amplimmune in the summer of 2013 to gauge its

interest in a sale.30

      D. The Merger Agreement

           Once Amplimmune expressed interest, negotiations moved quickly,

culminating in the signing of the Merger Agreement on August 25, 2013.31 The

parties agreed that consideration for the Acquisition would take two forms. First,

Amplimmune’s stockholders received $225 million in up-front cash. 32 Second, the

parties negotiated five contingent milestone payments, three of which (totaling

$200 million) were tied to the development of AMP-514. 33           Specifically, the

Monotherapy Milestone payment of $100 million would be owed upon “Successful

Completion of a Phase 1 Study” of AMP-514 as a monotherapy; 34 the Combination

Therapy Milestone payment of another $50 million would be owed upon “Successful

Completion of a Phase 1 Study” for a combination of AMP-514 and durvalumab;35

30
     Tr. 226:15–22 (Richman); PTO ¶ 31.
31
     JX 21 (“Merger Agreement”).
32
     PTO ¶ 39.
33
     Id.
34
     Merger Agreement § 9.1(a); PTO ¶ 40.
35
     Id. § 9.1(b); PTO ¶ 41.

                                            10
and another $50 million would be owed upon “Successful Completion of a Phase 1

Study” for a combination of AMP-514 and a second MedImmune proprietary

molecule.36

         Successful Completion is a defined term in the Merger Agreement, requiring

satisfaction of three conditions (or “prongs”): 37 (1) “completion of [a] Phase 1

Study . . . in a manner sufficient to support a regulatory filing for additional clinical

development” (the “first prong”); 38 (2) “completion of a study report for such

Phase 1 Study” (the “second prong”) 39 and (3) “a regulatory filing . . . submitting

the protocol for additional clinical development” of the Monotherapy or

Combination (the “third prong”). 40 The parties dispute whether the third prong has

been met for the Monotherapy Milestone and when the second prong was met for

the Combination Therapy Milestone. 41

36
  Id. § 9.1(c); PTO ¶ 42. Plaintiffs admit this last milestone has not been met, but argue
the $50 million payment is owed nonetheless by operation of the Merger Agreement’s
Acceleration Clause. PTO ¶ 42. I address the Acceleration Clause below.
37
     Merger Agreement § 1.1 at 15.
38
     Id.; PTO ¶ 43.
39
     Merger Agreement § 1.1 at 15.
40
     Id.; PTO ¶ 44.
41
     PTO ¶¶ 81–82.

                                           11
         The Merger Agreement’s Acceleration Clause states, in relevant part:

         Any Milestone Payments with respect to an (A) AMP-514 Mono
         Product or AMP-514 Other Combination Product, (B) AMP-514 First
         Combination,      (C)      AMP-[514]       Second      Combination      or
         (D) B7 Molecule, as applicable, that have not been paid shall be
         immediately due and payable in full if Parent shall have materially
         breached any of its material obligations under this ARTICLE IX with
         respect to such Product . . . provided, however, for purposes of sentence,
         if Parent can demonstrate that the actual damages resulting from any
         such material breach or breaches are less than such Milestone Payments
         payable in accordance with the terms of ARTICLE IX not yet earned,
         then Parent shall be required to pay such lesser amount in lieu of paying
         such unpaid Milestone Payments calculated as of the date of such
         material breach. For clarity, in no event shall a material breach with
         respect to one Product cause a Milestone Payment with respect to any
         other Product to be due pursuant to the preceding sentence.42

Plaintiffs argue this clause requires payment of each AMP-514 milestone payment

if they can prove a breach with respect to any AMP-514 milestone payment.43

Defendants respond that the clause only accelerates payment of a specifically

breached milestone payment. 44

         The Merger Agreement also contains a requirement that MedImmune use

“Commercially Reasonable Efforts” in developing the Monotherapy or

Combination. 45 Relatedly, the Merger Agreement appears to contemplate that

42
     Merger Agreement § 9.2(b)(iv).
43
     PTO ¶ 79.
44
     D.I. 195, Defs.’ Post-Trial Br. at 62–65.
45
     Merger Agreement § 9.2(b)(ii).

                                                 12
MedImmune alone, without input or assistance from Plaintiffs, would be responsible

for AMP-514’s development.46

      E. Development of AMP-514

         After the Acquisition, MedImmune quickly began Phase 1 trials of both the

Monotherapy and the Combination. Recognizing that their development of AMP-

514 lagged far behind the development of other companies’ PD-1 inhibitors,

Dr. Edward Bradley, who oversaw development of MedImmune’s oncology

portfolio, recommended a focus on Combination trials, noting “[i]f [] AMP-514 is

not differentiated from [nivolumab] [BMS’s drug] or lambro [Merck’s drug], we

should probably not do mono trials but would focus only on combo trials.”47 The

first patient was dosed with the Monotherapy in December 2013, and the first patient

was dosed with the Combination in May 2014.48 I discuss each trial in turn.

46
   See, e.g., JX 95 (Kabakoff acknowledging that MedImmune has the authority to
discontinue unilaterally the development of AMP-514); Tr. 227:10–12 (Richman) (stating
MedImmune’s acquisition of Amplimmune would “entail relinquishing, you know, full
control of the organization and our ongoing programs regarding further development.”).
47
   JX 13. Indeed, while Plaintiffs trumpet that MedImmune was enthusiastic about AMP-
514’s potential as a monotherapy, the evidence shows that MedImmune’s primary focus
was always on AMP-514’s use in combination therapies. See Tr. 239:22–241:4 (Richman);
id. at 526:3–9 (Pardoll); JX 17 at 5 (minutes from an August 2013 meeting noting that
while MedImmune believed AMP-514 had potential as a monotherapy, “the real value in
this approach is thought to be in combination therapies, of which there are several to
explore.”); JX 30 at 3 (a post-merger internal report noting MedImmune’s advisors
“recommended spending limited time in monotherapy development, and instead were more
in favor of advancing a PD1 + PDL1 antibody combination therapy option.”).
48
     PTO ¶¶ 54, 59.

                                         13
             The Phase 1 Monotherapy Trial

         Although MedImmune was focused on the potential of AMP-514 in

combination with other MedImmune molecules, it was hopeful that AMP-514 as a

monotherapy would prove substantially superior to its monotherapy competitors.

Accordingly, Dr. Bradley recognized that if MedImmune “got lucky and saw that

[AMP-514] was twice as good as [nivolumab] or Lambro—or some big degree of

superiority—we would then take a different and additional development route to go

head to head with [nivolumab] and knock them out cold.” 49 With this in mind,

MedImmune began Phase 1 trials with not only the primary goal of determining a

safe dose of AMP-514, but also looking for preliminary indications of the drug’s

efficacy as a Monotherapy. 50

         MedImmune submitted the required Investigator’s Brochure (“IB”) to the

FDA on October 10, 2013, detailing the planned Monotherapy trial. 51 The IB

49
     JX 24 at 1.
50
   JX 20 at 1; Tr. 679:2–680:20 (Bradley); id. at 492:21–493:4 (Pardoll) (noting that clinical
trials are “always looking for a signal of efficacy.”); JX 27 at 2 (noting secondary objective
of the Phase 1 monotherapy trial was to “assess preliminary antitumor activity of AMP-
514”); 21 C.F.R. § 321.21(a) (FDA regulations stating that Phase 1 trials should try to “gain
early evidence on effectiveness.”).
51
   JX 27. An Investigator’s Brochure is continually updated during clinical trials.
Tr. 158:24–161:2, 164:20–165:13 (Spector).

                                             14
described a Phase 1 trial where patients would be treated once every three weeks

with doses of the Monotherapy ranging from 0.1 mg/kg to 10 mg/kg. 52

          The early results at low doses were not encouraging. While results showed

AMP-514 was safe and well-tolerated by patients, there was no evidence of

preliminary anti-tumor activity. 53 Perhaps even more discouraging, AMP-514 was

not achieving the level of “receptor occupancy”—a measurement of the rate at which

lymphocytes had their PD-1 pathway blocked—that the preclinical data had

predicted would be achieved.54 These preliminary results stood in contrast to

nivolumab’s results at low doses in its clinical trials. 55

          Concerned with these data, MedImmune conducted a new test intended to

demonstrate AMP-514’s affinity—a key measure of the number of molecules

needed to bind to the cell’s receptors.56 This test also yielded disappointing results—

an affinity level of 29.1 nM, about ten times worse than what was previously thought

and fifteen times worse than the result nivolumab had achieved in a similar test.57

52
     Id. at 4.
53
     JX 116 at 60; JX 39 at 1; Tr. 582:14–583:10 (Bradley).
54
     Tr. 583:11–18 (Bradley); JX 42 at 2 (noting a receptor occupancy of only 60%).
55
     Tr. 500:1–12 (Pardoll); id. at 206:3–6 (Spector); see also JX 3; JX 5; JX 61.
56
     Tr. 583:19–584:2 (Bradley).
57
  JX 46 at 1. Plaintiffs dispute the value of this finding. D.I. 193, Pls.’ Opening Post-Trial
Br. at 15–17; 52–53. They note that a subsequent affinity test, using a different
methodology, found an affinity level roughly similar to what nivolumab had achieved.
                                               15
In other words, “to get the same effect as [nivolumab] you will need to give fifteen

times more [AMP-]514.”58              From MedImmune’s perspective, AMP-514’s

performance as a Monotherapy was “a disaster.”59

         Seeing no positive response at low dosages, MedImmune dramatically

increased the AMP-514 doses patients received. This revealed one of the molecule’s

positive attributes: it was well-tolerated by patients at extremely high doses—up to

20 mg/kg administered every two weeks. 60 And, after increasing the dose, patients

receiving AMP-514 saw a stronger anti-tumor response—with similar tumor

shrinkage in renal cell carcinoma to results nivolumab had shown at a similar stage

in trials—with the best results occurring at the highest dosages. 61

JX 115 at 12 (noting an affinity of 3.25 ± .90 nM); JX 138 (“Morse Dep.”) 203:5–18;
Tr. 714:2–716:4 (Coats). Regardless of which measure better reflects AMP-514’s affinity,
the drug was either roughly as good or nearly twice as bad as nivolumab. Neither outcome
is the kind of blockbuster result evidently required to shift MedImmune’s focus from
Combination therapy to Monotherapy development. See JX 24 at 1; JX 17 at 5; JX 30 at 3.
58
     Tr. 585:10–12 (Bradley).
59
     Id. at 664:22 (Bradley).
60
  JX 116 at 60. By comparison, nivolumab was effective at a 3 mg/kg dose. Tr. 519:2–7
(Pardoll).
61
   JX 116 at 60; JX 163 at 8, 10; JX 62 (noting “while the suspicion is that [AMP-514]
monotherapy is less potent than pembro or nivo, it nevertheless is active and the response
rates are not statistically different from the others given the large error bars. The safety is
fine.”); Tr. 845:1–846:12 (Morse).

