   IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE


FORTIS ADVISORS LLC,                      :
                                          :
                        Plaintiff,        :
                                          :
                v.                        :     C.A. No. 12147-VCS
                                          :
SHIRE US HOLDINGS, INC.,                  :
                                          :
                         Defendant.       :


                         MEMORANDUM OPINION


                         Date Submitted: June 2, 2017
                         Date Decided: August 9, 2017



Joel Friedlander, Esquire and Christopher Quinn, Esquire of Friedlander & Gorris,
P.A., Wilmington, Delaware and William S. Ohlemeyer, Esquire, Robin A. Henry,
Esquire and Jack Wilson, Esquire of Boies, Schiller & Flexner LLP, Armonk, New
York, Attorneys for Plaintiff.

Stephen C. Norman, Esquire and Jaclyn Levy, Esquire of Potter, Anderson &
Corroon LLP, Wilmington, Delaware; John D. Donovan, Jr., Esquire of Ropes &
Gray LLP, Boston, Massachusetts; and David B. Hennes, Esquire and Adam M.
Harris, Esquire of Ropes & Gray LLP, New York, New York, Attorneys for
Defendant.




SLIGHTS, Vice Chancellor
      Parties to a merger agreement dispute the right of the seller’s representative

to receive certain contingent post-closing payments. Plaintiff, Fortis Advisors LLC

(“Fortis”), in its capacity as Stockholders’ Agent for the former stockholders of

SARcode Bioscience Inc. (“SARcode”), alleges that Defendant, Shire US Holdings,

Inc. (“Shire”), has breached the provisions of the parties’ agreement by refusing to

pay so-called milestone payments that Fortis alleges are past due.

      Shire acquired SARcode pursuant to an Agreement and Plan of Merger by and

among Shire, Owl Merger Sub, Inc., SARcode Bioscience Inc., and Fortis Advisors

LLC, as Stockholders’ Agent Dated as of March 23, 2013 (the “Merger

Agreement”). At the time the parties entered into the Merger Agreement, SARcode

was in the process of developing and seeking regulatory approval for a drug,

Lifitegrast, that showed promise to treat the signs and symptoms of dry eye disease.

The Merger Agreement set forth a structure whereby the parties agreed to share the

risks and rewards of developing Lifitegrast by allocating merger consideration

between fixed up front payments and subsequent contingent payments that depended

on Shire’s ability to shepherd the drug through clinical trials and regulatory

approvals. This arrangement allowed SARcode to monetize its at-risk investment in

Lifitegrast while securing the promise of financial rewards if the drug continued to

be developed successfully and ultimately was commercialized. For Shire, the

milestone payments allowed it to hedge against future risks inherent in the drug’s


                                         1
development and commercialization by allocating the price it would ultimately pay

for SARcode between an initial upfront payment and subsequent payments that

would become due only if the defined milestones were reached per the agreed upon

schedule.

      In its Verified First Amended and Supplemental Complaint (the

“Complaint”), Fortis alleges that two of the designated milestones have been

achieved. This, in turn, has triggered Shire’s obligation to make $425 million in

milestone payments to former SARcode stockholders. Shire denies that the two

milestones have been met and has refused Fortis’ demands to make the milestone

payments. The Complaint asserts a single Count for breach of contract. Shire has

moved to dismiss the Complaint under Court of Chancery Rule 12(b)(6) on the

ground that Fortis’ claim of breach is premised on a construction of the Merger

Agreement that cannot be reconciled with its clear and unambiguous terms.

      After carefully considering the parties’ arguments, I conclude that Shire’s

proffered construction of the relevant provisions of the Merger Agreement is the

only reasonable construction. Because Fortis has failed to proffer a competing

reasonable construction of the operative language, it has failed to state a claim for

breach of contract. Accordingly, the motion to dismiss must be GRANTED.




                                         2
                          I. FACTUAL BACKGROUND

        The facts are drawn from allegations in the Complaint, documents integral to

the Complaint and matters of which the Court may take judicial notice.1 As it must

at this stage of the proceedings, the Court assumes all well-pled facts in the

Complaint are true.2

     A. The Parties

        Prior to the Merger Agreement, SARcode was a privately-held

biopharmaceutical company based in Brisbane, California. By the terms of the

Merger Agreement, Fortis serves post-merger as the “sole agent and attorney-in-

fact” for and on behalf of the former SARcode stockholders.

        Shire is a Delaware corporation and subsidiary of Shire PLC, a global

biopharmaceutical company, whose United States headquarters is located in

Lexington, Massachusetts. Shire acquired SARcode in March 2013.




1
  In re Crimson Exploration Inc. S’holder Litig., 2014 WL 5449419, at *8 (Del. Ch.
Oct. 24, 2014); In re Gardner Denver, Inc., 2014 WL 715705, at *2 (Del. Ch. Feb. 21,
2014). See also Reiter v. Fairbank, 2016 WL 6081823, at *5 (Del. Ch. Oct 18, 2016)
(“where a complaint quotes or characterizes some parts of a document but omits other parts
of the same document, the Court may apply the incorporation-by-reference doctrine to
guard against the cherry-picking of words in the document out of context.”).
2
    Crimson, 2014 WL 5449419, at *8.

                                            3
   B. SARcode’s Development of Lifitegrast

      Prior to the Shire acquisition, SARcode developed Lifitegrast as a treatment

for dry eye disease. Dry eye disease is diagnosed by an eye care professional based

on tests for objective signs of the disease, such as staining or tear break-up time

(signs), and subjective symptoms reported by patients, such as eye dryness or

discomfort (symptoms).

