Delaware Court Awards More Than $180 Million for Breach of Commercially Reasonable Efforts Obligation in Drug Development Milestone Dispute

On June 11, 2025, the Delaware Court of Chancery found Alexion Pharmaceuticals liable for more than $180 million in damages to former stockholders of Syntimmune, Inc., following the Court’s September 2024 ruling that Alexion breached its obligation to use commercially reasonable efforts (“CRE”) to develop Syntimmune’s lead product candidate after acquiring Syntimmune. The Court held that the objective, outward-facing definition of CRE in the parties’ merger agreement—which pegged the efforts required to those a hypothetical, similarly situated biotechnology company would take under the circumstances—did not leave room for Alexion to deprioritize and then terminate the development program at issue based on idiosyncratic, company-specific priorities. The award comes on top of $130 million previously awarded for Alexion’s failure to make a milestone payment when it became due.

The decision underscores the importance for sellers to secure strong post-closing “efforts” obligations in M&A agreements, including for life sciences companies in particular, as well as the general risks to buyers associated with these efforts obligations and the specific risks of deprioritizing or terminating development programs when bound by such obligations—even when supported by legitimate business justifications.

Background

In September 2018, Alexion acquired Syntimmune for $400 million upfront and up to $800 million in contingent milestone payments tied to the development and commercialization of ALXN1830, a monoclonal antibody designed to treat certain autoimmune diseases. The merger agreement required Alexion to use CRE for seven years to develop and commercialize ALXN1830. CRE were defined in the merger agreement by reference to what a comparable biopharmaceutical company would do when developing a similar product under similar circumstances, considering factors such as safety, efficacy, order of entry, and likelihood of regulatory approval.

In April 2020, Alexion shifted funding away from ALXN1830, citing COVID-19-related pressures and a focus on more advanced “priority” programs, including a goal of launching ten products by 2023. Because ALXN1830 was still in early stages, it could not meet that timeline. 

In July 2021, Alexion was acquired by AstraZeneca. AstraZeneca projected recurring synergies at $500 million per year from the acquisition, and the task of delivering on those synergies post-closing fell to Alexion’s leadership. Following a full portfolio review of Alexion’s drug programs, the company deprioritized the indications for which ALXN1830 had previously been under development in favor of two new indications that none of the company’s competitors were pursuing: thyroid eye disease (“TED”) and chronic antibody mediated rejection (“cAMR”).

In the fall of 2021, Alexion received interim Phase 1 clinical trial data that it believed reinforced questions about ALXN1830’s immunogenicity profile, as well as a report that a monkey had died after being dosed with ALXN1830 in a non-human primate study. In light of these developments, Alexion paused dosing in its clinical trial. While internal stakeholders and a consultant engaged to evaluate the program concluded that there was adequate evidence to continue ALXN1830’s development, Alexion did not resume dosing in its clinical trial. In its internal modeling, Alexion reduced ALXN1830’s probability of success in TED from 30% to 10%, and in cAMR from 34% to 10%. On December 14, 2021, Alexion terminated the ALXN1830 program altogether.

On behalf of Syntimmune’s former stockholders, Shareholder Representative Services LLC (“SRS”) brought suit against Alexion. The case proceeded to trial, after which the Court issued two post-trial rulings—one in September 2024, finding that Alexion had breached its obligations to use CRE, and the other in June 2025, addressing damages for the breach.

September 2024 Decision—Alexion Breached CRE Obligation

In its September 5, 2024 post-trial decision, the Court held that Alexion breached its obligation to use CRE to develop ALXN1830. Central to the Court’s ruling was the objective, outward-facing definition of CRE in the merger agreement, which was pegged not to the acquiring company’s internal business imperatives, but to the conduct expected of a reasonable biopharmaceutical company under similar circumstances. The Court emphasized that Alexion’s CRE obligation required it to go “beyond [the] buyer’s subjective good faith,” guided by factors defined in the merger agreement such as a product candidate’s “safety, efficacy, order of entry, [] likelihood of regulatory approval, and other advantages and disadvantages”—not by Alexion’s internal priorities, corporate goals, or subjective state of mind. 

Applying this framework, the Court concluded that Alexion’s decisions to shift funding away from ALXN1830 in April 2020, and to terminate the program in December 2021, breached Alexion’s CRE obligations because they were driven by unique rationales that would not lead typical biopharmaceutical companies to take similar measures.

With respect to the April 2020 funding reduction, the Court found that Alexion deprioritized ALXN1830 because it could not be launched quickly enough to be part of Alexion’s internal “10 by 2023” initiative—a corporate effort to launch ten new products by 2023. The Court found that “10 by 2023 was not a typical factor,” but rather an “idiosyncratic corporate initiative,” and a reduction in efforts “to accommodate such a unique program cannot satisfy an outward-facing efforts clause based on the typical efforts of similar companies.” The evidence reflected that Alexion’s competitors were moving forward with similar products around this time. According to the Court, absent its atypical corporate initiative, “a hypothetical company similar to Alexion, taking into account factors typically considered by such companies, would not have drastically reduced funding for a product like ALXN1830” in April 2020. However, the Court held that this funding reduction did not cause injury to Syntimmune’s former stockholders, at least above and beyond the injury from the program’s subsequent termination. 