                                              16
         While encouraging, MedImmune’s team still needed to decide whether this

new batch of preliminary results justified a dose expansion trial for the Monotherapy

given how far AMP-514’s development was behind nivolumab and pembrolizumab

and how much more AMP-514 was required to be dosed in order to achieve

comparable results.62 In June 2015, Dr. Bradley thought it best to “complete [dose]

escalation, declare victory (‘active and well tolerated’) and stop monotherapy

activity.” 63 This recommendation was accepted by all levels of the MedImmune

team, and the decision was then made to complete the Monotherapy Phase 1 trial

and focus on development of the Combination. 64                Kabakoff appeared to

acknowledge this decision, noting in an email to James Pedicano, Senior Director of

Biologics Project Management at MedImmune, that “it appears that Medimmune

does not plan to continue the development of [AMP-514] as a single agent or in

combination with any agents other than [durvalumab].” 65

62
     Tr. 284:3–285:9 (Richman).
63
     JX 62.
64
  Id.; Tr. 593:4–594:10 (Bradley); JX 66A at 12 (September 2015 pipeline report noting
“no plans for expansion” of the Monotherapy Study); Tr. 363:11–365:2 (Pedicano). Given
the small sample sizes involved in these trials, it was still possible that the AMP-514
Monotherapy could end up being superior to the Combination therapy. Tr. 757:8–14
(Coats); see JX 116 at 60 (noting a total of 58 patients dosed in the Monotherapy trial).
Accordingly, that hypothesis still had to be tested before MedImmune could definitively
determine its next steps with AMP-514.
65
     JX 95.

                                           17
             Additional Clinical Development of the Combination Therapy

          Despite some disappointment that AMP-514 was not “twice as good” as the

competition, the identification of a safe and effective dose of AMP-514 meant the

molecule might still fulfill its potential in combination with durvalumab. 66 That is,

“complete pathway blockade” was still viewed as viable, and the MedImmune team

got to work on designing a dose expansion trial to test that hypothesis. 67

          The Phase 1 Combination Therapy trial had been a single-arm study, whereby

patients were only dosed with the Combination, and those patients’ results were

compared to data from other trials.68               Dr. Bradley initially considered also

conducting a single-arm study for the dose expansion. 69 MedImmune, however,

eventually decided to conduct a two-armed trial whereby patients were chosen

randomly to be dosed with either the Combination or another drug as a comparison

arm. 70

          The question, then, was what treatment to use in the comparison arm of the

study. Numerous options were considered. MedImmune initially proposed using

66
     JX 24 at 1; Tr. 626:8–10 (Bradley).
67
     This trial was to be focused on treating patients with renal cell carcinoma. JX 82 at 2.
68
     JX 34 at 2; Tr. 547:11–18 (Bradley); id. at 595:20–597:9 (Bradley); JX 65 at 1.
69
     JX 65 at 1; Tr. 547:11–18, 594:11–597:9 (Bradley).
70
     Tr. 596:6–597:23 (Bradley); JX 65 at 1.

                                               18
nivolumab, but that drug was not yet approved for treating kidney cancer in all the

jurisdictions in which the study was to occur, making it an unattractive option.71

MedImmune next considered shifting the study’s focus to lung cancer and using

durvalumab as the comparison arm, but that option was rejected after it was

suggested that there would be enrollment delays caused by “compet[ition] for

patients.”72 After much deliberation, in December 2015, it was decided that AMP-

514 would be used as the monotherapy comparator in a study of patients with renal

cell carcinoma. 73

         MedImmune filed a Protocol Amendment with the FDA in February 2016,

describing “A Phase 1/2 Open-label Study to Evaluate the Safety and Antitumor

Activity of [AMP-514] in Combination with [durvalumab] and [AMP-514]

Monotherapy in Subjects with Select Advanced Malignancies.” 74 The parties’

disagreement regarding the purpose of this trial is the principal driver of their dispute

regarding whether the Monotherapy Milestone payment is owed. While the parties

agree that this trial constituted “additional clinical development” of the

Combination, satisfying the third prong of Successful Completion for the

71
     JX 70 at 23; Tr. 602:5–15 (Bradley); JX 67 at 1.
72
     JX 71 at 20; JX 72 at 1; Tr. 604:9–606:9 (Bradley); JX 75 at 1; JX 102 at 1.
73
     JX 77 at 2; Tr. 606:11–608:2 (Bradley).
74
     JX 82.

                                               19
Combination, they disagree whether this trial also constituted “additional clinical

development” of the Monotherapy. 75

           The Phase 1/2 study protocol submitted to the FDA listed as the trial’s primary

hypothesis that “[AMP-514] in combination with [durvalumab] will have a higher

response rate than [AMP-514] monotherapy in subjects with advanced or metastatic

clear cell renal cell carcinoma.” 76 It described the trial’s primary objective as

“evaluat[ing] the antitumor activity of [AMP-514] monotherapy and in combination

with [durvalumab]” in patients with kidney cancer.77

           The study used a single-tailed design, which allowed statistically significant

conclusions about whether the Combination was superior to the Monotherapy, but

not statistically significant conclusions in the other direction. 78        This lack of

symmetry is a product of design; single-tail studies “test[] for the possibility of the

relationship in one direction and completely disregard the possibility of a

relationship in the other direction.”79            Practically, this meant if the data

(unexpectedly) suggested the Monotherapy was more effective than the

75
     Pls.’ Opening Post-Trial Br. at 37–53.
76
     JX 82 at 2.
77
     Id.
78
     Id. at 6; JX 201; Tr. 822:14–824:7 (Morse).
79
     JX 201 at 2; Tr. 197:11–18 (Spector).

                                              20
Combination, MedImmune would have to regroup and shift the focus of future

studies in order to test that hypothesis further. 80

         The Phase 1/2 trial involved testing up to 60 patients with the Combination

and up to 60 patients with the Monotherapy. 81 The patient consent forms related to

the study disclosed that the purpose of the study was to “evaluate [AMP-514] in

combination with [durvalumab] and [AMP-514] monotherapy in treating clear-cell

Renal Cell Carcinoma.” 82 Because the study also involved dosing patients outside

of the United States, MedImmune was required to submit an Investigational

Medicinal Product Dossier to the foreign regulatory authorities. 83 This document

similarly described MedImmune’s development of AMP-514 as both a monotherapy

and in combination with durvalumab. 84 Plaintiffs point to this document, in addition

to the amended study protocol submitted to the FDA and the patient consent forms,

as evidence that MedImmune was proceeding with clinical trials of both the

Monotherapy and Combination.

80
     Tr. 373:17–374:20 (Pedicano); id. at 65:7–66:5 (Spector).
81
     JX 82 at 33.
82
     JX 85 at 3.
83
     JX 144 at 2.
84
     JX 91 at 4.

                                             21
         The Phase 1/2 trial began in the spring of 2016, but MedImmune quickly

encountered difficulties enrolling patients into the trial.85      This was because

nivolumab had been approved in 2015 for treating renal cell cancer, leading many

patients to opt for treatment with the standard of care rather than with an

experimental drug.86 Indeed, the first patient did not enroll in the Phase 1/2 trial

until August 2016, six months after the protocol amendment was filed with the

FDA. 87 In the face of this challenge, in March 2017, the decision was made to

replace the Monotherapy as the comparator arm with nivolumab in an effort to attract

patients—a change requiring a budget increase of $7.2 million. 88 This shift was

described in Amendment 5 to the Combination Trial protocol, which laid out other

changes in the study’s design, including dosing twice as many patients with the

combination therapy than with nivolumab as a monotherapy. 89

         Between 2016 and 2019, MedImmune submitted three IBs to the FDA. 90 An

IB tracks the development of a molecule and, accordingly, under FDA regulations,

85
     JX 105 at 2; Tr. 734:2–24 (Coats); id. at 766:5–17 (Coats).
86
     Tr. 734:2–16 (Coats).
87
     PTO ¶ 65.
88
     JX 109 at 5; JX 112 at 1; JX 111 at 2.
89
     JX 112 at 37.
90
     JX 81; JX 113; JX 115.

                                              22
an IB must be updated with current data and results from any ongoing clinical trials

involving the molecule. 91 True to their purpose, the IBs for AMP-514 presented the

results for the Combination trials as MedImmune was receiving the data.92 These

interim results were disappointing, with the Combination arm producing no better

outcomes than nivolumab alone. 93 With this data in hand, MedImmune made the

decision to terminate the Combination trial, and the last patient was treated with the

Combination in March 2020.94

         MedImmune completed a CSR—a formal summary of a clinical trial—and

submitted it to the FDA upon completion of the study. After submitting the CSR,

MedImmune determined the Combination Therapy Milestone had been achieved,

and it made the required $50 million earn-out payment in April 2020.

      F. Procedural History

         Plaintiffs filed their Complaint in June 2017, and the operative Amended

Complaint was filed in September 2017. 95 The Amended Complaint asserts one

91
     21 C.F.R. §§ 312.23(5), 312.55; Tr. 83:21–84:5 (Spector).
92
     JX 81; JX 113; JX 115.
93
     Tr. 745:24–746:9 (Coats).
94
     Id. 746:10–5 (Coats).
95
     D.I. 1; D.I. 25 (the “Amended Complaint”).

                                             23
Count of Breach of Contract.96 After voluntarily dismissing certain claims, Plaintiffs

sought relief for the following alleged breaches: (1) failure to pay the $100 million

Monotherapy Milestone payment; (2) failure to pay the $50 million Combination

Therapy Milestone payment when it was allegedly triggered in 2016; (3) failure to

exercise commercially reasonable efforts in developing AMP-514; and (4) failure to

comply with the Merger Agreement’s reporting requirements.97 As noted, Plaintiffs

separately claim that a finding of breach with respect to any single milestone

payment related to AMP-514 triggers the Acceleration Clause, thereby making all

milestone payments due and owing.98

         The parties cross-moved for summary judgment in August 2019. 99 Plaintiffs’

Motion for Summary Judgment argued there was no genuine dispute of material fact

that the Monotherapy and Combination Therapy Milestone payments were owed

because the Phase 1/2 trial indisputably constituted “additional clinical

development” of the Monotherapy, and numerous documents prepared by

96
     Amended Complaint ¶¶ 106–112.
97
     Id. Other claims asserted in the Complaint were voluntarily dismissed. D.I. 111.
98
     Amended Complaint ¶ 112(d).
99
     D.I. 112; D.I. 118.

                                             24
MedImmune indisputably could be classified as a “study report.”100 Plaintiffs’

motion further argued that the Acceleration Clause, as a matter of law, required all

milestone payments related to AMP-514 be paid if the Court found a breach with

regard to either the Monotherapy or Combination Therapy Milestone.101

          In opposition to Plaintiffs’ motion, Defendants maintained that Plaintiffs’

construction of the third prong of Successful Completion was not the only reasonable

construction because that provision could reasonably be read to require not only

clinical testing but also some movement towards commercialization of the

Monotherapy before the milestone payment was triggered.102 Additionally, they

argued Plaintiffs had not proven as a matter of undisputed fact and law that there had

been a “study report” completed for the Combination (per the second prong) because

a reasonable construction of that milestone would require submission of a Clinical

Study Report, a term of art, which indisputably had not been completed, much less

submitted to the FDA, at the time the motions were argued.103

100
   D.I. 175 Kabakoff v. Zeneca, Inc., C.A. No. 0459, at 6–7 (Del. Ch. Jan. 17, 2020)
(TRANSCRIPT) (“Summary Judgment Op.”).
101
      Id. at 8.
102
      Id. at 11.
103
      Id. at 13.

                                           25
            Defendants’ Cross-Motion for Partial Summary Judgment argued there was

no dispute of material fact that Defendants had exercised commercially reasonable

efforts in developing AMP-514.104 It further argued the only reasonable construction

of the Acceleration Clause was that it required an accelerated payment of only a

specifically breached milestone payment. 105 Finally, Defendants argued Plaintiffs

could not prove any damages arising from a breach of the Merger Agreement’s

reporting requirements, requiring dismissal of that claim. 106

            In a Bench Ruling on the motions, 107 I found the phrase “additional clinical

development” in the definition of “Successful Completion” was unambiguous, and

Defendants had offered the only reasonable construction of that phrase.108 Under

that construction, Plaintiffs are required to show there was some “movement towards

commercialization” of the Monotherapy in order to trigger the milestone payment.109

Finding there was an open question of fact as to whether the Phase 1/2 trial was

intended to move the Monotherapy towards commercialization, I denied Plaintiffs’

104
      Id. at 8.
105
      Id.
106
      Plaintiffs agreed to dismiss this claim before the Court ruled. D.I. 152.
107
      Summary Judgment Op. at 6–7.
108
      Id. at 11.
109
      Id. at 12.