      SARcode developed Lifitegrast to Phase III clinical trials. Phase III clinical

trials are performed to test both efficacy and safety of drugs using larger patient

populations than are involved in Phase I and Phase II trials. Prior to the Merger

Agreement, SARcode had conducted a Phase II clinical trial and a Phase III clinical

trial (OPUS-1) that had successfully established the efficacy and safety of Lifitegrast

in reducing the signs of dry eye disease. These clinical trials demonstrated the

commercial potential of Lifitegrast and their results attracted the interest of several

pharmaceutical companies that sought to acquire development rights for the drug.

       A second Phase III clinical trial (OPUS-2) was designed and initiated in late

2012 to evaluate the efficacy, safety and tolerability of Lifitegrast. The OPUS-2

Study had two co-primary efficacy endpoints that were specified in the OPUS-2

Study Protocol. One efficacy endpoint, the co-primary sign endpoint, was designed

to evaluate Lifitegrast’s effectiveness in treating the signs of dry eye disease while

the other efficacy endpoint, the co-primary symptom endpoint, would evaluate the


                                          4
drug’s effectiveness in treating the symptoms of dry eye disease. The OPUS-2 Study

was underway when Shire approached SARcode with an interest in acquiring the

company and, by extension, Lifitegrast. Shire and SARcode began negotiating the

Merger Agreement in early 2013.

   C. The Merger Agreement

      At the time SARcode and Shire entered into the Merger Agreement, the

OPUS-2 Study was ongoing and Lifitegrast was many steps away from

commercialization. To share the risks and rewards of further development of the

drug, the parties included in the Merger Agreement a number of additional payments

to SARcode stockholders that were contingent upon the drug successfully achieving

certain defined milestones. These milestones are divided into several categories,

described in § 9.1 of the Merger Agreement, only one of which is relevant to the

current dispute. That category of milestone payments, the “Base Case Milestones,”

is triggered by the occurrence of the OPUS-2 Study Endpoint Achievement Date

(the “Achievement Date”).      When the Achievement Date is reached, former

SARcode stockholders are entitled to receive $175 million for the OPUS-2

Successful Completion Milestone.

      Following achievement of the OPUS-2 Successful Completion Milestone and

regulatory approval of the drug, Shire is required to make an additional $250 million

payment for the Base Case Approval Milestone. If certain revenue targets are met


                                         5
following commercialization, former SARcode stockholders would be eligible for

another $100 million for the Base Case Revenue Milestone. Fortis alleges that it is

currently due the OPUS-2 Successful Completion Milestone Payment and the Base

Case Approval Milestone Payment.

      As noted, all of the Base Case Milestones are contingent upon the occurrence

of the Achievement Date. That term is defined in the Merger Agreement as follows:

      “OPUS-2 Study Endpoint Achievement Date” shall be deemed to occur
      upon receipt by or on behalf of Parent, or one of its Affiliates,
      Licensees, or other transferees, of audited final tables, figures and
      listings from the OPUS-2 Study (x) that demonstrate that both
      components of the co-primary efficacy endpoints of the OPUS-2 Study
      as specified in the OPUS-2 Study Protocol have been achieved and (y)
      which do not, in a significant and clinically meaningful respect, result
      in a materially less favorable safety/tolerability profile (e.g., treatment
      emergent adverse events, Serious Adverse Effects, etc.), taken as a
      whole, for the Product than for corresponding data generated for the
      Product in the OPUS-1 Study, which less favorable safety/tolerability
      profile would reasonably be expected to significantly reduce
      anticipated Product Sales (it being understood that such determination
      pursuant to this clause (y) shall be made in accordance with
      Section 9.3).3

      If the Achievement Date is reached, the former SARcode stockholders are

eligible to receive the Base Case Milestones payments at various designated

intervals defined, in relevant part, as:



3
 Opening Br. of Shire US Hldgs., Inc. in Supp. of its Mot. to Dismiss the Verified First
Am. and Supplemental Compl. (“Opening Br.”), Ex. 1 (“Merger Agreement”) §1.1.



                                           6
        (a) Base Case Milestones. If the OPUS-2 Study Endpoint Achievement
         Date shall have occurred:

        (i) OPUS-2 Success. Within ten (10) business days following the
         OPUS-2 Study Endpoint Achievement Date (the “OPUS-2 Successful
         Completion Milestone”), Parent shall notify the Stockholders’ Agent
         that the OPUS-2 Successful Completion Milestone has been satisfied
         and shall, within twenty (20) business days following the date of
         achievement of the OPUS-2 Successful Completion Milestone, pay or
         cause to be paid in accordance with Section 9.2(b), $175,000,000 (such
         amount, the “OPUS-2 Successful Completion Milestone Payment”);

        (ii) Base Case Regulatory Approval. Within ten (10) business days
         following receipt by or under the authority of Parent (or any of its
         Affiliates, Licensees or other transferee) of the first Regulatory
         Approval in the United States for a Product for the Covered Indication
         with the co-primary Sign and Symptom specified in the OPUS-2 Study
         Protocol included in the “Indications and Usage” section of the label of
         the Product (the “Base Case Approval Milestone”), Parent shall notify
         the Stockholders’ Agent that the Base Case Approval Milestone has
         been satisfied and shall, within twenty (20) business days following the
         date of achievement of the Base Case Approval Milestone, pay or cause
         to be paid in accordance with Section 9.2(b), $250,000,000 (such
         amount, the “Base Case Approval Milestone Payment”) . . . .

