      IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

BTG INTERNATIONAL, INC.,                   )
                                           )
      Plaintiff/Counterclaim Defendant,    )
                                           )
        v.                                 )    C.A. No. 12562-VCL
                                           )
WELLSTAT THERAPEUTICS                      )
CORPORATION,                               )
                                           )
      Defendant/Counterclaim Plaintiff.    )

                           MEMORANDUM OPINION

                         Date Submitted: June 26, 2017
                        Date Decided: September 19, 2017

Lisa Zwally Brown, MONTGOMERY, McCRACKEN, WALKER & RHOADS, LLP,
Wilmington, Delaware; Richard L. Scheff, Lanthrop B. Nelson, III, MONTGOMERY,
McCRACKEN, WALKER & RHOADS, LLP, Philadelphia, Pennsylvania; Attorneys for
BTG International, Inc.

Kelly E. Farnan, Blake Rohrbacher, Nicole K. Pedi, RICHARDS LAYTON & FINGER,
P.A., Wilmington, Delaware; Stephen D. Susman, Harry P. Susman, SUSMAN
GODFREY L.L.P., Houston, Texas; Cory Buland, Mark Musico, Trinity Brown,
SUSMAN GODFREY L.L.P., New York, New York; Attorneys for Wellstat Therapeutics
Corporation.

LASTER, Vice Chancellor.
       Pursuant to an Exclusive Distribution Agreement dated July 1, 2011 (the

“Distribution Agreement”), BTG International, Inc. (“BTG”) agreed to promote, distribute,

and sell Vistogard,1 a drug owned by Wellstat Therapeutics Corporation (“Wellstat”). At

trial, Wellstat proved that BTG breached the Distribution Agreement, and BTG did not

prove a prior breach by Wellstat that would have excused BTG’s breach. Wellstat is

entitled to damages of $55.8 million, pre- and post-judgment interest at the rate specified

in the Distribution Agreement, costs, and a limited award of attorneys’ fees.

                         I.      FACTUAL BACKGROUND

       Trial lasted five days. The parties introduced over 1,300 exhibits and lodged twenty-

nine depositions. Nine fact witnesses and seven experts testified live. The two sides

presented starkly different stories, and it was not possible to reconcile all of the witness

testimony and documentary evidence. This decision has relied most heavily on the

contemporaneous documents. Having weighed the evidence and evaluated the credibility

of the witnesses, this decision finds that the following facts were proven by a

preponderance of the evidence.




       1
       The parties used several different names for the drug before its commercial launch.
For simplicity, this decision consistently refers to the drug as “Vistogard.”


                                             1
A.    Vistogard

      Vistogard is an orally administered antidote for 5-fluorouracil (“5-FU”), a

commonly used chemotherapy drug. 5-FU toxicity can be severe, even fatal. Vistogard was

the first commercially available drug to address 5-FU toxicity.

      Wellstat developed Vistogard, but Wellstat lacked a sales team. Wellstat needed a

partner to launch Vistogard commercially and to market and distribute the drug.

      In fall 2009, Wellstat began discussions with BTG. On paper, the fit seemed strong.

BTG’s corporate objective at the time was to “become a significant player in the field of

specialty pharmaceuticals,”2 a category that includes Vistogard. BTG had a dedicated

specialty pharmaceuticals business unit (the “Pharmaceuticals Division”), which already

marketed antidotes. BTG’s portfolio included Voraxaze, a drug that treats toxicity from

another chemotherapy agent.

      BTG was eager to secure the rights to Vistogard. BTG’s CEO, Louise Makin, called

Vistogard “a great opportunity” for BTG and wanted to add the drug to BTG’s portfolio.3

B.    The Distribution Agreement

      After several years of negotiations, Wellstat and BTG entered into the Distribution

Agreement.4 Wellstat granted BTG “the exclusive right and license . . . to promote,




      2
          JX 100 at 1.
      3
          JX 126.
      4
          JX 152.



                                            2
distribute and sell” Vistogard for ten years following FDA approval.5 BTG paid Wellstat a

distribution rights fee of $7.5 million and agreed to pay two milestone payments of $1

million.6 BTG also agreed to pay royalties on the sales of Vistogard at rates ranging from

20-40% of the revenue attributable to the drug.7

       The Distribution Agreement divided responsibility for commercializing Vistogard

between Wellstat and BTG. Wellstat was required to “use Diligent Efforts, at Wellstat’s

sole cost and expense, to develop [Vistogard] in order to obtain, and subsequently maintain,

FDA Approval for [Vistogard] . . . , including to conduct pre- and post-FDA Approval

studies necessary to obtain and maintain FDA Approval.”8 BTG was required to “use its

Diligent Efforts to and be responsible for, at BTG’s sole cost and expense, all promotion,

distribution and sales activities with respect to [Vistogard] . . . .”9 The Distribution

Agreement defined “Diligent Efforts” as follows:

       Diligent Efforts means, with respect to a Party, the carrying out of obligations
       specified in this Agreement in a diligent, expeditious and sustained manner
       using efforts and resources, including reasonably necessary personnel and
       financial resources, that specialty pharmaceutical companies typically devote
       to their own internally discovered compounds or products of most closely
       comparable market potential at a most closely comparable stage in their
       development or product life, taking into account the following factors to the


       5
           Id. § 3.1(a).
       6
           Id. §§ 4.1, 4.2.
       7
           Id. § 4.3.
       8
           Id. § 6.3(a).
       9
           Id. § 8.1.



                                              3
       extent reasonable and relevant: issues of safety and efficacy, product profile,
       competitiveness of alternative products in the marketplace, the patent or
       other proprietary position of the Subject Product, and the potential
       profitability of the Subject Product. Diligent Efforts shall be determined
       without regard to any payments owed by a Party to the other Party (excluding
       the transfer price for supply of such Subject Product).10

       As part of its responsibilities under the Distribution Agreement, BTG was required

to “prepare in good faith the initial commercial plan and budget” for Vistogard (the

“Commercial Plan”).11 The Commercial Plan had to “include minimum commitments of

resources, personnel and financing for pre-launch and launch activities with respect to, and

subsequent promotion and distribution of” Vistogard.12 The Commercial Plan was “subject

to good faith discussions between the Parties” and was to be “mutually agreed upon by the

parties . . . .”13 Once the parties reached agreement, BTG was required to “promote and

distribute [Vistogard] . . . in material compliance with such Commercial Plan.”14

       The Distribution Agreement further called for the establishment of a joint

development and commercialization committee (the “Committee”) to “manage and

oversee the development and commercialization” of Vistogard.15 The Committee consisted




       10
            Id. § 2.11.
       11
            Id. § 8.1.
       12
            Id.
       13
            Id.
       14
            Id.
       15
            Id. § 5.1(a).



                                             4
of four Wellstat representatives and four BTG representatives. The Committee’s

responsibilities included to

       review and recommend amendments to the Commercial Plan, provided that
       no amendment to the Commercial Plan shall materially reduce the level of
       efforts required under the initial Commercial Plan agreed by the parties
       pursuant to Section 8.1 unless reasonably justified by changes in
       [Vistogard’s] product lifecycle stage or changes in the market . . . .16

C.     BTG’s New Strategic Plan

       When BTG signed the Distribution Agreement, it had high hopes for Vistogard.

Makin touted Vistogard as “an excellent fit” with BTG’s existing business that would

“enable [BTG] to leverage the sales team and back office support infrastructure which [it]

already [had] in place.”17 BTG executives prepared an investor Q&A announcing that

Vistogard “could generate up to $60 m[illion] peak sales per annum.”18

       But after BTG executed the Distribution Agreement, Makin shifted BTG’s

corporate strategy away from specialty pharmaceuticals and towards interventional

medicine.19 In 2013, BTG adopted a new strategic plan called the “BTG – 2020/2021

Vision.” It called for BTG to become “a leader in interventional medicine in oncology and




       16
            Id.
       17
            JX 155.
       18
            JX 153.
       19
         “Interventional medicine is the use of minimally invasive image guided
techniques to diagnose and treat diseases.” JX 295 at 12.