                                               26
motion.110 I further found both sides had proffered reasonable constructions of the

term “study report,” and therefore that term was ambiguous. 111         Accordingly,

I denied Plaintiffs’ motion as to the Combination Therapy Milestone payment.112

Next, I found both sides had proffered reasonable constructions of the Acceleration

Clause, requiring denial of both motions for summary judgment with respect to that

clause.113 Last, I found there was no genuine dispute of material fact that Defendants

had exercised commercially reasonable efforts in developing AMP-514, and granted

Defendants’ motion as to that claim. 114

            Having narrowed the issues, the Court convened a five-day trial from

February 14, 2020 through February 20, 2020. Trial focused on three questions:

(1) whether the Phase 1/2 trial was intended as a continuation of the Monotherapy

Trial such that it would constitute “additional clinical development” of the

Monotherapy, or was instead intended only to advance the Combination towards

commercialization; (2) what the extrinsic evidence demonstrated to be the proper

construction of “study report” in the Merger Agreement; and (3) what the extrinsic

110
      Id.
111
      Id. at 13–14.
112
      Id. at 14.
113
      Id. at 16.
114
      Id. at 18.

                                           27
evidence demonstrated to be the proper construction of the Acceleration Clause.

Post-trial closing arguments were presented on August 5, 2020, and the matter was

submitted for decision that day. 115

                                       II. ANALYSIS

         The Merger Agreement obligates Defendants to pay Plaintiffs upon

“Successful Completion” of a Phase 1 study for AMP-514 as either a Monotherapy

or Combination.          As noted, Section 1.1 of the Merger Agreement defines

“Successful Completion” as the satisfaction of three independent requirements:

         (1) “completion of such Phase 1 Study, in accordance with the protocol,
         in a manner sufficient to support additional clinical development”;

         (2) “completion of a study report for such Phase 1 Study”; and

         (3) a “regulatory filing . . . submitting the protocol for additional clinical
         development” of the Monotherapy or of the Combination. 116

         Where, as here, contractual obligations are contingent on the achievement of

certain conditions, Delaware courts place on the party seeking enforcement of the

contract the burden to prove that the conditions have been satisfied. 117 That element

of proof is layered on top of the traditional elements for proving breach of contract:

115
      D.I. 208 Post-Trial Oral Arg. (“Oral Arg. Tr.”).
116
      Merger Agreement at § 1.1 (formatting added).
117
    See S’holder Representative Servs. LLC v. Shire US Hldgs. Inc., 2020 WL 6018738,
at *49 (Del. Ch. Oct. 12, 2020) (citing Ewell v. Those Certain Underwriters of Lloyd’s,
London, 2010 WL 3447570, at *3 (Del. Super. Aug. 27, 2010)).

                                               28
(1) the existence of a contract; (2) the breach of an obligation that contract imposes;

and (3) resulting damages. 118 Because neither party disputes the existence of a valid

agreement, my analysis focuses on whether Plaintiffs have satisfactorily proven the

remaining elements of breach by a preponderance of the competent evidence.

         I first address the Monotherapy Milestone. My analysis focuses on the factual

issue of whether MedImmune satisfied the third prong of “Successful Completion,”

namely that MedImmune made “a regulatory filing . . . submitting the protocol for

additional clinical development.” For reasons I explain below, I have determined

that Defendants did not breach their obligation to pay the Monotherapy Milestone

because the preponderance of the evidence does not support Plaintiffs contention

that a regulatory filing was submitted for additional clinical development of the

Monotherapy. 119

         I next address the Combination Milestone. Here, the analysis centers on the

meaning of the ambiguous term “study report” in the second prong of “Successful

Completion.” Because I find Defendants offer the more reasonable construction of

“study report” based on the preponderance of the extrinsic evidence, I have

118
   Zayo Gp., LLC v. Latisys Hldgs., LLC, 2018 WL 6177174, at *10 (Del. Ch. Nov. 26,
2018).
119
      PTO ¶¶ 81, 82; Tr. 647:4–17 (Bradley).

                                               29
determined that their Milestone payment for the Combination was timely made after

the submission of a Clinical Study Report.

         My determination that Defendants did not breach their obligation to pay either

the Monotherapy or the Combination Milestones obviates the need to take up

Plaintiffs’ claim under the Acceleration Clause.

      A. Plaintiffs Have Not Proven Breach of the Monotherapy Milestone

         Plaintiffs contend the February 2016 Protocol Amendment (“Amendment 3”)

for the Phase 1/2 trial—laying out a two-armed trial dosing patients with AMP-514

as either the Combination or the Monotherapy—satisfies the third prong’s

requirement for “additional clinical development.” 120 Defendants counter that the

Phase 1/2 trial was purposed solely to test the Combination Therapy, and that the

Monotherapy was selected only as a last-resort control arm after MedImmune

considered three other experimental design options that ultimately proved

untenable.121

         Resolution of this dispute requires both a construction of the third prong’s

phrase “additional clinical development” as well as a factual inquiry into whether

Defendants’ actions satisfied that definition.             While I previously provided a

120
      Pls.’ Opening Post-Trial Br. at 38.
121
      Defs.’ Post-Trial Br. at 48 (citing JX 66 at 41; JX 77 at 2; JX 99 at 1).

                                                30
construction of the third prong on summary judgment, 122 the parties continued to

spar at trial over the evidence required to satisfy that standard. I therefore return to

the issue of contract construction before turning to the factual issues contested at

trial.

               The Unambiguous Contractual Language

            On summary judgment, I held that “additional clinical development” required

“movement towards commercialization.”123 Having fixed on that construction,

I advised the parties that the factual dispute to be resolved at trial would center on

“what the Phase 1/2 trial actually intended to accomplish.” 124 If the Phase 1/2 Trial

was a “continuation of the monotherapy Phase 1 trial,” then the Phase 1/2 Trial

would satisfy the third prong of “Successful Completion.” 125 If the Phase 1/2 Trial

was “only meant as a continuation of the combination therapy trial,” however, then

Amendment 3 would not reflect “additional clinical development” of the

Monotherapy under the Merger Agreement. 126

122
      See generally Summary Judgment Op.
123
   Id. at 11–12 (“When a word is used in different parts of a contract, that word is presumed
to have the same meaning throughout . . . . ‘Development’ is used elsewhere in the
agreement. . . . [T]he definition of “Development Plan” in Section 1.1 . . . is used to
describe movement towards commercialization.”)
124
      Id. at 12.
125
      Id.
126
      Id.

                                             31
      Notwithstanding that pretrial ruling, the parties continue in their post-trial

briefs to joust over what precisely must be shown to prove “movement towards”

commercialization. Defendants contend Plaintiffs must show that the purpose and

design of the regulatory filing was to move the product towards commercialization.

Plaintiffs protest that Defendants’ proposed standard of proof saddles them with an

impossible burden, forcing Plaintiffs to produce evidence that individuals at

MedImmune had the subjective intent to commercialize the Monotherapy by

believing that it would, at the Phase 1 stage, differentiate itself from other PD-1s

then on the market. Plaintiffs instead propose that the submission of a protocol

calling for testing and evaluation of both the Monotherapy and Combination in a

Phase 2 dose expansion trial should, on its own, suffice to demonstrate “additional

clinical development” under the Merger Agreement.

      To be clear, in order to prove “movement towards” commercialization,

Plaintiffs must prove by a preponderance of the evidence that the relevant regulatory

filing or protocol was made for the purpose of advancing the Monotherapy towards

commercialization. Mere inclusion of the Monotherapy within a trial does not

conclusively establish “additional clinical development.” Information incidentally

gathered on a drug included in a study as a control arm, for example, does not

                                         32
advance that control towards commercialization.127             The subjective intent of

individuals within MedImmune may be probative of MedImmune’s purpose, but it

is by no means dispositive. Most important in this determination are MedImmune’s

“objective acts (words, acts and context) . . . .” 128

       While “Successful Completion” must be proven with objective markers,

unfortunately, those markers are not expressly identified in the contract. Even so,

Plaintiffs can prove (and could have proven) “additional clinical development” in a

variety of ways, such as through the stated goals and methods of relevant regulatory

filings or internal documents relating to the clinical trial at issue. A clinical study

can have multiple purposes; and a study might test multiple hypotheses. If Plaintiffs

had proven that one of the goals in making the relevant regulatory filing or protocol

was to develop AMP-514 as a Monotherapy for commercialization, Plaintiffs would

127
   Plaintiffs argue that any use of data from the Monotherapy’s Phase 1 trial to inform the
Phase 1/2 trial represents a “continuation” of the Monotherapy’s development and should
suffice to show “additional clinical development.” Pls.’ Opening Post-Trial Br. at 37–38.
But mere inclusion of the Monotherapy in the Phase 1/2 trial (and the gathering of data
related to the molecule from that trial) is not tantamount to “additional clinical
development” that would justify the payment of significant additional merger
consideration. See Summary Judgment Op. at 12.
128
   Sterling Prop. Hldgs. v. New Castle Cty., 2013 WL 1821594, at *6 (Del. Ch. Apr. 30,
2013); see also Haft v. Haft, 671 A.2d 413, 417 (Del. Ch. 1995) (explaining that, in
ascertaining the purpose of a contract, “courts do not look for and give legal force to a
private subjective state of mind (intent) but to objective acts (words, acts and context).”).

                                             33
have proven that the Monotherapy Milestone was triggered. As explained below,

however, the preponderance of the evidence says otherwise.

               Plaintiffs Did Not Prove “Additional Clinical Development” of the
               Monotherapy

         To prove “additional clinical development” of the Monotherapy, Plaintiffs

rely on two categories of evidence, both of which relate to Amendment 3 and the

Phase 1/2 trial. First, they argue that Amendment 3 was designed to generate data

to support picking the Monotherapy as a “winner” in the trial, to distinguish the

Monotherapy from other similar therapies and to pursue further development of the

Monotherapy for use in treating other diseases. Second, Plaintiffs point to regulatory

documents filed by MedImmune that, by Plaintiffs’ lights, confirm the Phase 1/2

trial constituted “additional clinical development” of the Monotherapy. I disagree

on both fronts.

               a. The Phase 1/2 Trial Was Designed and Intended to Test Only the
                  Combination Therapy

         On February 11, 2016, MedImmune submitted a protocol (Amendment 3)

calling for the testing and evaluation of both the Monotherapy and Combination in

up to sixty new cancer patients each. 129 As noted, the protocol is titled “A Phase

1/2, Open-label Study to Evaluate the Safety and Antitumor Activity of MEDI0680

129
      JX 82.

                                          34
[AMP-514] in Combination with MEDI4736 [Durvalumab] and MEDI0680 [AMP-

514] Monotherapy in Subjects with Selected Advanced Malignancies.”130

Amendment 3’s hypothesis dealt exclusively with the Combination, but it stated as

its “primary objective” the evaluation of antitumor activity of both the Monotherapy

and Combination.131 It also noted among its “secondary objectives” a plan to

characterize the Monotherapy. 132 Patient consent forms disclosed the study would

“evaluate . . . the effect both MEDI4736 [durvalumab] in combination with

MEDI0680 [AMP-514] or MEDI0680 [AMP-514] alone have on your cancer.”133

            Plaintiffs place great weight on this protocol and its objectives in particular.