        (iii) Base Case Revenue Milestone. If the Base Case Approval
         Milestone has been achieved, then within sixty (60) days following the
         first time on which Product Sales within any four consecutive calendar
         quarters exceed $750,000,000 (the “Base Case Revenue Milestone”),
         Parent shall notify the Stockholders’ Agent that the Base Case Revenue
         Milestone has been satisfied and shall, within five (5) business days
         after such notification, pay or cause to be paid in accordance with
         Section 9.2(b), $100,000,000 (such amount, “Base Case Revenue
         Milestone Payment”).4




4
    Merger Agreement § 9.1(a)(i)–(iii).

                                            7
          The Merger Agreement defines several other terms that appear in the

definition of Achievement Date and are relevant to the determination of whether the

Achievement Date has occurred. The term “OPUS-2 Study” is defined as:

          “OPUS-2 Study” means the Phase III clinical trial for Lifitegrast to be
          conducted in accordance with the OPUS-2 Study Protocol, as further
          described on Schedule C.5

The OPUS-2 Study Protocol is defined as:

          “OPUS-2 Study Protocol” means the Company’s Protocol Number
          1118-Dry-300, dated November 6, 2012, as amended from time to time
          in accordance with this Agreement.6

          Importantly, the Merger Agreement separately defines the prior Phase III

clinical trial, the OPUS-1 Study, as:

          “OPUS-1 Study” means the Phase III clinical trial for Lifitegrast
          conducted by or on behalf of the Company in accordance with the
          Company Protocol Number 1118-KCS-200, dated May 27, 2011, as
          amended August 5, 2011.7

          Both parties were represented by sophisticated counsel in connection with the

negotiation, drafting and execution of the Merger Agreement. As noted, the Merger

Agreement was finalized on March 23, 2013.




5
    Merger Agreement § 1.1
6
    Id.
7
    Id.

                                            8
     D. Regulatory Approval of Lifitegrast

         Following the Merger Agreement, and at the completion of the OPUS-2 Study

in November 2013, Shire informed Fortis that the OPUS-2 Study had achieved the

co-primary symptom endpoint but had failed to achieve the co-primary sign

endpoint.     In a December 5, 2013 press release, Shire publicly reported that

“Lifitegrast did not meet the pre-specified co-primary endpoint for the sign of

inferior corneal staining score (change from baseline to Week 12) using fluorescein

staining compared with placebo (p-value = 0.6186).”8

         Shire designed and initiated an additional Phase III clinical trial called the

OPUS-3 Study in November 2014.              In early 2015, Shire filed a New Drug

Application (“NDA”) with the United States Food and Drug Administration

(“FDA”) for Lifitegrast. The data Shire submitted to the FDA included evidence

from the OPUS-2 Study, the OPUS-1 Study and other previous trials. In October

2015, the FDA issued a complete response letter in which it declined to approve

Lifitegrast based on the data submitted in the NDA and requested additional data

demonstrating the efficacy of the drug to treat the symptoms of dry eye disease.

         On October 16, 2015, apparently believing that the Achievement Date had

occurred, Fortis wrote to Shire to inquire whether it intended to make the



8
    Pl. Fortis Advisor LLC’s Verified First Am. and Supplemental Compl. (“Compl.”) ¶ 21.

                                            9
$175 million OPUS-2 Successful Completion Milestone Payment. Later that month,

on October 27, 2015, Shire announced that the OPUS-3 Study had been completed

and the data from that clinical trial showed that Lifitegrast had achieved the symptom

endpoint, data which would be provided to the FDA in a refiled NDA. Shire

responded to Fortis’ inquiry regarding the OPUS-2 Successful Completion

Milestone Payment on November 12, 2015, stating that none of the Base Case

Milestones had been met (or ever would be met) because the Achievement Date had

not occurred given that the OPUS-2 Study had failed to meet the sign co-primary

endpoint.

      In February 2016, Shire refiled its NDA with the FDA and included the

OPUS-3 Study data in its application. With this data in hand, on July 11, 2016, the

FDA approved Lifitegrast, under the brand name Xiidra, to treat the signs and

symptoms of dry eye disease. The FDA also approved the language and content of

the Xiidra label that had been proposed by Shire. On July 12, 2016, the label

appeared on the Shire website and showed graphical representations of the results

from the clinical trials submitted to the FDA. Following approval by the FDA of

Lifitegrast under the brand name Xiidra, Fortis alleged that the former SARcode

stockholders were now due the Base Case Approval Milestone Payment in addition

to the previously earned OPUS-2 Successful Completion Milestone Payment.




                                         10
   E. Procedural History

      On March 29, 2016, Fortis filed its Verified Complaint alleging a breach of

the Merger Agreement. Shire moved to dismiss the complaint on April 19, 2016.

On July 29, 2016, with briefing on the motion to dismiss complete, Fortis moved to

amend the complaint to update its allegations with facts relating to the FDA approval

of Lifitegrast and the approval of the Xiidra label, which Fortis alleged entitled the

former SARcode stockholders to the Base Case Approval Milestone Payment. Fortis

opposed the motion. After a hearing on the motion to amend, the Court granted

Fortis leave to file its amended complaint which it did on November 8, 2016.

      The Complaint sets forth a single count of breach of contract. Shire moved to

dismiss on December 9, 2016, arguing that Fortis’ reliance upon an unreasonable

interpretation of the plain and unambiguous language of the Merger Agreement as

the basis for its breach of contract claim warranted dismissal under Court of

Chancery Rule 12(b)(6) for failure to state a claim.