                                            5
vascular . . . .”20 Between 2011 and 2014, BTG built a portfolio of interventional medicine

products, primarily through acquisitions.21 BTG’s revenue from interventional medicine

grew astronomically, increasing from £5.6 million in 2011 to £79.1 million in 2014.22 BTG

expected that its revenue from interventional medicine would continue to increase,

reaching £642.6 million by 2021 and comprising 75% of BTG’s total revenue.23

       BTG’s strategic shift towards interventional medicine came at the expense of the

Pharmaceuticals Division. Specialty pharmaceuticals could not generate the same rate of

growth as interventional medicine, and BTG chose to allocate capital to the areas that

promised the fastest growth. Between 2011 and 2014, BTG made no acquisitions in the

specialty pharmaceuticals space.24 The new role of the Pharmaceuticals Division was to

generate cash to fund BTG’s investments in higher-growth areas.25

       Makin emphasized the implications of BTG’s new strategic plan in her

communications with BTG’s senior management team. In February 2015, Makin emailed

the heads of BTG’s business units with guidance on preparing their annual budgets for the



       20
            Id. at 6.
       21
            Id. at 3-6; see also Tr. (Higham) 661:9-14.
       22
            JX 295 at 14.
       23
            Id. at 7.
       24
            Tr. (Makin) 943:8-12.
       25
           See, e.g., JX 543 at 4 (describing Pharmaceuticals Division’s goal as “[o]ptimising
cash . . . and investing proceeds in high-growth areas of Interventional Medicine.”).



                                               6
coming fiscal year. Makin explained that, although BTG previously had maintained “a

nurturing/experimental mindset where we have been able to invest in most of the

opportunities we thought worthwhile,” the company now had “a portfolio” of opportunities

and therefore had “choices to make about where we invest.”26 In her email, Makin ranked

BTG’s five business units in order of priority for further investment. At the top was

interventional vascular medicine, which was “the highest priority for investment.”27 Last

was the Pharmaceuticals Division, which “[n]eed[ed] to continue to execute smarter and

smarter.”28 Makin wrote that the “[c]hallenge is to run at constant cost base whilst keeping

people motivated and deliver sustained mid to high single digit revenue growth. Ensure

[Vistogard] launch is in line with our risk appetite and delivered cost neutrally. Low

priority for additional investment.”29

       At trial, Makin and other senior BTG representatives claimed that Makin’s

challenge was not a directive, but rather an aspirational goal that the Pharmaceuticals

Division could push back on and did not have to follow.30 That testimony was not credible.




       26
            JX 361 at 1.
       27
            Id. at 2.
       28
            Id. at 3.
       29
            Id.
       30
            See, e.g., Tr. (Lewis) 309:3-311:16; Tr. (Makin) 958:8-959:23.



                                              7
In reality, the Pharmaceuticals Division heard Makin’s message loud and clear. Its

leadership promptly reduced the budget for the commercial group by $825,000.31

D.     The Sales Force For Vistogard

       In early 2015, Wellstat began a rolling submission of a New Drug Application for

Vistogard to the FDA. The submission started the countdown to the commercial launch.

       Internally, BTG began considering the sales force it would need. At the time, the

Pharmaceuticals Division had nineteen full-time sales representatives. All of them sold

both oncology products and snake venom antidotes. Facing Makin’s directive to run at

constant cost, the Pharmaceuticals Division considered whether the same number of

employees could market the oncology products better if the sales force split into two teams,

one dedicated to oncology products and the other dedicated to snake venom antidotes.

TGaS Advisors (“TGaS”), a consulting firm that the Pharmaceuticals Division had

retained, recommended against splitting the existing team. TGaS advised that the “creation

of a new sales force should only [be] considered with a significant . . . expansion” in the

number of full-time sales representatives.32 TGaS also told the Pharmaceuticals Division

that BTG needed “to ‘invest’ to generate revenues and prepare for [Vistogard’s] launch.”33




       31
            JX 368.
       32
            JX 353 at 7.
       33
            JX 382.



                                             8
In other words, BTG needed to add more sales representatives. TGaS recommended a

substantial increase: “[A]t a minimum, you need to double your sales organization . . . .”34

       Makin’s directive about the role of the Pharmaceuticals Division and the need for it

to be “cost neutral” and run at a “constant cost base” meant that the TGaS recommendations

were nonstarters. In March 2015, the constraints on the Pharmaceuticals Division tightened

further when Anthony Higham took over. He was a Makin disciple who sought to impress

his boss by exceeding her cost-control mandate. He immediately initiated “Project DJ,”

which called for across-the-board cost reductions of 5%.35 Higham told his staff: “I request

all established products are prioritized ahead of [Vistogard], we cannot afford to be

distracted from achieving the budget through ongoing [Vistogard] dialogue and activity.”36

       In April 2015, BTG engaged a new consultant, ZS Associates, for advice on its sales

team. BTG did not permit ZS Associates to do an independent assessment. Instead, BTG

instructed ZS Associates to assume as an “immutable factor” for its analysis that the entire

Pharmaceuticals Division sales force would remain fixed at nineteen.37 Even with this




       34
            Id.
       35
          Tr. (Higham) 634:1-635:12. DJ stood for “donkey jacket,” an English term that
refers to “a type of coverall that you would wear if you’re cleaning up outside.” Id. This
suggests Higham believed his job was to “clean up” excessive spending in the
Pharmaceuticals Division.
       36
            JX 424.
       37
          A draft of BTG’s request for proposal set the “immutable factor” at seventeen. JX
387 (Carolyn Lewis, General Manager of the Pharmaceuticals Division, advising her team
that the request for proposal “should call out that we want to increase [Vistogard] and


                                             9
direct instruction, ZS Associates signaled that the Pharmaceuticals Division needed to hire

more full-time sales representatives to launch Vistogard successfully. ZS Associates wrote,

“If sales force is expected . . . to achieve the [Vistogard] forecast of $9.5M net sales in FY

2017, we estimate that BTG will need 19-20 Oncology focused [full-time equivalents].”38

Because the Pharmaceuticals Division had only nineteen sales representatives devoted to

all of its products, the ZS Associates report necessarily contemplated more staff. Moreover,

ZS Associates explained that adding more sales representatives would be highly profitable

for BTG. According to ZS Associates, “[u]p to 22 Oncology [full-time equivalents] would

still provide a marginal [return on investment] over 100% for Voraxaze and [Vistogard].”39

ZS Associates noted that the estimated returns were “higher than [the] industry average.”40

       But Higham was not interested in expanding the sales team. He was focused on

cutting costs through Project DJ.

       Constrained by Makin’s directives and Higham’s impassioned implementation of

her strategy, the Pharmaceuticals Division went against the recommendations from TGaS

and ZS Associates. In July 2015, BTG split the Pharmaceuticals Division sales force into




Voraxaze sales without expanding the footprint in any way and the same applied to rolling
in [Vistogard]”). The final request for proposal increased the cap to nineteen. JX 388; see
also Tr. (Lewis) 335:19-337:1 (clarifying the change).
       38
            JX 462 at 6.
       39
            Id.
       40
            Id.



                                             10
two teams, creating an oncology sales force with just seven representatives.41 BTG planned

for these representatives to split their time equally between Vistogard and Voraxaze.

E.    The Commercial Plan For Vistogard

      Under the Distribution Agreement, BTG was obligated to prepare the Commercial

Plan so it could be implemented once the FDA approved Vistogard for launch. On July 10,

2015, Wellstat formally completed the filing of its New Drug Application with the FDA.