They point out that even Defendants’ expert conceded at trial that “the objectives”

of the protocol (in addition to the hypothesis) provide evidence of its purpose.134

And Defendants do not contest the dictionary definitions cited by Plaintiffs

demonstrating that the word “objective” is synonymous with “intent” and “purpose.”

According to Plaintiffs, Amendment 3’s stated objectives alone suffice to show the

Phase 1/2 trial was formulated to test the Monotherapy in addition to the

130
      Id. at 1 (emphasis added).
131
      Id. at 2.
132
      Id.
133
      JX 85 at 4.
134
      Tr. 820:3–7 (Morse).

                                               35
Combination, thereby “mov[ing the Monotherapy] towards commercialization” in

satisfaction of the third prong of “Successful Completion.”

         The problem with Plaintiffs’ theory is that these objectives, while probative,

do not exist in a vacuum, and the preponderance of the evidence places Plaintiffs’

proffered proofs in context and ultimately contradicts their characterization of the

Phase 1/2 trial. More specifically, the Phase 1/2 trial’s design, the governance record

relating to the Monotherapy and the commercial context within which the

Monotherapy was being developed collectively demonstrate that the Phase 1/2 trial

was not undertaken to move the Monotherapy towards commercialization. Rather,

the Phase 1/2 trial was intended to test the complete pathway blockade hypothesis,

using the Monotherapy solely “to compare” how “it look[s] if you are blocking only

one agent not two.”135

                i. The Design of Amendment 3

         Plaintiffs’ expert stipulated at trial that the sole hypothesis of Amendment 3

shows MedImmune “believed the combination was better” than the Monotherapy. 136

In credible expert testimony, Dr. Michael Morse, a clinical oncologist called by

Defendants who specializes in immnunotherapies, including anti-PD-1 and anti-PD-

135
      (Jallal) Dep. 147:10–148:2, 160:7–162:7.
136
      Tr .181:15–18, 182:22–183:9 (Spector); JX 82 at 2.

                                             36
L1, 137 explained that if MedImmune intended to advance the Monotherapy’s

development, one would expect Amendment 3 to offer hypotheses regarding the

efficacy of the Monotherapy. 138 No such hypothesis is stated. This corroborates

Defendants’ position that MedImmune was interested solely in testing the dual-

blockade hypothesis (which is stated), and included the Monotherapy in the study

design only to discover whether the dual-blockade treatment would outperform a

single-blockade treatment. 139

         While a failure to hypothesize about the Monotherapy’s efficacy does not, on

its own, prove that the Phase 1/2 trial was not advancing the Monotherapy towards

commercialization, the absence of a Monotherapy hypothesis coupled with the

study’s statistical design amounts to persuasive evidence that MedImmune was not

interested in the Monotherapy’s Phase 1/2 results for the sake of subjecting the

Monotherapy to “additional clinical development.”          The study used one-sided

137
      JX 131.
138
      Tr. 828:9–18 (Morse).
139
   Plaintiffs argue the dual blockade hypothesis pertains both to the Monotherapy as well
as the Combination, as it is connected to the efficacy of both the Monotherapy and the
Combination. See D.I. 199, Pls.’ Reply Post-Trial Br. at 9. But the evidence showed the
dual blockade hypothesis deals with combining anti-PD-1 and anti-PD-L1 drugs to achieve
a complete pathway blockade, using the Monotherapy only to compare the Combination’s
relative efficacy. See, e.g., JX 77 (IMed leadership team minutes describing the
development plan of a study to be “[d]ifferentiating complete vs single blockade.”);
Tr. 608:3–16 (Bradley) (“[T]he purpose of the trial was to see whether the combo was
better than the mono.”).

                                           37
significance for its statistical power, allowing MedImmune to draw statistically

significant conclusions only about whether the Combination was better than the

Monotherapy, but not the other way around. 140 Like the single hypothesis, a one-

tailed design suggests the Monotherapy was included only as a single-blockade

molecule to test a dual-blockade hypothesis. If MedImmune intended to move the

Monotherapy toward commercialization, or was even agnostic to the results (as it

would be in a “pick-the-winner” trial), 141 one would expect a two-tailed statistical

analysis where the Monotherapy could be evaluated on its own merits.142

       Plaintiffs argue that the statistical design of the trial is a red herring. They say

the statistical analysis in Amendment 3 was employed only for selecting the study’s

sample size; nothing prevented MedImmune from running a two-tailed statistical

140
   JX 82, at 6; JX 201; Tr. 822:14–824:7 (Morse); id. at 197:11–18 (Spector) (admitting
that a “one-tailed test, you are testing for the possibility of the relationship in one direction
and completely disregarding the possibility of a relationship in the other direction.”).
141
    A “pick-the-winner” trial is an adaptive trial design whereby the study sponsor
compares the results of molecules in a trial’s different arms and advances the molecule that
performs best. See Pls.’ Opening Post-Trial Br. at 42–43; see also JX 201 (explaining the
differences between one- and two-tailed tests).
142
    See Tr. 829:2–9 (Morse) (noting that the Phase 1/2 Trial’s statistical analysis plan’s one-
tailed design was set up to “only ask one question”—“whether the combination is better
than the monotherapy.”). See Pls.’ Reply Post-Trial Br. at 21 (recognizing implicitly that
a two-tailed analysis would be typical in a pick-the-winner trial by arguing that a two-tailed
analysis could have been done at the end of trial.).

                                               38
inquiry at the end of the trial. 143 Further, the statistical design was irrelevant to the

study, according to Plaintiffs, not only because the statistical power was too low to

generate a statistically meaningful result but also because the FDA does not require

statistical significance in smaller Phase 2 studies.144 Because the data collected for

the Combination is identical to the Monotherapy (i.e., each treatment was

administered to the same number of patients), Plaintiffs believe MedImmune was

agnostic to the trial’s outcome and willing to proceed with either treatment based on

the Phase 1/2 trial’s results.

       These arguments miss the point. Plaintiffs bear the burden to prove by a

preponderance of the evidence that MedImmune, through the purpose and design of

Amendment 3, was subjecting the Monotherapy to additional clinical development.

While the statistical design may be changed at the study’s conclusion, that is not the

relevant question. Instead, the relevant question is why MedImmune would not, in

its protocol, provide for a two-tailed statistical design in the first place if the study

was designed to advance the Monotherapy towards commercialization. Indeed, the

Court received credible testimony that a sponsor typically uses “the same type of

143
   Pls.’ Opening Post-Trial Br. at 22; Tr. 193:17–194:8 (Spector); id. at 484:21–485:20
(Pardoll).
144
    Tr. 193:21–194:8 (Spector) (testifying that “[y]ou don’t consider something statistically
significant unless the P value is .05 or less,” and the P value for the study here was .10.);
id. at 763:8–14 (Coats) (confirming that the FDA does not require statistical significance
in these smaller Phase 2 studies).

                                             39
statistical analysis at the end of the study” that was used to pick the original sample

size. 145 Moreover, the fact that a study is insufficiently powered does not mean the

study’s results are ignored. Indeed, the credible evidence is that “in oncology . . . a

good drug declares itself early” 146 and the Monotherapy would have to be

significantly better than its more mature competition to justify additional clinical

development. 147 While not dispositive, Amendment 3’s one-tailed design further

supports Defendants’ characterization of the Monotherapy as a “comparator” or

“control” in the Phase 1/2 trial, included purely “to compare” how “it look[s] if you

are blocking only one agent not two.”148

145
      Tr. 825:20–827:7 (Morse).
146
      Id. at 680:7–20 (Bradley).
147
   See, e.g., JX 13 (2013 MedImmune email explaining that AMP-514 would need to be
“differentiated” or else they would “focus only on combo trials”); Tr. 642:1–644:9
(Bradley).
148
     (Jallal) Dep. 157:10–148:2, 160:7–162:7. Plaintiffs make much of the semantic
difference between “control” and “comparator,” arguing the protocol did not explicitly
describe the Monotherapy as a “control” and that “comparators” are not treated the same
as “controls” because this prejudges the result. Tr. 508:14–509:5 (Pardoll). Regardless of
the semantic differences between the two terms, the Monotherapy’s role is implied in the
study’s design, and MedImmune characterized the Monotherapy interchangeably as both a
“comparator” or “control” in numerous internal and external documents predating the
litigation. See, e.g., JX 92 at 2 (describing the Monotherapy arm as a “comparator”);
JX 100 at 6 (describing the Monotherapy arm as a “control arm”); JX 77 at 2 (describing
the monotherapy arm as a “control arm”). This corroborates Defendants’ witness
testimony that the “principal distinction” between a “control” and “comparator” is largely
one of “nomenclature.” See Tr. 508:7–14 (Pardoll); accord, e.g., (Jallal) Dep. 183:4–
184:24; JX 159; JX 160. Consistent with this understanding, I refer to the Monotherapy as
a “comparator” in the Phase 1/2 trial because it was not a standard of care.

                                           40
      Plaintiffs argue the Monotherapy could not possibly serve as a control by

which to measure the Combination’s efficacy because the Monotherapy was not the

standard of care,149 but Defendants produced credible testimony that the difference

is irrelevant to determine whether the Monotherapy was included in the Phase 1/2

trial for purposes of commercial development.            Dr. Morse testified that, to

understand how the Monotherapy stacks up to its competition, it would have to be

compared with “another drug in the class or another proxy for other drugs in the

class if you were really interested in how MEDI0680 [the Monotherapy] performed

compared to what’s available out in the real world.”150 Amendment 3 provided for

no such comparator. 151

      Later Amendments support Defendants’ contention that Amendment 3 was

not intended to clinically develop the Monotherapy. In Amendment 5, for example,

MedImmune switched from AMP-514 to nivolumab—the standard of care. This

study was indisputably not a “pick-the-winner” trial seeking to develop

149
   The argument, more specifically, is that sponsors of a clinical study may not use an
unapproved drug in the control arm of the study. See Pls.’ Reply Post-Trial Br. at 19–20.
150
   Indeed, Michael Richman, a former MedImmune employee who testified on behalf of
Plaintiffs, admitted that the biotech company he currently works for also uses anti-PD-1
agents “as a comparator or control” to “compare how a given candidate will perform
against a known benchmark.” Tr. 236:13–237:18 (Richman).
151
   Id. at 828:19–829:1 (Morse) (testifying that using the Combination as a comparator
“doesn’t make sense”).

                                           41
nivolumab. 152 And yet, Amendment 5 and Amendment 3 remained similar in

meaningful ways. The protocols stated the same hypothesis, collected and evaluated

similar data in both arms, had objectives and endpoints involving the comparator

arm and employed the same statistical design. 153 While the Amendments differed

in some respects, such as the randomization ratio and certain objectives and

endpoints, Defendants presented credible evidence that explain these differences.

Most importantly, because the Monotherapy, unlike nivolumab, had not already

been characterized and had no historical data available to compare it against the

Combination, MedImmune had to gather more information on the Monotherapy to

make a meaningful comparison.154

         Overall, an evaluation of the Phase 1/2 trial’s design yields powerful evidence

that MedImmune included the Monotherapy in the Phase 1/2 study only to test

whether the Combination could outperform a single blockade molecule.

                ii. The Governance Documents

         The incompatibility of the study design with additional clinical development

of the Monotherapy comports with statements about the Phase 1/2 trial in the

152
      Id. at 69:16–19, 200:19–24 (Spector).
153
      Compare JX 82 at 6, with JX 112 at 2–4, 6.
154
   Tr. 779:12–780:11 (Coats); id. at 736:20–737:17, 745:9–16 (Coats) (explaining that the
different randomization ratios were used to accelerate enrollment).