                                  II. ANALYSIS

   While the parties agree that the language of the Merger Agreement is clear and

unambiguous, they disagree on how that language should be interpreted. Shire’s

motion to dismiss can be granted at this procedural stage only if its proffered

interpretation stands apart as the lone reasonable construction of the Merger

Agreement. After carefully considering both parties’ proffered constructions of the


                                         11
relevant provisions of the Merger Agreement, for the reasons that follow, I conclude

that Shire’s construction is reasonable and that Fortis’ construction is unreasonable.

      A. Motion to Dismiss Standard

         The standards governing this motion to dismiss for failure to state a claim

under Rule 12(b)(6) are now well settled:

         (i) all well-pleaded factual allegations are accepted as true; (ii) even
         vague allegations are ‘well-pleaded’ if they give the opposing party
         notice of the claim; (iii) the Court must draw all reasonable inferences
         in favor of the non-moving party; and (iv) dismissal is inappropriate
         unless the ‘plaintiff would not be entitled to recover under any
         reasonably conceivable set of circumstances susceptible of proof.’9

         Questions involving contract interpretation can be answered as a matter of law

on a motion to dismiss “[w]hen the language of a contract is plain and

unambiguous.”10 Dismissal of a contract dispute under Rule 12(b)(6) is proper,

however, “only if the defendants’ interpretation is the only reasonable construction

as a matter of law.”11 If the Plaintiff has offered a reasonable construction of the

contract, and that construction supports the claims asserted in the complaint, then




9
    Savor, Inc. v. FMR Corp., 812 A.2d 894, 896–97 (Del. 2002) (citations omitted).
10
     Capital Corp. v. GC Sun Hldgs., L.P., 910 A.2d 1020, 1030 (Del. Ch. 2006).
11
     VLIW Tech., LLC v. Hewlett-Packard Co., 840 A.2d 606, 615 (Del. 2003).

                                             12
the Court must deny the motion to dismiss even if the defendant’s construction is

also reasonable.12

      B. The Parties’ Competing Constructions of the Operative Language

         By the clear terms of the Merger Agreement, the Base Case Milestone

payments are not due unless the Achievement Date has occurred.13 Under Fortis’

interpretation of the Merger Agreement, the clinical data that may be considered

when determining whether both co-primary efficacy endpoints have been achieved

for purposes of assessing whether the Achievement Date has occurred is not limited

to the OPUS-2 Study, but can incorporate data from prior clinical trials as well. As

Fortis points out, the sign endpoint was achieved in the OPUS-1 Study. The

symptom endpoint was achieved in the OPUS-2 clinical trial. Therefore, according

to Fortis, the Achievement Date has occurred. Once that occurred, Fortis argues it

was due the OPUS-2 Successful Completion Milestone Payment. And because

Lifitegrast has now received regulatory approval following the Achievement Date,

Fortis claims that Shire must also make the Base Case Approval Milestone Payment.




12
  See Vanderbilt Income and Growth Assocs., L.L.C. v. Arvida/JMB Managers, Inc., 691
A.2d 609, 613 (Del. 1996) (“On a motion to dismiss for failure to state a claim, a trial court
cannot choose between two differing reasonable interpretations of ambiguous
documents.”).
13
     Merger Agreement § 9.1(a).



                                             13
         Shire, on the other hand, argues that the Achievement Date has not occurred,

which forecloses Fortis from claiming that either the OPUS-2 Successful

Completion Milestone Payment or the Base Case Approval Milestone Payment are

due.14 Under Shire’s construction of the definition of Achievement Date, the clinical

data must demonstrate that both sign and symptom co-primary efficacy endpoints

were achieved in a specific clinical trial, the OPUS-2 Study. Because the OPUS-2

Study did not establish the sign efficacy endpoint, Shire contends that the

Achievement Date did not and never will occur.

      C. Shire’s Construction of the Merger Agreement is Reasonable

         In support of its construction, Shire begins by pointing to the definition of

Achievement Date which occurs “upon receipt . . .of audited final tables, figures and

listings from the OPUS-2 Study (x) that demonstrate that both components of the

co-primary efficacy endpoints of the OPUS-2 Study as specified in the OPUS-2

Study Protocol have been achieved . . .”15 Shire notes that this definition explicitly

requires that the data triggering the occurrence of the Achievement Date come “from



14
   Although not directly at issue in this action, Shire’s construction would also forever
preclude payment of the Base Case Revenue Milestone Payment regardless of Shire’s
ability to hit the defined revenue targets. This is because, under Shire’s construction, the
Achievement Date has not occurred and will never occur. As noted, the occurrence of the
Achievement Date is a precondition to all of the Base Case Milestones payments, including
the Base Case Revenue Milestone.
15
     Merger Agreement § 1.1.

                                            14
the OPUS-2 Study.” The OPUS-2 Study, in turn, is defined as “the Phase III clinical

trial for Lifitegrast to be conducted in accordance with the OPUS-2 Study Protocol,

as further described on Schedule C.”16 The parties separately defined the OPUS-1

Study to mean “the Phase III clinical trial for Lifitegrast conducted by or on behalf

of the Company in accordance with the Company Protocol Number 1118-KCS-200,

dated May 27, 2011, as amended August 5, 2011.”17

           According to Shire, by separately defining the OPUS-1 and OPUS-2 studies,

the Merger Agreement makes clear that the studies and the data from each study are

distinct. And by expressly linking the Achievement Date to the receipt of data “from

the OPUS-2 Study,” and no other study, Shire argues that the only reasonable

construction of the definition of Achievement Date is that the OPUS-2 Study data is

the exclusive data relevant to determining whether the Achievement Date has

occurred.