BTG understood that the FDA could approve the application as soon as January 2016,

which meant that BTG needed to be ready to launch Vistogard as early as April 2, 2016.42

      Despite its obligation to prepare the Commercial Plan, BTG did nothing. Not until

September 10, 2015, after Wellstat asked BTG to present the Commercial Plan at the next

Committee meeting, did BTG spring into action.43 BTG employees hastily assembled a

PowerPoint presentation, which they dubbed the “Initial Commercialization Plan.”

      On September 17, 2015, BTG presented the plan to the Committee. It was woefully

inadequate. The bulk of the sixty-one slides consisted of generic information about how

BTG would market Vistogard.44 Only the last three slides addressed BTG’s obligation



      41
           JX 465 at 5.
      42
           JX 478 at 4.
      43
         JX 514. It appears that BTG forgot about its obligation to create the Commercial
Plan. See JX 519 (BTG employee forwarding Higham relevant language of the Distribution
Agreement).
      44
           JX 523; see also Tr. (Schneider) 33:9-34:3 (acknowledging slides “look[] simple
and . . . obvious”).



                                           11
under the Distribution Agreement to provide “minimum commitments of resources,

personnel and financing for pre-launch and launch activities.”45 The content of these slides

shows that BTG’s hastily constructed presentation did not offer a viable marketing strategy

and did not meet the requirements for a Commercial Plan.

       To address its obligation to provide a minimum commitment of resources, BTG

claimed it would spend $4.7 million on Vistogard in the coming year.46 BTG represented

that $2.1 million of that total would be spent on advertising and promotion. BTG allocated

the money among eight high-level categories, such as “market research,” “print and

production,” and “industry events and seminars.”47 BTG did not allocate the money based

on any study of Vistogard’s specific marketing needs. Rather, BTG took the percentage

allocated to each category in the Pharmaceuticals Division’s budget from the prior year,

multiplied that percentage by $2.1 million, and used the resulting figure for each category.48

       To address its obligation to provide a minimum commitment of personnel, BTG

represented that it would use its existing oncology sales force of seven representatives for

pre-launch activities. BTG did not say definitively how many representatives it would use

for launch. BTG suggested it could assign up to forty representatives from its Interventional




       45
            JX 152 § 8.1.
       46
            JX 523 at 61.
       47
            Id. at 60.
       48
            JX 942 at 5-6; Tr. (Lewis) 373:2-375:15.



                                             12
Oncology business unit,49 but BTG had rejected that idea internally two months earlier.50

In reality, BTG did not have a plan for its sales force or for a commercial launch. The most

candid aspect of the presentation admitted that BTG’s plans were still “[u]nder

development.”51

       The Wellstat representatives were unimpressed. They began to suspect that BTG

was not making the commitment required by the Distribution Agreement. Wellstat told

BTG that it wanted “a more detailed commercialization plan . . . .” 52 The next month,

Wellstat hired a consultant to assess whether BTG’s efforts were adequate.53

F.     The Pharmaceuticals Division Pleads For Resources.

       In October 2015, the Pharmaceuticals Division again engaged ZS Associates, this

time to develop a plan for Vistogard’s post-launch sales force. BTG again imposed

constraints on the analysis.54 BTG told ZS Associates to build a model that would show

the return on investment from placing representatives in thirty territories, splitting their




       49
            JX 523 at 61.
       50
            See JX 472 at 5.
       51
           JX 527 at 3; see also Tr. (Bamat) 907:5-16 (“[BTG] told us, ‘The seven sales reps
is just a start. Don’t worry, there’s going to be more.’”).
       52
            JX 527 at 3.
       53
            JX 551.
       54
            See Tr. (Lewis) 326:17-327:3.



                                            13
time equally between Voraxaze and Vistogard.55 BTG instructed ZS Associates to use a

profit margin that was net of the royalty owed to Wellstat when calculating return on

investment.56 This instruction ran flatly contrary to the terms of the Distribution

Agreement, which obligated each party to fulfill its duties “without regard to any payments

owed by a Party to the other Party . . . .”57

       Even with BTG’s revenues improperly depressed by the inclusion of the royalty, ZS

Associates still concluded that putting one sales representative in each of the thirty

territories would render all thirty territories immediately profitable.58 ZS Associates further

concluded that twenty-two of the territories would produce a 100% return on investment

in the first year and twenty-seven would produce a 100% return on investment by the

second year.59

       But the Pharmaceuticals Division knew that Makin would reject any request to add

twenty-three new employees to a division she had designated as a “[l]ow priority for

additional investment.”60 The Pharmaceuticals Division decided that the most it could ask




       55
            JX 828; Tr. (Lewis) 354:6-356:6.
       56
            JX 555; Tr. (Lewis) 350:4-351:10.
       57
            JX 152 § 2.11.
       58
            JX 828.
       59
            Id.
       60
            JX 361 at 3.



                                                14
for was nine additional sales representatives, resulting in an oncology sales team of sixteen

representatives. The Pharmaceuticals Division planned to place the representatives in the

markets that would generate a 300% return on investment for BTG. ZS Associates had

previously told BTG a 300% return was many times the average return on investment in

the industry.61

       On November 5, 2015, Phil Moody, the Pharmaceuticals Division’s Vice President

of Finance for the United States, approached Rolf Soderstrom, BTG’s CFO, about

expanding the oncology sales team. Moody tried to frame the request softly, stressing that

the Pharmaceuticals Division “ha[d] heard you and [Makin] loud and clear that we need to

drive efficiency to allow for investment.”62 But Moody emphasized that adding the sales

representatives “will strongly bolster the launch of Vistogard and will be crucial to achieve

optimal top line revenues. The return on investment here is significant.”63

       On November 18, 2015, the Pharmaceuticals Division presented its proposal for

additional sales representatives to Makin. The presentation emphasized the need to have

additional sales representatives for Vistogard at the outset: “Long term performance will

be set in the first 6 months[.] Must Get It Right . . . Early!”64 The presentation also stressed




       61
            See JX 462 at 6.
       62
            JX 594 at 1.
       63
            Id.
       64
            JX 607 at 18.



                                              15
that having more sales representatives in more local markets “generates incremental

national lift due to robust, dynamic oncology networks.”65

       Makin was skeptical and asked for more details. Higham read between the lines and

received her message. The next day, November 19, 2015, he told his subordinates that he

was “very disappointed” in the presentation.66 He instructed his staff to prepare a new plan

that would phase in the nine additional representatives over an extended period of time.67

The Pharmaceuticals Division had previously considered and rejected this idea because it

would provide lower returns to BTG in the long-run than hiring them immediately.68

       Meanwhile, Makin’s corporate team put more pressure on the Pharmaceuticals

Division to reduce costs. On November 22, 2015, Soderstrom instructed Moody that “[o]n

costs other than salary costs we are pushing to keep all selling costs flat except for specific

investments. Any other investment will need to be self funding.”69 Moody forwarded the

email to Higham and commented, “I’m working hard to keep the team together, but this is

very discouraging.”70




       65
            Id.
       66
            JX 611.
       67
            Id.
       68
            JX 594.
       69
            JX 620 at 2.
       70
            Id. at 1.



                                              16
       On November 25, 2015, the Pharmaceuticals Division submitted a formal white

paper to Higham which asked for authority to hire an inside sales force of three telephone

representatives to supplement the work of the field sales representatives. The white paper

noted that the current seven-member sales force left “~60% of the market opportunity and

oncology centers uncovered,” and that “[e]ven if direct team expanded to 16 [people],

~30% of the market [is] still left completely uncovered.”71

       On December 10, 2015, the Pharmaceuticals Division submitted a second white

paper to Higham that proposed immediately hiring nine additional representatives. The

white paper again emphasized the importance of additional representatives to Vistogard’s

success. “Vistogard will require promotional efforts to raise disease awareness; early

investment will be critical to achieve potential of product . . . . Various case studies suggest

that inadequate investment at launch significantly impacts peak revenue potential of the

product. Early underinvestment would likely decrease peak sales.”72 The white paper noted

that Vistogard and Voraxaze warranted at least twenty-two sales representatives. The

Pharmaceuticals Division nonetheless “trimmed the proposal down to 16” because a higher

number of representatives “would likely be dilutive to earnings in FY17.”73




       71
            JX 625 at 2.
       72
            JX 645 at 2.
       73
            Id.



                                              17
       In accordance with the instruction that Higham had given to phase in the

representatives over time, the white paper included an alternative which had BTG phase in

the additional sales representatives over six months. This proposal contemplated BTG

immediately hiring four representatives, then hiring five more in mid-2016 if the four initial

sales representatives were effective.74 The evidence as a whole demonstrates that the

Pharmaceuticals Division only included this alternative because Higham insisted on it. The

Pharmaceuticals Division similarly only proposed sixteen sales representatives because of

the directives from senior management.