                                              42
mountain of governance documents related to Amendment 3. Decisions regarding

trial design and strategy are made according to an established governance process.155

Within MedImmune, the AMP-514 Product Development Team (“PDT”) reported

to the IMed Committee, which in turn reported to the Early Stage Product

Committee. 156 This internal reporting process produced a contemporaneous record

documenting MedImmune’s purpose and goals in conducting the Phase 1/2 trial.

If MedImmune had a secondary developmental purpose for the Monotherapy during

the Phase 1/2 trial, that intent would likely be documented by the trial’s governance

committee in some form, whether through meeting minutes, governance memos or

presentations.157

         MedImmune initially contemplated a single-arm study of the Combination,158

and pursued a two-arm trial only after its parent, AstraZeneca, requested a “more

robust control” in the study by introducing a “real control arm and do[ing] a

155
      See, e.g., (Jallal) Dep. 43:23–45:6; (Gallagher) Dep. 9:15–20.
156
      Tr. 352:5–354:24 (Pedicano).
157
     Tr. 781:1–11 (Coats) (credibly testifying, as AMP-514 PDT’s leader, that if
MedImmune had further plans to develop the Monotherapy, “it absolutely would have been
reflected” in the PDT meeting minutes or in a governance interaction); see also id.
at 736:6–11 (Coats) (noting that, as the AMP-514 PDT leader, he never saw
“any documents or any information that suggested that while [the Monotherapy] was
serving as the benchmark, that there were any other purposes for having the [Monotherapy]
arm of the study” during the Phase 1/2 trial).
158
      JX 65 at 1; Tr. 547:11–18, 594:11–597:9 (Bradley).

                                              43
prospective randomized trial of the single agent versus a double agent.” 159 The

Monotherapy was chosen only after two other single-blockade inhibitors were

rejected for logistical reasons. 160       In December 2015, MedImmune’s IMed

Committee settled on using the AMP-514 Monotherapy as the “control arm” in a

study of patients with kidney cancer. 161             The meeting minutes stated,

“[d]ifferentiating complete versus single blockade is the goal of this study.” 162 This

singular purpose was corroborated by a 2016 Scientific Advisory Board

presentation, and by Dr. Bradley, leader of the oncology group and then-member of

the IMed Committee, who attended the December 2015 IMed meeting where the

initial Phase 2 trial design was approved. 163

159
   Tr. 596:6–597:23 (Bradley); JX 65 at 1 (September 2015 email suggesting as a
comparator “durva alone, nivo, or a separate arm for both.”).
160
   As noted, Nivolumab was first considered but ultimately rejected because it had not yet
been approved for the indication to be studied (kidney cancer). JX 70 at 23; Tr. 598:15–
601:23 (Bradley); id. at 602:5–15 (Bradley); JX 67 at 1; (Jallal) Dep. 66:7–22, 167:8–
169:2. Durvalumab was next considered but rejected due to unacceptable risk of
enrollment delays. JX 71 at 20; JX 72 at 1; Tr. 602:9–606:9 (Bradley); id. at 744:4–12
(Coats); JX 75 at 1; JX 102 at 1, 8.
161
      JX 77 at 1; Tr. 606:11–608:2 (Bradley).
162
   JX 77 at 1; Tr. 608:3–13 (Bradley) (corroborating the meeting minutes as consistent
with his independent understanding).
163
   See, e.g., JX 65; JX 70; JX 72; JX 75; JX 77; Tr. 594:11–602:15, 606:10–21, 612:23–
613:5 (Bradley). Richman testified that Dr. Bradley “would know for a fact whether the
company had decided to further clinically develop the monotherapy or not.” Id. at 288:1–
23 (Richman).

                                                44
         Amendment 3 was subsequently filed to implement that plan. Every witness

with first-hand knowledge of the Phase 1/2 trial laid out in Amendment 3 credibly

testified that it was intended only to develop the Combination and not the

Monotherapy. 164        Despite extensive discovery, Plaintiffs found no governance

documents to controvert the facts that the Phase 1/2 trial was motivated to

“[d]ifferentiat[e] complete versus single blockade,” that the Monotherapy was

included only as the “control arm” of the study, and that there was “[n]o expansion

planned” for the Monotherapy. 165

         Plaintiffs argue that some internal documents contradict Defendants’ narrative

of institutional consensus. For example, they cite April 2015 meeting minutes

showing the Clinical team contemplated expansion of the Monotherapy even as the

Commercial team projected that the “monotherapy will not be a registration

option.”166 They also cite an internal pipeline tracker from September 2015 detailing

plans to escalate the Monotherapy in certain patients to “evaluate efficacy to support

continuation of trial to expansion phase,” despite the fact that the pipeline tracker

stated on the same page that there are “[n]o plans for expansion [of the Monotherapy]

164
    Tr. 608:14–23 (Bradley); id. at 625:11–17 (Bradley) (“At that time, there was no
development plan, no intention of developing monotherapy, period.”); JX 129 207:9–23;
Tr. 375:3–13 (Pedicano); id. at 722:1–5 (Coats); id. at 736:6–11 (Coats).
165
      JX 77 at 2; JX 66 at 41; JX 99 at 1.
166
      JX 207 at 2.

                                             45
at this time.” 167 Finally, they cite Dr. Drew Pardoll’s testimony that Dr. Ashok

Gupta, MedImmune’s Vice President for Clinical Development in Oncology, had

expressed “enthusiasm” and that he “advocated, successfully . . . in his leadership

role” to move AMP-514 forward to the randomized Phase 2 trials.168

Notwithstanding the weight of the governance record, the plan for discontinuing

commercial advancement of the Monotherapy must have changed, Plaintiffs believe,

before Amendment 3 was filed.

         But some documented confusion among MedImmune’s ranks in discrete,

isolated parts of a voluminous set of governance records does not detract from the

overwhelming evidence that the Monotherapy was not considered by the relevant

governance committees to be worth pursuing. While the Clinical team may have

disagreed with the Commercial team about the Monotherapy’s commercial

prospects in early 2015, an updated report on the Monotherapy in November of that

year indicated MedImmune was “not doing any additional studies in

167
      JX 66 at 41.
168
    Tr. 518:6–22, 521:1–8 (Pardoll). Plaintiffs make the same argument with regard to
Mr. Pedicano because he predicted that AMP-514 would be a “critical molecule in the next
three years.” JX 83. It is unclear, however, whether Pedicano was referring to the molecule
as a Monotherapy or as part of the Combination, as the update to which Pedicano was
responding concerned both. In other words, this fact, without more, does not suggest
Pedicano believed the Monotherapy alone would be a viable commercial option.

                                            46
monotherapy.” 169 Indeed, Dr. Kabakoff acknowledged in his response to the report

that “MedImmune does not plan to continue the development of MEDI0680 [AMP-

514] as a single agent.”170 As for Dr. Gupta, it is unclear from Dr. Pardoll’s

testimony whether Dr. Gupta’s enthusiasm was for the Monotherapy or the

Combination. 171 A single pipeline tracker with ostensibly contradictory entries

regarding the Monotherapy cannot detract from the overwhelming evidence that the

Monotherapy was included in the Phase 1/2 trial as a last-choice comparator based

more on necessity than any commercial interest.

                iii. The Commercial Reality of the Monotherapy

         Before attempting to discern the parties’ shared intent with respect to

particular provisions of a contract, the “basic business relationship between parties

must be understood” and the contract must be “read in full and situated in the

commercial context between the parties.” 172 There is some evidence that the

Monotherapy outperformed the Combination in clinical trials.173                   And yet,

169
      Tr. 363:11–365:2 (Pedicano); JX 73 at 20.
170
      JX 95; see also Tr. 369:10–21 (Pedicano).
171
   Indeed, Dr. Bradley similarly expressed optimism that AMP-514 was sufficiently active
to allow further development of the Combination, and there is no question Dr. Bradley did
not see a commercial future for the Monotherapy. See Tr. 622:18–623:3 (Bradley).
172
      Chi. Bridge & Iron Co. v. Westinghouse Elec. Co., 166 A.3d 912, 927 (Del. 2017).
173
      Tr. 69:23–71:7, 71:11–15 (Spector); JX 82 at 26; Pls.’ Opening Post-Trial Br. at 13.

                                              47
MedImmune evidently discontinued development of the Monotherapy. 174 While

MedImmune’s decision to abandon development of what appeared to be an effective

drug may at first seem confusing, it makes sense when viewed in the context of drug

development at major pharmaceutical companies.

         MedImmune’s interest in AMP-514 was born of a need to develop an anti-

PD-1 molecule to complement its existing anti-PD-L1 portfolio.175 MedImmune

acquired Amplimmune and its anti-PD-1 molecule, AMP-514, at a time when the

industry began focusing on the potential of combining multiple immunotherapies.176

         AMP-514’s competitive potential as a monotherapy was encumbered by the

fact that its development lagged well behind its competitors. Two rival companies

were already in late-stage clinical trials with anti-PD-1 monotherapies in the race to

market by the time MedImmune began developing AMP-514.177                          Thus,

MedImmune’s “core strategy” in acquiring Amplimmune was always to test its

complete pathway blockade hypothesis 178 in order to achieve a “breakthrough[]” that

174
      See JX 207 at 2.
175
      See Tr. 547:6–10, 561:2–14 (Bradley).
176
      Id. at 237:23–238:6 (Richman).
177
      PTO ¶¶ 49–50.
178
    See Tr. 239:22–240:4, 241:4–13, 242:2–5, 242:24–243:2, 249:19–250:5 (Richman);
see also, e.g., JX 17 at 5 (August 2013 meeting minutes of Science Committee stating that
the “real value in this approach is thought to be in combination therapies” and explaining
that the acquisition would “place MedImmune in a unique position to develop optimal
                                              48
would “leapfrog” the competition.179 While MedImmune “would certainly have

considered developing [AMP-514] as a monotherapy, in addition to the combination

therapy,” 180 it would only do so if it “got lucky” and AMP-514 proved superior to

its competitors.181 If AMP-514 were only “a little better” than its competition,

MedImmune would not “try to take that possible small advantage and go head to

head with” the two more mature monotherapies. 182 Because MedImmune needed

the Monotherapy to demonstrate a “large” degree of superiority to be commercially

viable, the Phase 1 trial was expected to suffice for assessing its competitive

potential despite the fact that Phase 1 trials are only secondarily aimed at assessing

a drug’s efficacy. 183

proprietary combination regimens”); see also, e.g., JX 30 at 3 (2013 report reflecting the
external advisors “recommended spending limited time in monotherapy development, and
instead were more in favor of advancing a PD1/PDL1 antibody combination therapy
option”).
179
      Tr. 547:6–10, 561:2–14, 567:2–7 (Bradley).
180
      Tr. 555:15–556:7 (Bradley); see also (Jallal) Dep. 80:11–23.
181
      JX 24 at 1.
182
   JX 20 at 1; see also, e.g., JX 13 (2013 Bradley email explaining that if AMP-514 was
not “differentiated,” they would “focus only on combo trials”); Tr. 642:1–644:9 (Bradley).
183
   Tr. 679:2–680:6 (Bradley); JX 20 at 1; see also Tr. 680:7–20 (Bradley) (explaining that
“in oncology . . . a good drug declares itself early” and citing durvalumab as an example);
21 C.F.R. § 321.21(a) (FDA regulations stating that Phase 1 trials should also seek to “gain
early evidence on effectiveness.”).