           Moreover, Shire contends that any results reached in the OPUS-2 Study must

be statistically significant in order to “achieve” the co-primary endpoints. In this

regard, Shire points to the OPUS-2 Study Protocol which specifies that “[s]tatistical

significance is required for both the sign and the symptom for treatment success.”18


16
     Id.
17
     Id.
18
     Opening Br., Ex. 2 (“OPUS-2 Study Protocol”) at 73.

                                            15
As Shire highlights, the OPUS-2 Study Protocol goes on to provide that statistical

significance for the co-primary sign and symptom endpoints was a “p-value” of less

than or equal to 0.05.19

         If the Merger Agreement is construed to require that the determination of

whether the Achievement Date has occurred be assessed by reference to OPUS-2

Study data only, and that the OPUS-2 Study data must reach statistical significance

in order to “achieve” the co-primary endpoints, Fortis’ demand for payment of the

Successful Completion Milestone Payment and the Base Case Approval Milestone

Payment fizzles. This is because the Merger Agreement clearly provides that to

reach the Achievement Date, “both components of the co-primary efficacy endpoints

of the OPUS-2 Study as specified in the OPUS-2 Study Protocol [must] have been

achieved . . .”20 With this construction in mind, Shire maintains that the payments

Fortis has demanded in this litigation are not due and will never become due.

         Shire’s interpretation of the Merger Agreement is reasonable. By its clear

terms, the definition of the Achievement Date requires that data “from the OPUS-2

Study” demonstrate that the sign and symptom co-primary efficacy endpoints have



19
  Id. at 71, 73. As explained in the Complaint, a “p-value is the probability of obtaining a
result at least as extreme as the result that was actually observed when the then null
hypothesis (in this case, that there is no relationship between Lifitegrast and the observed
symptom or sign) is true.” Compl. ¶ 21.
20
     Merger Agreement § 1.1 (emphasis supplied).

                                            16
been achieved. No other data is referenced in the definition and no other provision

of the Merger Agreement suggests that the parties intended other data to be relevant

to the determination of whether the Achievement Date has occurred. Shire’s

construction harmonizes and gives meaning to all of the provisions in the Merger

Agreement, including those that identify and define the OPUS-1 Study as separate

and distinct from the OPUS-2 Study. It is also reasonable to construe the definition

of Achievement Date as requiring that results from the OPUS-2 Study be statistically

significant given that the OPUS-2 Study Protocol, which lays out how the OPUS-2

study is to be conducted, requires statistically significant results.21

         Having determined that Shire’s proffered construction is reasonable, however,

does not end the inquiry. Shire’s construction cannot prevail on a motion to dismiss

if Fortis’ construction of the same provisions is also reasonable.

      D. Fortis’ Construction is Unreasonable

         Fortis maintains that the Merger Agreement makes clear that data from

clinical trials other than the OPUS-2 Study can be considered when determining

whether the Achievement Date has occurred. This construction rests on three

principal arguments. First, Fortis contends that the absence of any language

expressly excluding data from clinical trials other than the OPUS-2 Study in the


21
     OPUS-2 Study Protocol at 73 (“Statistical significance is required for both the sign
and the symptom for treatment success.”).

                                            17
definition of Achievement Date reflects the parties’ intent that such data could and

should be considered when determining whether the Achievement Date has

occurred. Indeed, according to Fortis, in order for Shire’s construction of the

operative language to make sense, the Court would have to insert additional

language into the definition of Achievement Date. Specifically, Fortis argues that

the following bracketed and bold language would need to be added:

      “OPUS-2 Study Endpoint Achievement Date” shall be deemed to occur
      upon receipt . . . of audited final tables, figures and listings from the
      OPUS-2 Study (x) that demonstrate that both components of the co-
      primary efficacy endpoints of the OPUS-2 Study as specified in the
      OPUS-2 Study Protocol have been achieved [in the OPUS-2 clinical
      trial relying only on audited final tables, figures and listings from
      the OPUS-2 clinical trial and without reliance on any data from any
      other trial or study] . . .

Fortis contends that “without the addition of this language not contained in the actual

text of the Merger Agreement, the OPUS-2 Study Endpoint Achievement Date

simply does not have the limitation that Shire seeks to impose.”22

      Second, Fortis argues that not only does the definition of Achievement Date

not explicitly exclude data from prior studies, it makes clear that the parties did, in

fact, contemplate that data from other clinical trials would be included. Specifically,

Fortis points to the definition of OPUS-2 Study, a term incorporated in the definition




 Pl. Fortis Advisors LLC’s Mem. in Opp’n to Shire’s Mot. to Dismiss the Verified First
22

Am. and Supplemental Compl. (“Answering Br.”) 34.