G.     The Makin-Approved Plan

       On December 9, 2015, Nadine Wohlstadter, Wellstat’s CEO, asked Higham to

provide the Vistogard “sales force design study indicating the number and geographic

spread” as well as the “[s]ales forecast or sales projections for launch and years

thereafter.”75 Higham forwarded the email to Dan Schneider, BTG’s Senior Vice President

for United States Commercial Operations. Schneider was concerned that Wellstat was

“setting [up a] base case for breach.”76 Schneider told Moody that BTG did not “need or

have to give all info to her.”77 This unwarranted reaction evidenced a guilty conscience.




       74
            Id. at 4.
       75
            JX 641 at 1-2.
       76
            Id. at 1.
       77
            Id.



                                             18
Had BTG been doing what it was contractually obligated to do, Schneider would not have

jumped to the conclusion that Wellstat was preparing to sue.

       On December 10, 2015, the FDA approved Vistogard for commercial launch. On

December 15, Wohlstadter followed up on her December 9 request. Higham again declined

to give her the information.78

       Even after the white papers and Wellstat’s inquiries, Higham believed that Makin

would not support immediately hiring nine additional sales representatives, so his staff did

not present that plan.79 On December 16, 2015, the Pharmaceuticals Division presented

only the proposal that called for BTG to phase in the nine additional representatives over

six months. The division again emphasized that Vistogard was “promotionally sensitive,”

and thus “aggressive investment in Vistogard, now will pay dividends to achievement of

peak sales potential.”80

       Makin approved the request and authorized the Pharmaceuticals Division to

immediately hire four additional sales representatives.81 This number was later increased

to five representatives. These new representatives, once hired, would increase BTG’s

oncology sales team to a total of twelve representatives. But BTG did not actually hire any

of the new representatives for another three months.



       78
            JX 661.
       79
            JX 662 at 14.
       80
            Id.
       81
            See JX 663.


                                            19
H.     The Relationship Deteriorates.

       At BTG, key employees in the Pharmaceuticals Division believed that the oncology

sales force was too small to provide adequate support for Vistogard’s impending launch.

On January 7, 2016, Christine Coyne, a marketing executive, asked Higham and Schneider

to move up the hiring schedule and bring on four additional sales representatives in

February.82 Schneider was sympathetic, but felt there was nothing he could do. He told

Coyne, “I know this is painful at times . . . but it is the reality we currently live in.” 83 Shortly

after sending this email, Schneider received data indicating that the existing twelve-person

sales team only covered 61% of Vistogard’s market and that a sixteen-person sales team

would only cover 73% of the market. Schneider candidly and correctly responded that this

was “[p]ainfully low coverage.”84

       Moody also understood that the oncology sales force was too small, and he

continued to advocate for more support for Vistogard. In January 2016, BTG fired him.

When he ran into some Wellstat executives, Moody confided that he had been fired for

“pushing too hard for Vistogard internally.”85 He also told them that “BTG’s focus had




       82
            JX 698.
       83
            Id. at 1.
       84
            JX 697.
       85
         Tr. (Bamat) 908:13-909:7; see also JX 704 (Higham to Makin: “[T]he sooner we
can get [Moody] out of the business the better!!”).



                                                 20
shifted to interventional medicine, and away from specialty pharma.”86 The evidence at

trial demonstrated that Moody’s assessments were accurate.

       Moody’s termination caused Wellstat to become more suspicious about BTG’s

efforts. Wellstat pressed BTG for its internal sales forecasts and its plan for Vistogard’s

sales team. BTG continued to resist providing Wellstat with this information. Both sides

began preparing for litigation.87

       On February 17, 2016, the Committee met for the first time since September 2015.

The meeting was contentious, and the exact nature of the discussions is disputed. In the

weeks following the meeting, BTG and Wellstat exchanged differing versions of the

minutes.88 They ultimately could not agree on a set of minutes. 89 Having reviewed the

evidence and considered the testimony and demeanor of the witnesses, I regard Wellstat’s

account as more accurate and reliable.

       Regardless, both sides agree that, during the meeting, BTG described its plan for

the oncology sales team. The plan contemplated five new sales representatives by the end

of March, which would bring the total number of sales representatives to twelve. BTG also

said that it would consider hiring four additional sales representatives “[p]ending




       86
            Tr. (Bamat) 909:9-15.
       87
            See, e.g., JX 754.
       88
            See JX 826; JX 869.
       89
            JX 888.



                                            21
evaluation of initial launch performance.”90 Wellstat argued strongly that these staffing

levels were not sufficient and asked to see the ZS Associates report analyzing staffing

levels.91 BTG knew that the ZS Associates report supported Wellstat’s position, so BTG

refused to provide it.

       During the Committee meeting, BTG also provided Wellstat with a sales forecast

for Vistogard that contemplated $9.8 million in sales during the first year and $28 million

in the third year.92 Wellstat thought that these numbers were too low and demanded to see

the underlying model. BTG promised to provide the information to Wellstat.93

I.     BTG Manipulates Its Model.

       On February 23, 2016, BTG sent Wellstat a presentation which purported to show

how BTG calculated its estimate of $9.8 million in sales for Vistogard during the first year.

BTG did not provide any estimates beyond the first year, stating only that that the model

assumed “a smooth [month-over-month] growth rate, which diminishes through year 3 and




       90
            JX 759 at 84.
       91
            See JX 823; 869.
       92
            JX 759 at 90; see also JX 779 at 7 (noting a price per packet of $3,750).
       93
            JX 760 at 14.



                                               22
flattens at 1% thereafter,” and that “[y]ears 2-7 do not assume any additional resources . .

. .”94 Wellstat insisted on seeing a full seven-year forecast.95

       When BTG’s personnel tried to prepare the full seven-year forecast for Wellstat,

they discovered that BTG’s model did not support the sales figures that BTG had

provided.96 The model showed that a sales force of sixteen representatives would generate

only $24 million in gross sales in the third year. This was less than the $28 million figure

that BTG had given Wellstat and significantly lower than the $39.8 million figure BTG

had used in its long-term budget. And that was only the begining of the problems. Because

BTG’s model assumed a regular month-over-month growth rate, the revenue forecasts for

all subsequent periods fell short of BTG’s projections. The model supported peak annual

sales of $39 million,97 well below BTG’s earlier projections of $50-55 million.98

       To solve this problem, BTG falsified the data. Between February 25 and March 2,

2016, someone at BTG hard-coded the data in the spreadsheet so that the model purportedly

generated an output of $39.8 million for the third year. To accomplish this, BTG replaced




       94
            JX 779 at 9.
       95
            JX 805.
       96
            JX 788 (noting “a fairly significant disconnect”).
       97
            Tr. (Lewis) 402:3-13; see also JX 295 at 3.
       98
            JX 823 at 35.