                                              49
         MedImmune’s hopes for the Monotherapy’s superiority were dashed when its

Phase 1 trial revealed the Monotherapy compared unfavorably to its competitors.

Unlike competing drugs, 184 none of the patients dosed with AMP-514 experienced

any tumor shrinkage in the first six months of Phase 1 trials. 185 Concerned with

early patient data, MedImmune then conducted new testing of AMP-514’s affinity

and found the molecule’s affinity level to be roughly fifteen times worse than its top

competitor. 186 Dr. Bradley credibly testified that “any hope that [AMP-514] would

be even as good, not to mention better than the other competitors, kind of went out

the window. . . . But there was still the hope that we could at least test the hypothesis

that two is better than one.”187

         This commercial reality—that early testing of the Monotherapy revealed it

would not perform as well as, much less outperform, more developed drugs with

which it would compete—provides color to the protocol and the governance record

relating to Amendment 3. The Monotherapy was the fourth-choice comparator in

184
   The earliest cohorts treated with nivolumab showed anti-tumor responses at dosages as
low as 0.1 mg/kg in the same types of tumors tested in the Amp-514 trials. Tr. 496:6–
501:17 (Pardoll); JX 3; JX 5; JX 61; Tr. 206:3–6 (Spector).
185
      JX 116 at 66; JX 39 at 1; Tr. 582:14–583:10 (Bradley).
186
   JX 42 at 2; see also, e.g., Tr. 583:11–584:2 (Bradley); JX 45; JX 46 at 1. This affinity
level meant that, in effect, “to have the same effect as nivo, you [would] need to give 15
times more [AMP-]514.” Tr. 585:10–12 (Bradley).
187
      Tr. 585:15–586:11 (Bradley).

                                             50
Amendment 3 because it did not earlier demonstrate superiority over other

molecules, and so was not viewed as a viable competitor to the rival anti-PD-1s. The

governance record overwhelmingly shows that MedImmune was not interested in

commercially developing the Monotherapy because, again, its equal-at-best

performance vis-à-vis competitors did not warrant the expense. While it remained

possible MedImmune might abruptly change course between December 2015

(when it evaluated the Monotherapy’s performance) 188 and February 2016 (when

Amendment 3 was filed), Plaintiffs have not presented any credible evidence that a

change of course was ever seriously contemplated much less implemented.

               b. Other Regulatory Filings Do Not Evidence the Monotherapy’s
                  “Additional Commercial Development”

         MedImmune filed various documents with regulatory authorities that

discussed MedImmune’s commercial development plans regarding the Phase 2 trial.

Plaintiffs highlight representations made to two different regulators in those

documents as evidence of MedImmune’s intent to move the Monotherapy towards

commercial development. 189

188
      JX 77.
189
    There is no dispute MedImmune’s statements in regulatory filings are accurate.
Tr. 345:22–346:22, 337:12–339:19 (Pedicano) (affirming that MedImmune “stand[s] by”
what it submits to the FDA).

                                        51
            First, Plaintiffs point again to Amendment 3. Specifically, MedImmune

represented to the FDA through Amendment 3’s “Benefit-risk evaluation” section

that “[e]merging data” for the AMP-514 Monotherapy demonstrated “encouraging

clinical activity with a manageable safety profile.”190

            Second, in April 2016 and April 2017, MedImmune filed with European

Union regulators an Investigational Medicinal Product Dossier (IMPD) to support

the expansion phase of their AMP-514 study outside the United States.191 The IMPD

is a “clinical trial application” submitted to the European Medicines Agency (EMA)

(“like the European FDA” 192) that allows investigators to decide whether to allow

participation in the trial. 193 It is the European counterpart to the IB, describing what

is known about the drug and why the study sponsor believes the potential benefits

outweigh the potential risks for patients taking part in the clinical trial. 194 Dr. Gupta,

the “senior clinician” working on the AMP-514 program who was “responsible for”

the Phase 1/2 trial,195 signed the IMPD. 196           Section 2.3 of the IMPD states

190
      JX 82 at 26.
191
      JX 91; JX 168; JX 144.
192
      Tr. 720:6–721:1, 730:22–731:2 (Coats).
193
      Id.
194
      Id. at 720:6–721:1 (Coats).
195
      Id. at 344:16–345:1 (Pedicano); see also id. at 659:12–18 (Bradley).
196
      JX 91 at 9.
                                               52
“MEDI0680 [AMP-514] is being developed as a potential anticancer therapy in both

a monotherapy and combination therapy setting for patients with advanced

malignancies.”197 It goes on to say:

          MEDI0680 [AMP-514] in monotherapy or combination settings may
          provide meaningful clinical benefit with a manageable safety and
          tolerability profile by generating durable and improved rate of clinical
          responses. . . . . Based on available data, the sponsor [MedImmune]
          believes that MEDI0680 [AMP-514] continues to demonstrate an
          overall benefit-risk balance to support its further clinical evaluation in
          cancer patients. 198

          Contrary to Plaintiffs’ characterizations, these regulatory filings are hardly

“smoking guns.” The FDA filing, for its part, adds nothing to the analysis. To

repeat, the competitive dynamics of the anti-PD-1 market makes clear that merely

“encouraging clinical activity with a manageable safety profile” alone would not

warrant the Monotherapy’s “additional clinical development.”

          Nor is the European IMPD persuasive evidence that MedImmune was

advancing clinical development of the Monotherapy.                    The “Benefit-Risk

Conclusion” in the April 2016 IMPD reflects that MedImmune believed it was

ethical (i.e., the potential benefits outweighed the possible risks) to dose patients

197
      Id. at 4.
198
      Id. at 8.

                                             53
with either the Monotherapy or the Combination; 199 it does not speak directly to

whether the Monotherapy was being moved towards commercialization. And the

April 2017 IMPD does not proffer any conclusions about the Monotherapy in its

benefit-risk analysis because the Monotherapy was not included in that trial.

         Further, the 2016 IMPD’s statement that the Monotherapy was “being

developed” does not mean there was “additional clinical development” underway as

contemplated by the Merger Agreement.              Indeed, in the April 2016 IMPD—

submitted when AMP-514 was no longer used in the comparator arm—the

introductory language cited by Plaintiffs remains unchanged.200 MedImmune did

not change this language because the Monotherapy’s Phase 1 trial was ongoing at

the time of both cited versions of the IMPD. 201 That trial’s purpose and design was

indisputably to move the Monotherapy towards commercialization.                  Thus,

MedImmune’s representation in the IMPD that AMP-514 was “being developed” as

a Monotherapy could reasonably be understood as a reference to its Phase 1 trial (not

at issue here), as opposed to its role as comparator in the Phase 1/2 trial. While

MedImmune determined to stop developing the Monotherapy during the Phase 1

trial, the purpose of that trial did not retroactively change because of, or following,

199
      Tr. 722:6–723:5 (Coats).
200
      See JX 168 at 3.
201
      See id. at 3–4; Tr. 725:8–13 (Coats).

                                              54
that determination.202 Accordingly, the related regulatory filings cited by Plaintiffs

provide no persuasive evidence that the Phase 1/2 trial constituted “additional

clinical development” of the Monotherapy.

                                              *****

          Because Plaintiffs have not carried their burden to prove that MedImmune

submitted a regulatory filing to subject the Monotherapy to “additional clinical

development,” Defendants owe no obligation to make the $100 million Milestone

payment for the Monotherapy under Section 9.1(a) of the Merger Agreement.

      B. Plaintiffs Have Not Proven Breach of the Combination Therapy
         Milestone

          Both parties agree the Combination Therapy Milestone has been triggered,

but dispute when it was triggered. 203 Plaintiffs argue the Milestone payment was

owed in February 2016, upon the filing of Amendment 3 to the Combination Trial

protocol. Defendants agree the filing of Amendment 3 satisfied the third prong of

“Successful Completion,”204 but maintain that the Milestone’s second prong—

202
      Tr. 778:1–13 (Coats).
203
   For context, as noted, the Milestone’s date of completion implicates the Agreement’s
Acceleration Clause. If Plaintiffs are correct that Defendants breached their Agreement by
delaying payment on the Combination Milestone, then the Acceleration Clause arguably
makes due all money owed on every Milestone. Because I ultimately determine that the
Defendants timely paid the Milestone, I do not reach that question.
204
      Defs.’ Post-Trial Br. at 61; see also, e.g., JX 106 at 10.

                                                 55
requiring “completion of a study report for such Phase 1 Study”—was not satisfied

until Defendants submitted a CSR on the Combination’s Phase 1 trial in March 2020.

         With these battle lines drawn, the parties’ dispute centers on the meaning of

“study report,” a term left undefined in the Merger Agreement. Plaintiffs argue a

“study report” is “any summary of findings and data from Phase 1 that would enable

MedImmune to proceed with further development.” 205 Under their definition,

MedImmune “complet[ed]” a study report upon filing its 2016, 2017, and 2019 IBs,

as well as its 2015 Annual Report. Defendants argue a “study report” was intended

to reference the industry-specific CSR (case study report)—a comprehensive

document describing the conduct and results of a clinical trial in a prescribed

regulatory format. 206 On summary judgment, I determined that the undefined term

“study report” was ambiguous. 207 Because “reasonable minds could differ as to the

contract’s meaning,” the Court must “consider admissible extrinsic evidence.” 208

205
      Pls.’ Opening Post-Trial Br. at 53.
206
      Defs.’ Post-Trial Br. at 34–36.
207
   See Summary Judgment Op. at 12–14. Of course, by declaring the term ambiguous, the
Court did not pass on which of the two proffered “reasonable constructions” was most
reasonable. See Bank of New York Mellon v. Commerzbank Capital Funding Tr. II, 65
A.3d 539, 550 (Del. 2013) (“Even a ‘less natural’ reading of a contract term may be
‘reasonable’ for purposes of an ambiguity inquiry.”).
208
    GMG Capital Invs., LLC v. Athenian Venture P’rs I, L.P., 36 A.3d 776, 783 (Del. 2012)
(citing Lawrence M. Solan, Pernicious Ambiguity in Contracts and Statutes, 79 Chi-Kent
L. Rev. 859, 862 (2004) (“If a contract is clear, then resorting to extrinsic evidence that
might undermine the plain language of the agreement is barred by the parol evidence rule.
                                            56
         Having declared an ambiguity, the analysis from here proceeds in two

sequential steps. First, I must determine the superior construction of the disputed

contract language as informed by the competent extrinsic evidence. Second, I must

interpret the implications of my chosen construction on the parties’ obligations.

I take up each inquiry in turn.

             “Study Report” Refers to a Clinical Study Report

         Despite both parties’ shared intent to use “objective,” “clear,” “black and

white” metrics by which to measure “Successful Completion,”209 the Merger

Agreement’s drafters inexplicably chose to leave the term “study report”

undefined.210 As noted, this choice has left the Court to discern the intended

meaning of the term from the preponderance of the extrinsic evidence. 211 “Such

extrinsic evidence may include overt statements and acts of the parties, the business

context, prior dealings between the parties, [and] business custom and usage in the

industry.” 212 Extrinsic evidence disambiguates contractual language when it reveals

When, in contrast, contractual texts are deemed ambiguous, the resolution of the ambiguity
becomes a trial issue for the jury. Thus, a court acts as a gatekeeper in making its initial
inquiry into whether an ambiguity exists.”)).
209
      Tr. 268:20–270:8 (Richman); id. at 569:16-570:9, 573:7–574:6 (Bradley).
210
      See Summary Judgment Op. at 12–14.
211
      Eagle Indus. v. DeVilbiss Health Care, 702 A.2d 1228, 1232 (Del. 1997).
212
    United Rentals, Inc. v. RAM Hldgs. Inc., 937 A.2d 810, 834–35 (Del. Ch. 2007)
(alteration in original) (internal quotation marks omitted).