                                          18
of Achievement Date, and argues that while the OPUS-2 Study Protocol is defined

separately from the OPUS-1 Study Protocol, the contractual language makes clear

that a Phase III clinical trial need only be conducted “in accordance with” the OPUS-

2 Study Protocol in order to constitute part of the OPUS-2 Study as referenced in the

Achievement Date definition.23 According to Fortis, in order “to be in accordance

with” the OPUS-2 Study Protocol, the clinical trial need not be identical to the

OPUS-2 Study, but rather need only be conducted in “a way that agrees with or

follows” the OPUS-2 Study Protocol.24 Furthermore, Fortis argues that while Shire

highlights the use of the definite article “the” in the definition of OPUS-2 Study,25

as in “the Phase III clinical trial,”26 the Merger Agreement itself indicates that, when




23
     Merger Agreement § 1.1 (defining OPUS-2 Study).
24
     Answering Br. 20 n 7 (citing Merriam-Webster’s Dictionary                         Online,
https://www.merriam webster.com/dictionary/in%20 accordance%20with.).
25
   Specifically, Shire argues that “[t]he use of the definite article—‘the’—means that the
term that follows (i.e., ‘Phase III clinical trial’) is a ‘unique or a particular member of its
class.’”) Opening Br. 32 (citing to Merriam-Webster Dictionary Online,
http://www.merriamwebster.com/dictionary/the). In this way, Shire contends that “[t]he
word ‘the’ makes clear that the parties were referring to one particular clinical trial of
Lifitegrast.” id. (emphasis in original).
26
   Merger Agreement §1.1 (“OPUS-2 Study” means the Phase III clinical trial for
Lifitegrast to be conducted in accordance with the OPUS-2 Study Protocol, as further
described on Schedule C.)

                                              19
construing its provisions, “the singular . . . shall include the plural . . .”27 Thus, Fortis

would read that provision as stating “the Phase III clinical trials.”28

         Third, Fortis argues that once the Xiidra label was approved by the FDA and

publicly made available on Shire’s website, Fortis was able to confirm that, contrary

to Shire’s representations, the OPUS-2 Study had, in fact, achieved both co-primary

efficacy endpoints. Indeed, according to Fortis, the FDA approval and the contents

of the Xiidra label confirm that the former SARcode stockholders are entitled to an

additional Base Case Milestone Payment as well as providing further evidence that

both co-primary efficacy endpoints have in fact been achieved for purposes of

determining whether the previously earned milestone payments are due.29

         Fortis’ construction of the Merger Agreement is unreasonable. As for its first

argument—that the parties’ intent to allow data from the OPUS-1 Study to be

considered in the definition of Achievement Date can be gleaned from the absence

of any express exclusion of such data from the definition—Fortis’ proffered


27
     Merger Agreement § 11.9(b).
28
   The definition of “OPUS-2 Study” would then read: “OPUS-2 Study” means the Phase
III clinical trials for Lifitegrast to be conducted in accordance with the OPUS-2 Study
Protocol, as further described on Schedule C.
29
   Fortis argues that when the Xiidra product label was released by Shire it “contain[ed]
data sufficient to show that the OPUS-2 clinical trial produced data demonstrating the
efficacy of the sign and symptom endpoints such that the [Achievement Date] occurred”
because “[i]t notes that a ‘larger reduction . . . favoring Xiidra was observed in three of the
four studies.’” Answering Br. 22.

                                              20
construction turns a “four corners” construction of the definition inside out. The

canon of construction expresio unius est exclusio alterius—to express or include one

thing implies the exclusion of the other—seems particularly apt here.30 The fact that

the parties decided separately to define the OPUS-1 and OPUS-2 studies as different

Phase III clinical trials, and then designated the data “from the OPUS-2 Study” as

relevant to the determination of whether the Achievement Date had occurred, clearly

and unambiguously reflects an intent that only that data should be considered when

assessing whether both the sign and symptom co-primary efficacy endpoints had

been achieved. Indeed, as Shire points out, only Fortis’ proffered construction

requires the insertion of language not present in the Merger Agreement in order for

the contract to get Fortis where it wants to go. Specifically, the Court would have

to insert the bold and bracketed text in order for Fortis’ construction to be reasonable:

       upon receipt . . . of audited final tables, figures and listings from the
       OPUS-2 Study [or the OPUS-1 Study] (x) that demonstrate that both
       components of the co-primary efficacy endpoints of the OPUS-2 Study
       as specified in the OPUS-2 Study Protocol have been achieved




30
  Shintom Co., Ltd. V. Audiovox Corp., 888 A.2d 225, 230 (Del. 2005). To require that
parties to a contract expressly exclude all that they intend to exclude, when the relevant
contact language is expressly inclusive, would present a challenge to scriveners that would
be extraordinarily difficult, if not impossible, to meet. Here, the express reference to the
OPUS-2 Study data within the definition of Achievement Date would have been
unnecessary and, indeed, confusing if the parties had intended for the definition to include
other, unspecified data as well.

                                            21
         Of course, this new language that Fortis would have the Court blue-pencil into

the Merger Agreement ignores that the Merger Agreement both defines the OPUS-

2 Study as a separate Phase III clinical trial from the OPUS-1 Study and requires

that the “audited final tables, figures and listings” that demonstrate both co-primary

efficacy endpoints have been achieved come “from the OPUS-2 Study.”31 By

ignoring these provisions, Fortis’ proffered construction requires the Court to render

them superfluous—something Delaware courts do not do when engaging in contact

construction.32

         Fortis’ second argument—that the definition of OPUS-2 Study clearly and

unambiguously allows for data from other clinical trials to be used to satisfy the