                                               23
the 1.5% month-over-month growth rate used in the model with an artificial 30% increase

between March and April 2018. The result is depicted graphically as follows:99




       At trial, none of BTG’s witnesses could recall how the change came about.100 Nor

could BTG’s witnesses offer any benign explanation for why the model was hard-coded in

this manner. In its post-trial brief, BTG suggested that the change might have resulted from

“curve smoothing when annual projections are converted into monthly ones” and that the




       99
            JX 829.
       100
           See, e.g., Tr. (Lewis) 400:12-21. The evidence indicates that high-level
executives in the Pharmaceuticals Division were involved in the decision to alter the model.
See, e.g., JX 809 (invitation for March 1, 2016 meeting among executives in
Pharmaceuticals Division with subject: “Vistogard 3 year forecast discussion”); JX 824
(BTG executive: “Can you send me the model (ugly as it may be) that populated the graph
to [W]ellstat?”).



                                            24
modification was just a “blip.”101 The graphic reveals otherwise. I find that BTG falsified

its model to conceal that its sixteen-person sales force could not provide adequate support

for Vistogard.

       On March 2, 2016, BTG sent Wellstat a seven-year sales forecast. To hide its

manipulation of the data, BTG did not send the underlying spreadsheets. BTG only

disclosed the annual revenue numbers. BTG claimed that its model forecasted $39.8

million in revenue in the third year and $56 million in revenue in the seventh year.102 These

statements were knowingly and intentionally false.

J.     Vistogard Launches With Three Full-Time-Equivalent Sales Representatives.

       On March 2, 2016, BTG began selling Vistogard commercially. Although Makin

had authorized the Pharmaceuticals Division to hire five additional oncology sales

representatives three months earlier, BTG had not yet hired any of them. On top of that,

one of BTG’s existing sales representatives had left before Vistogard’s launch.

Consequently, BTG launched Vistogard with a sales force of six oncology representatives

who split their time equally between Vistogard and Voraxaze. That translated into three

full-time equivalent sales representatives.




       101
             Dkt. 266 at 57.
       102
             JX 823 at 35.



                                              25
       BTG scrambled to hire more sales representatives.103 By April 5, 2016, BTG had

filled the vacant position and added five more representatives.104 This brought BTG’s sales

team up to the twelve representatives that BTG had planned to have ready when Vistogard

launched. BTG knew from the TGaS report, the ZS Associates report, and its own internal

analyses that having twelve representatives was inadequate for a full launch. Moreover, an

analysis by ZS Associates concluded that the new sales representatives would not be fully

effective for six or seven months.105

K.     BTG Disregards The Commercial Plan.

       In April 2016, BTG developed a budget for Vistogard for the coming fiscal year.106

The budget disregarded the numbers in the Commercial Plan that BTG had presented to

the Committee in September 2015.

       Overall, BTG budgeted approximately 10% less for Vistogard than it had in the

Commercial Plan, a shortfall of $4.31 million. These reductions included a cut of $1.24

million from advertising and promotions, which slashed that category by approximately

50%. Within that category, BTG gutted the line item for “Commercial Operations,” which




        See JX 835 (Schneider: “We have tremendous pressure to get people in the field
       103

now. Honestly should have hired by Mid February.”).
       104
             See JX 921.
       105
             JX 462 at 16; see also Tr. (Lewis) 395:24-396:11.
       106
             JX 928.



                                              26
included training for sales representatives. BTG budgeted only $35,000 for this line item,

approximately 90% less than what BTG committed to spend in the Commercial Plan.107

       When the senior executives in the Pharmaceuticals Division realized that the budget

differed from what BTG had presented in the Commercial Plan, they instructed their staff

that the numbers “approved in the FY17 budget will be the reference point for development

of any numbers going forward.”108 No one disclosed the changes to Wellstat.109

L.     BTG Tries To Make Its Efforts Look Better.

       Fearing litigation and recognizing that its sales efforts were inadequate, BTG tried

to make its sales efforts look better. On May 24, 2016, Schneider asked the Pharmaceuticals

Division to prepare a white paper that would propose expanding the oncology sales team

from twelve to sixteen representatives.110 Schneider and Higham were scheduled to meet

with Wellstat in July, and Schneider told his staff that “it is in our best interests to have the

+4 on board [and] in training” before the meeting.111 On June 2, Higham forwarded the

completed white paper to Makin. He noted that “early indication[s] . . . highlight traction




       107
             JX 942 at 5.
       108
             Id. at 1.
       109
             Tr. (Lewis) 385:8-386:1.
       110
             JX 985 at 2.
       111
             Id.



                                               27
(~80% of all sales) in the covered territories” and that all of the additional sales

representatives would be “self-funding.”112 Makin approved the request.113

       BTG rushed the new representatives into service without adequate training or

support. On July 5, 2016, a BTG employee reported that “the existing reps are already very

frustrated at their lack of training on Vistogard, and the new ones never had any formal

training on Voraxaze. I don’t understand why [BTG management is] unwilling to train the

new reps appropriately.”114 The answer is that BTG had not supported Vistogard

adequately and was trying to cover up its failure to meet its obligations.

M.     This Litigation

       On July 7, 2016, the Wellstat and BTG teams met. Wellstat demanded BTG return

the distribution rights to Vistogard and compensate Wellstat to fund a “re-launch” of

Vistogard. Wellstat gave BTG ten days to respond.115

       Instead of responding, BTG filed this action. In a complaint filed on July 15, 2016,

BTG sought (i) a declaratory judgment that it did not breach the Distribution Agreement,

(ii) specific performance by Wellstat of its obligations under the Distribution Agreement,

(iii) a preliminary injunction enjoining Wellstat from declaring BTG in breach, and (iv) in




       112
             JX 996 at 1.
       113
             JX 997.
       114
             JX 1029 at 1.
       115
             JX 1041; Tr. (Higham) 645:4-646:11.


                                             28
the alternative, damages for breach of contract. In the course of this litigation, BTG largely

abandoned its affirmative claims against Wellstat.

       On July 18, 2016, Wellstat gave BTG written notice that BTG had breached the

Distribution Agreement. On August 11, Wellstat answered the complaint and filed

counterclaims against BTG for breach of contract.

                               II.     LEGAL ANALYSIS

       Each side claims that the other breached the Distribution Agreement. Under

Delaware law, the elements of a breach of contract claim are “first, the existence of the

contract, whether express or implied; second, the breach of an obligation imposed by that

contract; and third, the resultant damage to the plaintiff.”116 The existence of the contract,

namely the Distribution Agreement, is undisputed.

       The central issue in this case is whether BTG breached the Distribution Agreement.

BTG originally sought a declaratory judgment that it did not breach the Distribution

Agreement. Wellstat filed a counterclaim asserting that BTG did breach the Distribution

Agreement. BTG’s claim that Wellstat breached the Distribution Agreement is advanced

principally as a defense to Wellstat’s assertion of breach.

       This decision holds that BTG breached the Distribution Agreement and that Wellstat

is entitled to damages of approximately $55.8 million. This decision rejects the defensive

contention by BTG that Wellstat breached the Distribution Agreement.




       116
             VLIW Tech., LLC v. Hewlett-Packard Co., 840 A.2d 606, 612 (Del. 2003).


                                             29
A.    BTG’s Breach Of The Distribution Agreement

      Wellstat contends that BTG breached the Distribution Agreement in two ways. First,

Wellstat claims that BTG failed to use Diligent Efforts to promote and market Vistogard.

Second, Wellstat claims that BTG failed to develop a Commercial Plan in good faith and

then failed to comply with the minimum commitments it set forth in the Commercial Plan.

Wellstat proved at trial that BTG breached the Distribution Agreement in both respects.

      1.       The Failure To Use Diligent Efforts

      To exercise Diligent Efforts, BTG had to devote “efforts and resources, including

reasonably necessary personnel and financial resources, that specialty pharmaceutical

companies typically devote to their own internally discovered compounds or products . . .

.”117 Led by Makin, BTG’s senior management deployed a strategy of “[o]ptimising cash

contribution from [the Pharmaceuticals Division] and investing proceeds in high-growth

areas of Interventional Medicine.”118 Because of this strategy, Makin and her senior

management team did not permit the Pharmaceuticals Division to invest the resources in

Vistogard, including reasonably necessary personnel and financial resources, that specialty

pharmaceutical companies typically devote to their own internally discovered compounds

or products.