                                             57
what an “(objectively) reasonable party in the position of either bargainer would

have understood the nature of the contractual rights and duties to be.” 213

         To begin, both parties agree that Defendants’ proposed definition for “study

report”—a CSR—satisfies the second prong.214              The question more narrowly

focused, then, is whether Plaintiffs’ proffered study reports—IBs and Annual

Reports—also qualify. Contracts can, of course, include a “broad, flexible” term

that “may encompass a spectrum of events” without sacrificing clarity. 215 But the

burden is on the Plaintiffs to prove, by a preponderance of the evidence, that the

parties intended MedImmune’s obligation to pay tens of millions of dollars in

milestone payments would be triggered upon MedImmune’s completion of any one

of an undefined “spectrum” of documents regarding the Combination Therapy.

         Plaintiffs do not import their definition of “study report” from a regulatory

authority or published source. Indeed, neither Plaintiffs nor any of their witnesses

could identify a regulatory or other published document characterizing an IB or an

Annual Report as a “study report,” despite the fact that clinical trials, not

213
      U.S. West, Inc. v. Time Warner, Inc., 1996 WL 307445, at *10 (Del. Ch. June 6, 1996).
214
      See Pls.’ Reply Post-Trial Br. at 30.
215
   E.I. Du Pont de Nemours & Co. v. Admiral Ins. Cor., 711 A.2d 45, 63–64 (Del. Super.
Ct. 1995).

                                              58
surprisingly, are highly regulated. 216         Rather, Plaintiffs’ proposed definition

purportedly derives from the contemporaneous understanding of three trial witnesses

who negotiated the Merger Agreement on Amplimmune’s behalf: Mr. Richman,

Dr. Spector and Dr. Kabakoff. Plaintiffs urge the Court to disregard Defendants’

witnesses, who steadfastly maintained throughout trial that a study report was

intended to reference only a CSR, 217 because none of Defendants’ witnesses actually

participated in the Merger Agreement’s negotiations.

         While Plaintiffs’ strategy of presenting negotiators makes perfect sense, the

execution of the strategy requires consistency among the witnesses in order to

deliver the desired result. That did not happen at trial. The inconsistencies were

particularly conspicuous against the backdrop of the parties’ stated goal of crafting

“black and white” Milestone objectives that were beyond dispute.218 Mr. Richman

testified that he understood “study report” to mean any written document (an email,

a memo, an article abstract) so long as it included “some data” from the clinical

trial—even if that data concerned only one patient. 219 Dr. Spector—Amplimmune’s

216
      See Tr. 148:23–150:18, 152:2–11 (Spector).
217
      Id. at 359:2–5 (Pedicano); id. at 574:18–576:2 (Bradley).
218
      Id. at 268:20–270:8 (Richman); id. at 569:16–570:9, 573:7–574:6 (Bradley).
219
      Id. at 274:15–275:15 (Richman).

                                              59
lead negotiator—disagreed, identifying IBs as the only viable study reports.220

Dr. Kabakoff’s interpretation of “study report” landed somewhere between the two.

His definition encompassed not only an IB but also any “report that presents the

result of the study” and “that would contain sufficient data that it could be

summarized in a report and it could go into a regulatory filing to FDA or a foreign

regulatory body that would support additional clinical development.” 221                The

inconsistencies were not subtle and their impact was to diminish the credibility of

each witness on the point.

         Beyond their witnesses’ inconsistent descriptions of the parties’ intent,

Plaintiffs offered evidence of drafting history and emails among MedImmune

employees to support their broad construction of “study report.” 222 Specifically,

Plaintiffs point to the following:

220
   Id. at 153:11–155:17 (Spector) (stating that “a memo describing the results” of a study
would not qualify as a study report and replying “[y]es” when asked if he could not identify
any study reports outside the 2016, 2017 and 2019 IBs).
221
    Id. at 398:2–23 (Kabakoff). Plaintiffs argue that the “fine distinctions” between their
witnesses’ testimony “misses the forest for the trees” because the witnesses testified to the
same basic understanding of “study report.” Pls.’ Reply Post-Trial Br. at 24 n.4. I disagree.
Mr. Richman’s idea of a study report was clearly more expansive than the others.
And Dr. Spector’s ability to identify only IBs as study reports conflicts with Plaintiffs’
argument that annual reports also meet that standard. When parties purportedly negotiate
for “black and white” metrics by which to measure multi-million dollar earnout provisions,
“fine distinctions” matter.
222
      See Pls.’ Opening Post-Trial Br. at 53–60.

                                              60
               • The term “study report” is preceded by “a” not “the”, evidencing the
                 drafters’ intent that “study report” would encompass multiple
                 documents;223

               • Past iterations of the Merger Agreement saw the drafters remove the
                 qualifier “final” previously placed before “study report,”224 signaling
                 the parties’ intent to allow other documents presenting trial data, such
                 as IBs and Annual Reports, to satisfy the second prong’s requirements;

               • An email chain where two MedImmune employees refer to an Annual
                 Report as a “study report”;225 and

               • Prongs (i) and (iii) of the Milestone triggers both refer expressly to
                 actions taken to support “additional” development. 226          Thus,
                 “Successful Completion of a Phase 1 Study” concerns what is
                 necessary to advance from Phase 1 to Phase 2. With this in mind, a
                 “study report” should be understood to call for documentation of a
                 drug’s development from the beginning to support the additional
                 clinical development referenced in the other prongs; IBs and annual
                 reports do exactly that.

         In response, Defendants argue that “study report” must be understood to mean

CSR when one considers industry practice and usage as well as the context in which

the term is used. In this regard, they note that the chosen determiner preceding

“study report” (“a” vs. “the”) is irrelevant because there can be more than one

223
      Pls.’ Reply Post-Trial Br. at 29.
224
      JX 16.
225
      See JX 148; Tr. 853:17–854:18 (Morse).
226
      Merger Agreement § 1.1 at 15.

                                               61
CSR. 227 And removal of the word “final” in the Merger Agreement’s drafting

history is likewise irrelevant given that the “final” CSR need not be submitted until

after Phase 3 trials are completed, but the industry’s (and MedImmune’s internal)

practice, both when the Merger Agreement was drafted and now, is to prepare a CSR

upon the completion of each trial. 228 Thus, the drafters’ removal of the word “final”

merely reflects an intent to clarify that the second prong is satisfied by the

completion of a CSR upon the conclusion of the Phase 1 study.

            Although Plaintiffs note the drafters could have written “clinical study report”

or “CSR” explicitly into the Merger Agreement, MedImmune’s witnesses

maintained that “study report” and “CSR” are “interchangeable terms.” 229 As

Dr. Pedicano explained, while the second prong “doesn’t say ‘clinical’ in front of

study report, . . . I can’t think of anything else it would refer to.” 230 Emails sent by

MedImmune employees both before and after the contract’s signing refer to a CSR

when discussing the second prong’s Milestone trigger, evidencing MedImmune’s

understanding that the second prong’s “study report” means CSR. 231                   Even

227
      Defs.’ Post-Trial Br. at 34–36.
228
      Tr. 729:9–730:16 (Coats); JX 155 at 61–62.
229
      Id. at 304:4–10 (Pedicano).
230
      Id.
231
    JX 12 at 2 (internal MedImmune email from August 2013 discussing the milestone
trigger as “completion of a final CSR”); JX 87 at 1–2 (internal MedImmune email from
                                               62
Plaintiffs’ expert, Dr. Spector, agreed “CSR” is a “study report” and that is “a widely

understood term in the clinical industry . . . . [a]nd there’s almost no one you could

find anywhere that would think it was not a study report.”232

         Plaintiffs proffer another MedImmune email chain, where two MedImmune

employees appear to use “study report” to refer to Annual Reports, as evidence

supporting their construction.233 Defendants respond that, at the time the emails

were written, the MedImmune employees were preparing an AMP-514 IND annual

report for the FDA, which concerns a molecule rather than an individual study.234

Indeed, the subject of both IBs and Annual Reports generally is the specific molecule

of interest, encompassing any studies where the molecule is being tested.235

Defendants maintain that JX 148 does not relate to a “study report for such Phase 1

Study” because the second prong’s language contemplates a report that addresses

March 2016 inquiring about the date the “CSRs might be completed” in reference to
milestone discussions). Plaintiffs claim that the former email in 2013 merely evidences
that MedImmune negotiated down from “CSR” to “study report,” but the latter email shows
that MedImmune’s equation of a CSR with study report persisted after the Merger
Agreement was executed.
232
   Tr. 162:7–15 (Spector); see also, e.g., id. at 169:8–9 (Spector); id. at 362:24–363:3
(Pedicano).
233
      See JX 148; Tr. 853:17–854:18 (Morse).
234
      Tr. 855:5–856:17 (Morse).
235
    Id. at 359:6–20 (Pedicano) (testifying that an IB’s purpose is “not at all” the same as a
CSR because an IB offers “information about the molecule”—not the study—and in fact
is “a distillation of a lot of different research that’s done.”).

                                               63
the study itself.236 In other words, a “study report” is different than a report on a

molecule under study.

          After carefully considering all of the extrinsic evidence presented at trial, it is

clear the overwhelming weight of that evidence reveals that no industry participant

or deal party would reasonably understand the term “study report” to refer to an IB

or annual report, much less an email or informal document describing a study.

Dr. Bradley credibly testified that study reports and IBs are “totally different

thing[s].” 237 Mr. Pedicano testified that industry participants do not refer to an IB

as a “study report.”238         Even Dr. Spector—who testified (incredibly) that the

negotiators intended study report to include an IB—could not recall ever having

heard of an IB being referred to as a study report.239 A single email chain among

two employees referring to an annual report as a study report does not counter the

substantial weight of extrinsic evidence speaking to the contrary collective

understanding held by industry participants and deal parties.

         Without sufficient evidence of industry usage or credible testimony as to the

parties’ contemporaneous understanding of the term, Plaintiffs are left to rely upon

236
      Defs.’ Post-Trial Br. at 35 n.8.
237
      Id. at 574:18–576:2 (Bradley).
238
      Id. at 360:2–5 (Pedicano).
239
      Id. at 147:21–148:7 (Spector).

                                              64
their structural argument that the prongs of “Successful Completion,” read together,

convey an intent to trigger Milestone payments once the Phase 1 study is

functionally completed—that is, when the tested molecule progresses from Phase 1

to Phase 2. To be sure, if all prongs in fact were concerned only with functional

completion, then that would lend some logical support for the contention that IBs

and Annual Reports, which are drafted throughout a study’s lifecycle, fall within the

scope of the second prong.

         While Plaintiffs’ concept of functional completion finds no support in any

FDA guidance or regulatory documents, 240 the text of the other two prongs does lend

some superficial credence to their construction. The third prong is clearly concerned

with functional advancement, as the parties agree it was satisfied when the

Combination advanced from Phase 1 to Phase 1/2 upon the filing of Amendment 3.