Achievement Date—is likewise unpersuasive. To support this contention, Fortis


31
     Merger Agreement § 1.1.
32
   See O’Brien v. Progressive Northern Ins. Co., 785 A.2d 281, 287 (Del. 2001). For the
first time at oral argument, Fortis raised a new argument that the phrase “from the OPUS-
2 Study” is merely a “temporal trigger” that identifies the time at which the determination
of whether the OPUS-2 Endpoint Achievement Date has occurred is to be made. Oral Arg.
on Def.’s Mot. to Dismiss the Verified First Am. and Supplemental Compl. (“Oral Arg.
Tr.”) 37–38. This argument was not previously raised in Fortis’ briefing and is therefore
waived. See Emerald P’rs v. Berlin, 2003 WL 21003437, at *43 (Del. Ch. Apr. 28, 2003)
(“It is settled Delaware law that a party waives an argument by not including it in its
brief.”). Even if the argument were not waived, however, I would reject it in any event.
The unambiguous language of the Merger Agreement clearly states that the “audited final
tables, figures, and listings from the OPUS-2 Study” must “demonstrate that both
components of the co-primary efficacy endpoints of the OPUS-2 Study as specified in the
OPUS-2 Study Protocol have been achieved . . .” Nothing in this language suggests that
the parties intended it to mean that the receipt of OPUS-2 Study data would act simply as
a “temporal trigger” after which data from any and all other Phase III clinical trials will be
evaluated to determine whether both endpoints had been achieved.

                                             22
argues that, while the OPUS-2 Study is defined as “the Phase III clinical trial for

Lifitegrast to be conducted in accordance with the OPUS-2 Study Protocol . . .,” the

Merger Agreement makes clear that “the singular . . . shall include the plural” and,

therefore, it is reasonable to include other unspecified Phase III clinical trials within

that definition.33 Fortis correctly quotes Section 11.9(b) but shoots well wide of the

mark in arguing that it somehow supports its construction of Shire’s milestone

payment obligations.

         Even when one changes singular terms to plural within the definition of

OPUS-2 Study, the language from that definition still does not support the notion

that data from multiple clinical trials should be considered when assessing whether

both co-primary efficacy endpoints have been achieved as contemplated in the

definition of Achievement Date. The OPUS-2 Study is clearly defined as a clinical

trial that is “to be conducted.”34      Applying the Merger Agreement’s rule of

construction to change the singular terms to plural, the definition of OPUS-2 Study

would read “the Phase III clinical trials for Lifitegrast to be conducted in accordance

with the OPUS-2 Study Protocol . . .”35 The OPUS-1 Study, however, had already

been conducted by the time the Merger Agreement was executed. That fact is


33
     Merger Agreement § 11.9(b).
34
     Merger Agreement § 1.1.
35
     Id. (emphasis added).

                                           23
evident from the definition of OPUS-1 Study, which is “the Phase III clinical trial

for Lifitegrast conducted by or on behalf of the Company in accordance with the

Company Protocol Number 1118-KCS-200 . . .”36                 The Merger Agreement,

therefore, clearly and unambiguously differentiates between the OPUS-1 Study that

had been conducted and the OPUS-2 Study (and perhaps other Phase III trials) that

were to be conducted. Adding plural terms to the definition of OPUS-2 Study does

nothing to change this temporal reality.37

         Fortis engages in even more strained interpretive gymnastics when it argues

that any data from any clinical trial conducted “in accordance with” the OPUS-2

Study Protocol can be considered when determining whether the Achievement Date

has occurred. This construction just outright ignores that the OPUS-1 and OPUS-2

studies were conducted pursuant to separately defined protocols. Moreover, even if

the OPUS-1 Study was conducted “in accordance with” the OPUS-2 Study Protocol,

a point Shire disputes at full throat, Fortis simply cannot explain how that clinical

trial could fit within the definition of Achievement Date when that term is defined



36
     Id. (emphasis added).
37
  This, of course, assumes that the context here requires singular terms to be converted to
plural. The rule of construction upon which Fortis relies within § 11.9(b) applies only
“wherever the context requires.” Given that the OPUS-1 and OPUS-2 studies were both
separately defined in the Merger Agreement, and the provisions at issue here are clear and
unambiguous as drafted, it is difficult to discern anything about this “context” that
“requires” a conversion of terms from singular to plural.

                                            24
to include only clinical trials “to be conducted” in accordance with the OPUS-2

Study Protocol. To reiterate, the OPUS-1 Study had already been conducted at the

time of the Merger Agreement, a fact that is undisputed and is, in any event, clear

from the definition of the OPUS-1 Study in the Merger Agreement. For these

reasons, it is unreasonable to construe the definition of OPUS-2 Study as

encompassing data from multiple clinical trials in addition to the OPUS-2 Study.38

      As for Fortis’ third and final basis to argue that the Achievement Date has

occurred—that the Xiidra label provides irrefutable evidence the OPUS-2 Study did

achieve both co-primary efficacy endpoints—the argument ignores that the Merger

Agreement clearly and unambiguously requires that the study data achieve statistical

significance. And it glosses over the fact that Fortis has not pled that the Xiidra label

showed a statistically significant result for the OPUS-2 Study. To get around the

reference to statistical significance in the OPUS-2 Study Protocol, Fortis contends

that the reference to the OPUS-2 Study Protocol within the definition of the

Achievement Date is simply intended to identify the co-primary efficacy endpoints


38
   I note that the Complaint is devoid of any well-pled allegations that would allow the
Court reasonably to infer that the OPUS-1 Study, which was conducted in accordance with
Company Protocol Number 1118-KCS-200, dated May 27, 2011, as amended August 5,
2011, was conducted “in accordance with” the OPUS-2 Study Protocol, a separately
defined protocol designed well after the OPUS-1 Study. The Complaint makes no effort
to compare the two protocols factually, scientifically or otherwise. Fortis’ “in accordance
with” construction, therefore, appears to be of post-pleading vintage. In any event, the
construction cannot be squared with the clear and unambiguous terms of the contract and
must be rejected for that reason alone.