      117
            JX 152 § 2.11 (emphasis added).
      118
            JX 543 at 4.



                                              30
       Consistent with Makin’s strategy, the Pharmaceuticals Division sought to launch

Vistogard as cheaply as possible. Makin emphasized to senior management that Vistogard

was a “[l]ow priority for additional investment” and that the goal was to ensure that

Vistogard’s launch would be “delivered cost neutrally.”119 Higham carried out Makin’s

directive ardently by implementing a cost-cutting initiative and telling the division’s staff

that “all established products are prioritized ahead of [Vistogard] . . . .”120

       The result of BTG’s cost-cutting was a sales force that was inadequate to launch

Vistogard. Until April 2016, BTG had, at most, seven oncology sales representatives who

split their time equally between Vistogard and Voraxaze.121 There is overwhelming

contemporaneous evidence that this was far fewer personnel than specialty pharmaceutical

companies would have devoted to Vistogard had it been one of “their own internally

discovered compounds or products . . . .”122

       Outside consultants advised BTG that it needed to hire more sales representatives

for Vistogard. TGaS told the Pharmaceuticals Division that it needed to “at a minimum . .

. double your sales organization” of nineteen representatives in advance of Vistogard’s




       119
             JX 361 at 3.
       120
             JX 424.
       121
             JX 523 at 56; JX 828.
       122
             JX 152 § 2.11.



                                               31
launch.123 Because Makin’s strategy and the resulting budget constraints foreclosed this

path, the Pharmaceuticals Division engaged a new consulting firm, ZS Associates, and

instructed them to assume as an “immutable factor” in their analysis that the

Pharmaceuticals Division would not expand its sales force.124 Notwithstanding this

limitation, ZS Associates saw the matter much as TGaS had. In July 2015, ZS Associates

told BTG it would need “19-20 Oncology focused [full-time equivalents],” or more than

twice BTG’s existing oncology sales force, to reach Vistogard’s sales targets.125 ZS

Associates also concluded that “up to 22 Oncology [full-time equivalents],” or more than

three times Vistogard’s existing oncology sales force, would still provide BTG with returns

that exceeded the industry average.126 Four months later, ZS Associates reported that using

thirty representatives, or more than four times BTG’s existing oncology sales force, would

still be profitable for BTG, even after deducting the royalty payments to Wellstat (in

violation of the Distribution Agreement).127

       The Pharmaceuticals Division also recognized that Vistogard’s sales force was too

small and repeatedly made this clear to BTG’s senior management. In October 2015, the




       123
             JX 382.
       124
             JX 387; JX 388.
       125
             JX 462 at 6.
       126
             Id.
       127
             JX 588.



                                               32
Pharmaceuticals Division sought authority to hire nine additional oncology sales

representatives immediately and emphasized that the additional representatives were

“crucial to achiev[ing] optimal top line revenues.”128 Consistent with the ZS Associates

analysis, the managers in the Pharmaceuticals Division believed that BTG should have

twenty-two sales representatives servicing Vistogard and Voraxaze, but they proposed

sixteen because of the limitations that Makin had placed on the division.129 When Higham

sensed Makin’s disapproval and pushed for phasing in nine sales representatives over time,

the managers in the Pharmaceuticals Division immediately asked to accelerate the hiring

because they knew the sales team had “[p]ainfully low coverage.”130

       Faced with overwhelming contemporaneous evidence, BTG’s witnesses offered

several after-the-fact justifications for the inadequate sales force. None were credible.

       First, BTG’s witnesses claimed that sales representatives were not expected to be

the “main promotional driver” for Vistogard and so a smaller sales force was appropriate.131

The contemporaneous documents contradict this carefully prepared testimony. Documents

authored by ZS Associates and the Pharmaceuticals Division repeatedly touted the




       128
             JX 594 at 1.
       129
             See JX 996.
       130
             JX 697; see also JX 698.
       131
             See, e.g., Tr. (Schneider) 57:20-58:6; Tr. (Lewis) 289:5-14.



                                               33
importance of sales representatives for achieving Vistogard’s potential.132 Just as tellingly,

the number of sales representatives was the key driver in BTG’s sales model,133 so much

so that BTG falsified other inputs to conceal that its planned sales force would be unable

to achieve BTG’s own projections.134 Sales representatives in fact proved critical once

Vistogard launched.135 BTG did not use a small sales force because it believed that sales

representatives were unimportant to Vistogard’s success. BTG used a small sales force

because senior management did not want to invest the necessary resources in Vistogard.

       Second, BTG’s witnesses claimed that their executives made a reasonable judgment

that phasing in additional sales representatives over time was the better approach. 136 BTG

asserts that this decision “was made by those who knew the market best – the team

responsible for the-day-to-day work on Vistogard.”137 There is considerable irony in this




       132
          See, e.g., JX 462 at 6 (ZS Associates opining that Vistogard was “promotionally
sensitive”); JX 594 at 1 (Moody telling Soderstrom that more sales representatives “will
strongly bolster the launch of Vistogard and will be crucial to achieve optimal top line
revenues”); JX 607 at 18 (highlighting importance of sales representatives); JX 645 at 2
(white paper justifying increased sales representatives on grounds that “Vistogard will
require promotional efforts to raise disease awareness”).
       133
             See JX 823 at 31; Tr. (Schneider) 212:19-213:20.
       134
             See JX 829.
       135
            See JX 996 at 1 (noting that approximately 80% of all sales had occurred in
territories with sales representatives).
       136
             See, e.g., Tr. (Schneider) 93:24-95:2.
       137
             Dkt. 266 at 34-35.



                                               34
litigation-driven, counter-factual contention. The managers in the Pharmaceuticals

Division, who knew the market best and were responsible for the day-to-day work on

Vistogard, repeatedly argued for expanding the sales force immediately. They thought that

Vistogard’s “[l]ong-term performance [would] be set in first 6 months.”138 Moody told

Soderstrom explicitly that the managers in the Pharmaceuticals Division “don’t

recommend” phasing in sales representatives.139

       Higham overruled the team that knew the market best. Importantly, Higham did not

overrule the team because he thought hiring additional sales representatives over time was

the best way to increase Vistogard’s revenue. He overruled the team because he understood

Makin’s corporate strategy, including not investing in the Pharmaceuticals Division, and

believed that Makin would not approve the team’s plan.140

       Third, BTG’s witnesses claimed that they were caught flatfooted when the FDA

approved Vistogard earlier than expected and that BTG responded by hiring additional

sales representatives as quickly as it could.141 The litigators invented that story as well.

When Wellstat filed the New Drug Application in July 2015, BTG believed that FDA

approval could come as soon as January 2016, and BTG also recognized the “need to plan




       138
             JX 607 at 18.
       139
             JX 594.
       140
             See, e.g., JX 424.
       141
             See, e.g., Tr. (Schneider) 72:2-74:3, 205:8-206:7.



                                               35
(and be ready) for earlier approval . . . .”142 FDA approval came just one month earlier than

anticipated, in December 2015. BTG then waited nearly four months to hire any additional

sales representatives.143 BTG did not fail to hire enough sales representatives because the

FDA approved Vistogard early. BTG failed to hire enough sales representatives because it

did not want to incur the expense.

       Fourth, BTG points to the number of sales representatives that it used when

launching Voraxaze as proof that Vistogard’s sales force was large enough. If anything,

the comparison proves that BTG should have used a larger sales force for Vistogard than

it did for Voraxaze. It is true that the two drugs are comparable in that both treat toxicity

from chemotherapy drugs, but the chemotherapy drug Voraxaze treats is used far less

frequently than 5-FU. Consequently, the market for Voraxaze is much smaller than it is for

Vistogard. For Voraxaze, BTG projected peak sales of $15 million.144 For Vistogard, BTG

projected peak sales of $56 million.145 BTG therefore should have deployed more sales

representatives for Vistogard.