         Plaintiffs argue the first prong is likewise focused on completion as expressly

stated in that provision.241 But that is not all the first prong says. The express

language requires “completion of such Phase 1 Study, in accordance with the

protocol, in a manner sufficient to support a regulatory filing for additional clinical

development.” 242 Defendants argue the dependent clause “in accordance with the

240
      See id. at 116:10–118:2 (Spector).
241
      Pls.’ Reply Post-Trial Br. at 26–28.
242
      Merger Agreement § 1.1 at 15 (emphasis added).

                                             65
protocol” refers back to the preceding half of the sentence, which deals with the

study’s “completion,” thereby incorporating by reference the Phase 1 Study

protocol’s definition of “study completion.” The protocol in both the Monotherapy

and Combination defines “study completion” as “the last protocol-specified

visit/assessment (including telephone contact).”243 Thus, Defendants argue, the

second prong’s “completion of a study report” corresponds to the “completion of

such Phase 1 Study,” which occurs upon the last patient’s last visit.244 The CSR is

the only report completed at the end of the Phase 1 study. 245

         Plaintiffs’ construction of the first prong cannot be reconciled with the clause

“in accordance with the protocol.” Under Plaintiffs’ reading, the first prong is

satisfied once the Phase 1 Study is completed “in a manner sufficient to support a

regulatory filing.” But that reading renders superfluous the clause “in accordance

with the protocol,” contrary to basic canons of contract construction. 246 If the

“manner sufficient” language relates to the time at which the first prong is satisfied,

as Plaintiffs claim, there would be no need to reference the protocol because “a

243
      JX 27 at 85; JX 34 at 104.
244
      Defs.’ Post-Trial Br. at 29–30.
245
   Tr. 169:22–170:3 (Spector); see also id. at 163:11–170:4 (Spector); JX 155 at 61–62;
Tr. 303:10–23 (Pedicano); id. at 574:7–17 (Bradley).
246
  See NAMA Hldgs., LLC v. World Mkt. Ctr. Venture, LLC, 948 A.2d 411, 419 (Del. Ch.
2007), aff’d, 945 A.2d 594 (Del. 2008).

                                            66
manner sufficient to support a regulatory filing” necessarily implies compliance with

the regulated protocol.

         Defendants’ construction, by contrast, imports a critical and unique meaning

into the latter half of the first prong’s sentence. When the first prong speaks to the

“manner” in which the study is to be performed, it constrains the way in which the

Phase 1 trial is to be conducted, not (as Plaintiffs suggest) the time at which the study

is to be completed. In other words, the latter half of the first prong is conduct-

oriented, ensuring that the Phase 1 study complies with regulatory requirements and

best practices such that the Phase 1 results can inform the Combination’s later stages

of development. By giving effect to all parts of the first prong’s language,

Defendants offer the more reasonable construction of the first prong, which was

satisfied “in accordance with the protocol.”

         Plaintiffs nonetheless maintain there is no basis to incorporate the study’s

protocol when attempting to discern the parties’ broader intent. 247 First, they argue

that Defendants’ reading improperly elevates a definition in another document that

postdated the Merger Agreement over the language of the contract. 248 Second, they

argue that the vague reference to “the protocol” could address any aspect of the

247
      Pls.’ Reply Post-Trial Br. at 27–28.
248
   See Town of Cheswold v. Cent. Del. Bus. Park, 188 A.3d 810, 819 (Del. 2018)
(“To incorporate one document into another, an explicit manifestation of intent is
required.”).

                                             67
protocol affecting how the study is completed, from dosing to data analysis. 249 The

more specific language, they say, must therefore control. 250

       Neither argument is persuasive. As conditions precedent, all three prongs of

“Successful Completion” contemplate actions and documents yet to be completed;

those documents may nevertheless be incorporated by reference into a contract.251

Moreover, a reasonable person would not understand the first prong’s reference to

the protocol to be vague. While the first prong of “Successful Completion” (like all

the other prongs) could have been written more clearly, neither party disputes that

“the protocol” references the Phase 1 trial’s protocol. The dependent clause “in

accordance with the protocol” immediately follows “completion of such Phase 1

Study.” Thus, the text makes clear enough that the parties explicitly invoked the

249
   I note that Plaintiffs do not dispute whether the Agreement’s reference to “the protocol”
is vague as to the actual instrument; both parties agree that “the protocol” references the
study’s protocol. See Pls.’ Reply Post-Trial Br. at 27–28.
250
   See DCV Hldgs., Inc. v. Conagra, Inc., 889 A.2d 954, 961 (Del. 2005) (stating the
“well-settled rule of contract construction” that “specific language in a contract controls
over general language”).
251
   11 Williston on Contracts § 30:25 (“As long as the contract makes clear reference to the
document and describes it in such terms that its identity may be ascertained beyond doubt,
the parties to a contract may incorporate contractual terms by reference to a separate,
noncontemporaneous document, including a separate agreement to which they are not
parties, and including a separate document which is unsigned. It is not necessary to refer
to or incorporate the entire document; if the parties so desire, they may incorporate a
portion of the document.”) (emphasis added).

                                            68
protocol to define “completion” of that “Phase 1 Study.” The protocol expressly

defines “study completion” as, in effect, last patient/last visit. 252

         Moreover, Defendants’ interpretation comports with the parties’ stated intent

to define “black and white” metrics by which to measure each prong’s

achievement. 253 The last patient’s last visit is a definite date tracked for regulatory

reporting purposes.254 Witnesses and relevant regulatory filings stated the

Combination’s Phase 1 trial was “ongoing” until the last patient’s last visit, contrary

to Plaintiffs’ contention that the first prong’s “completion of Such Phase 1 Study”

allowed for an earlier ending.255 Indeed, Plaintiffs’ construction leaves uncertain the

final end date of the first prong. Dr. Spector acquiesced at trial that he could not

“venture a guess as to when” the date of completion might occur under his

definition.256

         The persuasive evidence reveals that, consistent with the parties’ intent to

remove doubt regarding when the milestone payments were due, and when they were

252
   JX 27 at 85; JX 34 at 104; Tr. 271:24–272:5 (Richman) (testifying that protocols would
typically define “study completion” as last patient, last visit).
253
      Tr. 268:20–270:8 (Spector); Tr. at 568:4–570:9 (Bradley).
254
   See, e.g., JX 164 at 5 (citing a regulation that defines “study completion date” as the
date of the “last subject’s last visit”).
255
   See Tr. 717:14–20, 746:19–24 (Coats); (Gallagher) Dep. 102:23–104:6; JX 82 at 22–
23; JX 110 at 12–13; JX 112 at 22–23; Tr. 113:14–116:2, 136:15–137:6 (Spector).
256
      Tr. 118:3–13 (Spector); see also id. 111:13–19 (Spector).

                                              69
not due, Defendants’ construction of “study report” is the only one that comports

with that intent.257 A CSR is a known quantity, and it is a document all parties knew

would have to be “completed” with respect to the Phase 1 study. 258 On the other

hand, pegging the obligation to pay a substantial milestone payment to the

completion of any number of documents that fit within a litigation-driven construct

of “reporting on the study” is hardly “black and white.” 259

         Indeed, understanding a “study report” to mean CSR makes sense in view of

the commercial relationship between the parties and the “real-world” context of drug

development by pharmaceutical companies more broadly. 260               An early-stage

molecule’s successful development is uncertain. Pharmaceutical acquisitions often

account for this uncertainty through milestone payments, which reward target

companies as their acquired assets progress toward commercialization.261 The

257
      Tr. 268:20–270:8 (Spector); id. at 568:4–570:9 (Bradley).
258
   Tr. 169:22–170:3 (Spector) (acknowledging that a CSR is “required to be prepared after
a clinical trial is completed or terminated.”); id. at 361:8–362:12 (Pedicano).
259
      Tr. 268:20–270:8 (Spector); id. at 568:4–570:9 (Bradley).
260
      Chi. Bridge & Iron Co., 166 A.3d at 926–27.
261
   See Brian J.M. Quinn, Putting Your Money Where Your Mouth Is: The Performance of
Earnouts in Corporate Acquisitions, 81 U. Cin. L. Rev. 127, 160–61 (2012) (observing
that earnouts are likely more prevalent in industries such as the pharmaceutical industry
where the value of the assets are not yet credibly conveyed to an acquirer.).

                                              70
Merger Agreement effectuated that intent in the second prong by identifying as a

milestone the completion of a definite and objective document: the CSR.262

         After considering all of the credible evidence, I cannot conclude that Plaintiffs

carried their burden of proving the Combination milestone payment was due prior

to MedImmune’s completion of the Phase 1 CSR. To review: No regulatory

documents or definitions support Plaintiffs’ equation of an IB, Annual Report or

more informal documents to a study report.             Plaintiffs’ negotiator witnesses

impugned each other’s credibility by offering different understandings of what

constituted a “study report” under the second prong, contrary to their stated goal of

setting out clear metrics by which to measure each prong’s achievement. Plaintiffs’

structural argument fails because the first prong concerned itself not with functional

completion (i.e., when the Combination could proceed from Phase 1 to Phase 2), but

with study completion. Plaintiffs’ only evidence that MedImmune understood a

study report to mean an annual report was a single isolated and vague email chain

among two employees. And, most important, Plaintiffs’ interpretation of “study

report” as a moving target is directly contrary to the parties’ intent to effectuate

precision in the determination of when milestone consideration was due.

262
      Tr. 729:9–730:16 (Coats); JX 155 at 61–62.

                                             71
         This holding does not, as Plaintiffs suggest, contravene a “basic canon of

contract interpretation” that contract terms should not be interpreted in such a

manner “that would lead to an absurd result.” 263              Contrary to Plaintiffs’

expostulation, Defendants could not unreasonably delay their completion of a CSR

in order to delay payment of the Combination milestone without exposing

themselves to liability for breach of the Merger Agreement’s “Commercially

Reasonable Efforts” provision.264 That provision works hand in glove with the

milestone provisions to ensure that MedImmune does not unreasonably frustrate

Plaintiffs’ rights to milestone consideration. 265

             Plaintiffs Did Not Prove a Breach of the Combination Milestone

         The preponderance of the evidence reveals that the three prongs of

“Successful Completion” were satisfied on the following dates:

             • The first prong of “Successful Completion” for the Combination was
               achieved in March 2019 after the last patient’s last visit for the
               Combination’s Phase 1 trial.266

263
      Kan-Di-Ki, LLC v. Suer, 2015 WL 4503210, at *24, n.251 (Del. Ch. July 22, 2015).
264
      See Merger Agreement at § 9.2(b)(ii).
265
   Of course, Plaintiffs did not claim or present any credible evidence that MedImmune
had unreasonably delayed in the preparation of the CSR.
266
      Tr. 746:19–24 (Coats).

                                              72
              • The second prong of “Successful Completion” for the Combination
                was achieved on March 31, 2020, upon submission of the CSR for the
                Combination Trial. 267

              • The third prong of “Successful Completion” for the Combination was
                achieved in February 2016 with the filing of Amendment 3 to the
                Combination Trial protocol.268

         Because the Merger Agreement requires all three prongs of “Successful

Completion” to be met before a Milestone Payment is due, the First Combination

Milestone Payment was not due until March 31, 2020. Defendants timely made that

Milestone Payment.

                                 III.   CONCLUSION

         For the reasons stated above, judgment will be entered for Defendants on all

claims. Defendants shall present a form of final judgment, on notice to Plaintiffs,

within ten (10) days.

267
   Defendants presented unrebutted testimony establishing that Defendants’ policy is to
prepare a CSR within twelve months of a study’s completion. See Tr. 729:9–21 (Coats).
268
      See, e.g., JX 106 at 10.

                                          73