                                            25
as defined in the OPUS-2 Study Protocol; it does not, however, reflect an intent to

incorporate all aspects of the OPUS-2 Study Protocol, including the requirement of

statistical significance, within the Achievement Date definition. To characterize this

construction as fanciful would be charitable.

       In advancing its proffered construction, Fortis would have the Court ignore

that the OPUS-2 Study Protocol, in its entirety, is an attached schedule to the Merger

Agreement and is thereby expressly incorporated as part of the entire agreement.39

By incorporating the entire OPUS-2 Study Protocol into their agreement without

conditions or limitations, the parties unambiguously reflected their intent that all

aspects of the protocol, including its detailed specifications for statistical

significance, would become elements of their contract, equally as essential as any

other element.40 Fortis’ attempt to read out of the OPUS-2 Study Protocol the


39
   See Merger Agreement, Schedule C. At § 11.4 of the Merger Agreement, the parties
agreed that the schedules to the Merger Agreement were incorporated as part of the parties’
entire agreement. See Merger Agreement § 11.4(a)(i) (“This Agreement and the documents
and instruments delivered pursuant hereto, including the exhibits hereto, the Company
Disclosure Schedule and the other schedules hereto, and the Escrow Agreement:
(i) together constitute the entire agreement among the parties with respect to the subject
matter hereof . . .”).
40
  See Realty Growth Inv. Council of Unit Owners of Pilot Pointe, 453 A.2d 450, 454 (Del.
1982) (holding that documents incorporated by reference into a contract must be
considered by the court when discerning the parties’ intent); Green Plains Renewable
Energy, Inc. v. Ethanol Hldg. Co., LLC, 2015 WL 590493, at *6 (Del. Super. Ct. Feb. 9,
2015) (holding that the operative contract’s express “identification of all schedules to the
[contract] as being part of the ‘entire agreement’ is sufficient to satisfy the incorporation
by reference standard.”); accord Kerly v. Battaglia, 1990 WL 199507, at *4 (Del. Super.
Ct. Nov. 21, 1990) (noting that parties may limit the incorporation by reference of other
                                             26
provisions that undermine its construction of the Achievement Date definition

cannot be countenanced.

       Moreover, as noted, Fortis has not attempted to plead that the Xiidra label

shows that the co-primary efficacy endpoints were achieved in a statistically

significant manner. Rather, it construes the data on the label as revealing only that

the OPUS-2 Study demonstrated that the reduction for the sign endpoint was

favorable for Lifitegrast as compared to the placebo.41 Fortis contends that this

means that the sign endpoint was “achieved” in the OPUS-2 Study if one construes

the term “achieved,” an undefined term, in accordance with its ordinary dictionary

meaning. According to Fortis, as used in the operative language, “achieve” means

“to reach or attain”; it does not mean or require that the study produce statistically




agreements by designating “only certain provisions” of the other agreement to be
incorporated into the contract at issue).
41
   Fortis argues that Shire has denied it access to the actual data from the OPUS-2 Study
even though it is contractually entitled to this data. According to Fortis, the actual data
would allow it to determine if the results in the OPUS-2 Study were, in fact, statistically
significant. Yet this is not the breach of contract claim Fortis brought in this action. If
Fortis believes that it has been denied access to information that it is entitled, by contract,
to receive, it may bring that claim and Shire may raise its defenses. The fact that the
information has not been produced thus far, however, does not and cannot alter the fact
that the clear and unambiguous terms of the Merger Agreement do not support the breach
of contract claim that Fortis has asserted. As an aside, I cannot help but observe that it
would be remarkable if the OPUS-2 Study actually did achieve statistically significant
results when Shire reported to the FDA in a NDA, against its interest, that the study did not
meet the co-primary Sign endpoint with statistical significance. See Transmittal Aff. of
Jaclyn C. Levy, Ex. A at 37 (the NDA was incorporated by reference in the Complaint).

                                              27
significant results. This construction, of course, ignores the details of the OPUS-2

Study Protocol where the parameters of the study are set forth in detail, including

the population of patients to be tested, the number of study participants and how they

would be sourced and screened, the methodology by which participants would be

assigned to the Lifitegrast or placebo cohorts, the mechanics for the testing

procedures and, importantly, the manner by which the outcomes would be evaluated

for statistical significance. Under these circumstances, there is simply no room to

embed a general dictionary definition for “achieve” within the definition of

Achievement Date when the detailed ingredients of the OPUS-2 Study Protocol fully

occupy the space.42

                                 III. CONCLUSION

      To state a claim for breach of contract, Fortis must proffer a reasonable

construction of the operative terms of the Merger Agreement that would support its

claim of breach. It has not done so. On the other hand, Shire’s construction is



42
   See Brinckerhoff v. Enbridge Energy Co., Inc., 159 A.3d 242, 254 (Del. 2017) (observing
that “settled rules of contract interpretation requir[e] that the court prefer specific
provisions over more general ones.”). Although the Court is bound to a four corners
analysis of the Merger Agreement unless the contractual language is ambiguous, I pause
to note that it makes eminent sense that these two parties would require statistical
significance as the measure for “achievement” in this context when seeking an objective
means by which to determine whether milestones have been reached. While Fortis’
interpretation would leave the trigger point for the milestone payments as something more
fluid and open to debate, I cannot fathom that two sophisticated parties with hundreds of
millions of dollars on the line would have been so cavalier.

                                           28
entirely reasonable. Because Shire’s construction reveals that it has not breached

the Merger Agreement, Shire’s motion to dismiss the Complaint must be

GRANTED.

      IT IS SO ORDERED.




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