       142
             JX 478.
       143
             JX 921.
       144
             JX 1304 at 10.
       145
             JX 823 at 35; Tr. (Suvari) 824:18-825:10.



                                              36
       Perhaps more importantly, BTG viewed the launch of Voraxaze as unsuccessful, in

large part because BTG failed to deploy an adequate sales force.146 In fact, when

developing their internal analysis in preparation for the launch of Vistogard, the

Pharmaceuticals Division included a slide titled “Lessons Learned from Voraxaze.”147 The

lessons included that “[o]ncology products are promotionally sensitive,” that “[i]t is

important to identify and call on all stakeholders within an account,” and that “[i]n-depth

training . . . is necessary to ensure that [sales representatives] are confident selling to

oncologists . . . .”148 Yet, because of Makin’s corporate strategy and Higham’s zealous

implementation of it, BTG ignored all of these “lessons learned.” It cut the promotional

budget for Vistogard, did not pursue the necessary promotional efforts, failed to hire

enough sales representatives, and then failed to provide them with adequate training or

support.

       BTG finally argues that, even if it failed to provide “reasonably necessary

personnel” as required by the Distribution Agreement, BTG’s other marketing activities

constituted Diligent Efforts. To make this argument, BTG overstated the extent of its other

marketing activities. For example, BTG emphasized its medical education efforts, but BTG




       146
          See JX 472 at 3 (“Voraxaze has been short of annual goals”); JX 535 at 43 (BTG
noting that Voraxaze was “underperform[ing]”).
       147
             JX 600 at 20.
       148
             Id.



                                            37
also conceded that pre-launch disease awareness was a critical component of these

efforts.149 BTG had to adjust its sales forecast downward in February 2016 because it had

engaged in “[m]inimal pre-launch disease education effort[s].”150 Similarly, BTG

emphasized its digital marketing strategy, but BTG budgeted minimal amounts for digital

marketing,151 and Vistogard’s full website was not operational until June 2016, three

months after launch.152

       Even assuming that BTG’s other promotional activities were as significant as BTG

claims, they would not show that BTG met its obligation to exercise Diligent Efforts. The

Distribution Agreement defines Diligent Efforts as what “specialty pharmaceutical

companies typically devote to their own internally discovered compounds or products . . .

.”153 BTG’s outside consultants and its own employees emphasized the critical role of sales

representatives for Vistogard’s success, and they told BTG to hire more sales

representatives. BTG’s own model treated the number of sales representatives as the key




       149
            See, e.g., JX 463 at 3 (“Increasing clinical understanding of severe 5-FU toxicity
. . . will be a cornerstone to initial and sustained product usage.”); JX 936 at 2; accord JX
1083 at 67 (“Conducting pre-market diseases state education 4-6 months prior to [FDA]
approval is better practice in industry.”).

         JX 759 at 63 (emphasis omitted); see also JX 824 (showing “Impact of truncated
       150

Dis. Awareness”).

         See JX 1132 (showing $135,000 budget for “Digital” for the entire
       151

Pharmaceuticals Division).
       152
             JX 998; JX 1046 at 12.
       153
             JX 152 § 2.11.


                                             38
input and showed that BTG could not achieve its projections for Vistogard using the

number of sales representatives that BTG deployed. Other specialty pharmaceutical

companies would not have ignored this data. They would not have deployed a sales force—

both before and after Vistogard’s launch—that was far smaller than what the most

knowledgeable people recommended, what the model contemplated, and what would

generate greater-than-industry-standard profits.

       Despite warnings from Wellstat, BTG’s outside consultants, and its own employees,

BTG deployed a sales force that was far too small to achieve Vistogard’s revenue potential.

BTG breached the Distribution Agreement by failing to exercise Diligent Efforts when

sizing and deploying its sales force for Vistogard.

       2.       The Failure To Develop And Implement A Commercial Plan

       To comply with its obligations under the Distribution Agreement, BTG had to

“prepare in good faith [an] initial commercial plan and budget” for Vistogard that

“include[d] minimum commitments of resources, personnel and financing . . . .”154 BTG

breached this obligation by failing to prepare a Commercial Plan in good faith. BTG then

breached the Distribution Agreement again by failing to deliver on the inadequate

commitments contemplated by the hastily prepared Commercial Plan.




       154
             JX 152 § 8.1.



                                            39
      BTG’s initial Commercial Plan was a PowerPoint presentation that BTG assembled

in one week.155 The Distribution Agreement required that the Commercial Plan identify a

minimum commitment of personnel. The presentation did not contain a commitment; BTG

said only that “there may be” additional sales representatives beyond its existing seven,

“[d]epending on strength of indication and initial uptake.”156 BTG also misleadingly

implied that it could assign up to forty representatives from another business unit to

Vistogard when BTG already had rejected this idea internally.157 Contrary to what the

Distribution Agreement required, BTG had not thought through how many sales

representatives it would use after the launch of Vistogard and told the Committee that its

plans for this phase were “[u]nder development.”158

      The Distribution Agreement also required that the Commercial Plan identify

minimum commitments for expenditures. BTG’s Commercial Plan did not contain these

commitments. BTG specified the amount of money that it had budgeted in different high-

level categories, but refused to commit to those numbers.159 More importantly, the numbers

that BTG included in its Commercial Plan were not reliable budget numbers developed



      155
            See JX 514; JX 519.
      156
            JX 523 at 61.
      157
            Id.; see also JX 472 at 5.
      158
            JX 527 at 3.
      159
          See JX 523 at 60 (“Revisions may occur throughout the course of the business
planning cycle.”).



                                           40
after meaningful analysis. BTG generated the numbers simply by taking the percentage

allocated to that category in the Pharmaceuticals Division’s budget from the prior fiscal

year and multiplying that number by the amount that BTG intended to spend on

Vistogard.160 The numbers in the Commercial Plan were therefore not “minimum

commitments of resources” prepared in good faith. They were artificial numbers that BTG

included to give the appearance that BTG had prepared a real plan, when in fact BTG had

not done the necessary work.

      BTG subsequently changed the expenditure figures that it had presented in the

Commercial Plan. This fact demonstrates that BTG never took those numbers seriously. In

April 2016, BTG set its budget for Vistogard without regard for the numbers that BTG had

presented. BTG cut spending on advertising and promotion by almost 50%. BTG cut

spending on Commercial Operations, which included training for sales representatives, by

almost 90%.161 BTG’s disregard for the Commercial Plan during its internal budgeting

process shows that BTG did not prepare the Commercial Plan in good faith. Equally

important, BTG’s cavalier disregard for the numbers it provided to Wellstat resulted in

BTG separately breaching its obligation to “promote and distribute [Vistogard] . . . in

material compliance” with the Commercial Plan.162 Even though BTG failed to develop




      160
            JX 942.
      161
            JX 928.
      162
            JX 152 § 8.1.


                                           41
meaningful figures for the Commercial Plan, once it showed those numbers to Wellstat,

BTG had to stick to those numbers. BTG could not cut them unilaterally and without

disclosing the cuts to Wellstat, yet that is precisely what BTG did.

       BTG did not prepare a Commercial Plan in good faith. It prepared a disingenuous

and misleading plan that BTG never took seriously. BTG then failed to market Vistogard

in accordance with its Commercial Plan. These acts constituted further breaches of the

Distribution Agreement.

B.     The Defense Of An Alleged Breach By Wellstat

       Before turning to damages, this decision addresses BTG’s claim that Wellstat

breached the Distribution Agreement. BTG advances this claim in an effort to excuse its

own material breaches of the Distribution Agreement on the theory that Wellstat breached

first and compromised BTG’s efforts to fulfill its own contractual obligations. BTG’s

arguments are meritless.