With respect to the December 2021 termination of ALXN1830, the Court analyzed each of the factors in the merger agreement’s definition of CRE and concluded that termination of the program fell short of the efforts a hypothetical company would make under similar circumstances. For example, while there were ongoing questions about ALXN1830’s safety profile based on partial data, the record reflected that those questions “posed only a hypothetical risk,” and that “a hypothetical company using commercially reasonable efforts would respond by gathering further data . . . not by terminating the program.” Further, while ALXN1830 would have entered the market after other drugs for certain indications, the Court held this “did not mean ALXN1830 could not compete” in light of internal Alexion communications projecting that it could win market share, and ALXN1830 was projected to be the first entrant for both TED and cAMR. 

Of significance to the Court, while the ALXN1830 program had weaknesses, none of the factors in the definition of CRE changed materially between AstraZeneca’s July 2021 acquisition of Alexion and the December 2021 decision to terminate, and there was no evidence in the record that Alexion had been hesitant about the program before it was acquired. The Court determined that the real reason Alexion terminated the ALXN1830 program was its mandate to deliver on AstraZeneca’s promised $500 million in recurring synergies. Like the “10 by 2023” initiative, this was an idiosyncratic factor that would not be relevant to a typical, hypothetical company developing a similar product, and therefore did not support the commercial reasonableness of Alexion’s decision. 

The Court also resolved another dispute at issue—whether the first milestone in the merger agreement, successful completion of a Phase 1 clinical trial, had been satisfied. Parsing the merger agreement’s criteria for “successful completion” and considering other extrinsic evidence, the Court held that the milestone had been satisfied. Accordingly, it found Alexion liable for $130 million—the amount of the first milestone payment. 

The Court reserved its ruling on damages with respect to Alexion’s breach of its CRE obligation to a later date.

June 2025 Decision—Over $180 Million in Expectation Damages for CRE Breach 

On June 11, 2025, the Court awarded $180,944,915.32 in expectation damages to SRS on behalf of Syntimmune’s former stockholders, plus pre- and post-judgment interest that brings the expected total to approximately $220 million. 

In determining the appropriate measure of expectation damages, the Court followed a previous decision of the Court of Chancery from September 2024, Fortis Advisors LLC v. Johnson & Johnson, in concluding that damages should be “the expected value of the earnout payments at the time of breach.” The Court started with the amounts of the milestone payments for each of the merger agreement’s un-reached milestones, then probability-adjusted those amounts based on each milestone’s likelihood of achievement. The Court rejected Alexion’s argument that SRS was required to establish that Alexion “was more likely than not to achieve a given milestone to establish proximate cause,” because the injury was the “loss of expected value associated with milestone payments.” Thus, as long as any particular milestone had a nonzero chance of being achieved, Alexion’s breach—which brought each probability to zero—caused injury in the amount by which the expected value of the milestone payment was reduced. 

To determine the probability of success for each milestone, the Court considered several sources of information, including calculations by Syntimmune’s largest former stockholder valuing its rights to future distributions shortly after the acquisition, as well as opinions on probabilities proffered by expert witnesses in the case. Ultimately, the Court found Alexion’s own internal probability calculations most reliable. However, the Court used Alexion’s probability estimates from before it started clinical trials, rather than lower probability estimates from the fall of 2021, finding the latter to be less reliable given Alexion’s desire to terminate the program. The Court further discounted the expected milestone payments to present value using expected dates when each milestone could have been reached, leading to the $180.9 million damages figure. 

SRS also argued that Alexion had violated the “non-avoidance” clause of the merger agreement by intentionally obstructing the achievement of the post-closing milestones. Invoking Delaware’s prevention doctrine, SRS sought recovery of the full $800 million in contingent payments. The Court rejected this theory, holding that such an award would result in a windfall to the sellers and was not supported by the evidentiary record.

Finally, the Court declined to award attorneys’ fees under the merger agreement’s indemnification provision. Although the agreement permitted fee-shifting under certain circumstances, the Court found that SRS had failed to comply with the contractual requirement to provide timely written notice of its indemnification claim, and was therefore not entitled to fees.

Key Takeaways

• CRE clauses in M&A agreements that focus exclusively on objective factors will be interpreted objectively. Evolving corporate priorities—even those linked to reasonable business strategies—may not justify deprioritizing or terminating development programs.
• Strategic shifts driven by integration goals, synergy targets, or portfolio realignment may be inconsistent with efforts obligations if they fail to account for a product’s standalone potential.
• Program risks and weaknesses that are not sufficiently documented in contemporaneous records may not provide strong litigation support for program deprioritization or discontinuation. Post-hoc justifications will be met with skepticism, and the reasonableness of a buyer’s decision-making will be viewed in hindsight in any litigation.
• Courts faced with breaches of CRE obligations are not afraid to impose substantial damages based on the expected value of lost earnout payments even where probabilities of reaching milestones are low.

This informational piece, which may be considered advertising under the ethical rules of certain jurisdictions, is provided on the understanding that it does not constitute the rendering of legal advice or other professional advice by Goodwin or its lawyers. Prior results do not guarantee similar outcomes.