       BTG first claims that Wellstat failed to use Diligent Efforts to obtain FDA approval

for Vistogard because Wellstat filed the New Drug Application approximately eighteen

months later than Wellstat initially had planned. The evidence at trial showed that the delay

did not result from Wellstat’s failure to exercise Diligent Efforts. It instead occurred due

to events outside of Wellstat’s control.163 In any event, Wellstat’s delay in filing the New




       163
          These events included (i) Wellstat’s third-party manufacturer suffering
equipment failures that contaminated one of Vistogard’s first batches, (ii) unexpected FDA


                                             42
Drug Application did not prejudice BTG’s ability to market Vistogard, nor did it cause

BTG any damage.164 If anything, the delay gave BTG more time to plan and prepare.

       BTG also claims that Wellstat refused to provide BTG with clinical data that BTG

needed for commercial activities. Dr. Michael Bamat, a Wellstat scientist, candidly

acknowledged that, for several months at the beginning of 2015, Wellstat did not share data

from its clinical studies with Vistogard, even though Bamat believed that Wellstat should

have.165 In May 2015, BTG and Wellstat met to address the issue, and afterwards BTG sent

Wellstat a list of the data that they wanted.166 In the weeks following the meeting, Bamat

gave BTG the information that he had.167 Thereafter, Wellstat regularly provided BTG with

clinical information as it became available.168 Assuming, for the sake of argument, that

Wellstat did not provide the information in as timely a fashion as it should have, Wellstat

cured the problem long before it created any issues for BTG with the launch of Vistogard.




decisions on several matters, and (iii) poor performance by Wellstat’s third-party database
vendor. See Tr. (Bamat) 882:6-887:21.
       164
          BTG in fact argued that it would have benefited from even more time. See, e.g.,
Tr. (Schneider) 203:8-24 (asserting BTG was forced to “accelerate[] our spend in
preparation for this faster-than-expected launch”).
       165
             Tr. (Bamat) 892:10-893:10.
       166
             See JX 418; JX 420.
       167
             See, e.g., JX 419; JX 421; JX 422; JX 426.
       168
             See Tr. (Bamat) 896:22-900:16.



                                              43
       Viewing the evidence as a whole, Wellstat acted in good faith and fulfilled its

contractual commitments. The same cannot be said for BTG. Wellstat’s actions do not

excuse BTG’s breaches of the Distribution Agreement.

C.     Damages

       “[T]he standard remedy for breach of contract is based upon the reasonable

expectations of the parties . . . .”169 “It is a basic principle of contract law that remedy for

a breach should seek to give the nonbreaching [] party the benefit of its bargain by putting

that party in the position it would have been but for the breach.” 170 “Expectation damages

thus require the breaching promisor to compensate the promisee for the promisee’s

reasonable expectation of the value of the breached contract, and, hence, what the promisee

lost.”171 Expectation damages should “be measured as of the time of the breach.”172

       Expectation damages “should not act as a windfall.”173 But “the injured party need

not establish the amount of damages with precise certainty where the wrong has been




       169
             Duncan v. Theratx, Inc., 775 A.2d 1019, 1022 (Del. 2001).
       170
             Genecor Int’l, Inc. v. Novo Nordisk A/S, 766 A.2d 8, 11 (Del. 2000).
       171
             Duncan, 775 A.2d at 1022.
       172
             Comrie v. Enterasys Networks, Inc., 837 A.2d 1, 17 (Del. Ch. 2003).
       173
             Paul v. Deloitte & Touche, LLP, 974 A.2d 140, 146 (Del. 2009).



                                              44
proven and injury established.”174 “[D]oubts about the extent of damages are generally

resolved against the breaching party.”175

       Wellstat claims expectation damages equal to the net present value of the difference

between (i) the revenue Wellstat would have earned if BTG had used Diligent Efforts and

(ii) the revenue that Wellstat will earn under the status quo, given BTG’s actual efforts.

Both sides retained multiple experts to grapple with the calculation. Wellstat claims that

its damages exceed $112 million. BTG claims that Wellstat suffered no damages at all.

       The amount of Wellstat’s damages turns primarily on three hotly disputed issues.

The first is the size of Vistogard’s patient population. The second is the rate at which an

appropriately sized sales team could gain access to physicians and educate them on

Vistogard’s benefits. The third is which set of BTG’s projections to use when determining

what Wellstat will earn under the status quo.

       1.     Vistogard’s Patient Population

       The first major damages-related dispute is the size of Vistogard’s patient population.

Neel Patel, one of Wellstat’s expert witnesses, estimated the size of Vistogard’s patient

population using a sixty-eight question survey that he distributed to forty-two




       174
           Siga Techs., Inc. v. PharmAthene, Inc., 132 A.3d 1108, 1131 (Del. 2015)
(internal quotation marks omitted).
       175
          Id.; accord Beard Research, Inc. v. Kates, 8 A.3d 573, 613 (Del. Ch. 2010)
(“Public policy has led Delaware courts to show a general willingness to make a wrongdoer
bear the risk of uncertainty of a damages calculation where the calculation cannot be
mathematically proven.” (internal quotation marks omitted) (collecting cases)).



                                             45
physicians.176 Patel’s opinion regarding Vistogard’s patient population largely turns on two

data points: (i) the number of patients who suffer early-onset 5-FU toxicity and (ii) the

percentage of physicians who would treat those patients with Vistogard.

       Patel’s survey distinguished among patients suffering from mild, moderate, and

severe toxicity. Patel included all three categories of patients in Vistogard’s patient

population. BTG claims that Patel’s model should have excluded patients that his survey

classifies as suffering from “mild” or “moderate” toxicity, because the FDA only approved

Vistogard for “early-onset, severe or life-threatening toxicity.”177 Excluding both

categories would reduce Wellstat’s damages to no more than $19.2 million.

       Physicians often assess the severity of toxicity using grades. One widely used

industry standard, the Common Terminology Criteria for Adverse Events (the “Common

Terminology”), defines mild toxicity as Grade 1, moderate toxicity as Grade 2, severe

toxicity as Grade 3, and life-threatening toxicity as Grade 4. Patel used a four-grade metric

in his survey, but he did not precisely align his metric with the Common Terminology.

Patel’s survey defined mild toxicity as Grades 1-2, moderate toxicity as Grade 3, and severe

toxicity as Grade 4.178 Thus, Patel’s survey described Grade 3 patients as “moderate,” while




       176
             Tr. (Patel) 1210:22-1211:8.
       177
             JX 1077 at 27.
       178
             JX 674 at 6.



                                             46
the Common Terminology would classify them as “severe.” BTG accordingly argues that

the Grade 3 patients should be excluded when calculating damages.179

       The problem with BTG’s position is that Patel’s classifications worked in BTG’s

favor. The drug profile presented in the survey accurately described Vistogard as indicated

for patients “exhibiting early-onset, severe or life-threatening toxicity.”180 Because the

survey described Grade 3 as “moderate,” rather than “severe,” some of the physicians who

responded that they would not treat Grade 3 patients with Vistogard likely did so because

the drug’s indication did not support using Vistogard to treat moderate toxicity. Had Patel

classified Grade 3 toxicity as “severe,” as called for by the Common Terminology, it is

likely that more doctors would have said that they would prescribe Vistogard. This

conclusion is supported by Patel’s survey, which found that physicians were almost twice




       179
           More aggressively, BTG argued that deviating from the Common Terminology
warranted disregarding Patel’s survey entirely. BTG relied on two trademark cases in
which the court rejected surveys that used classifications that did not accord with statutory
definitions. See Icon Enters. Int’l, Inc. v. Am. Prods. Co., 2004 WL 5644805, at *28 (C.D.
Cal. Oct. 7, 2004); J & J Snack Foods, Corp. v. Earthgrains Co., 220 F. Supp. 2d 358, 369
(D.N.J. 2002). Those cases are obviously distinguishable. Toxicity grades are not fixed by
statute and, as noted, lack a precise industry standard. Moreover, the surveys in those cases
skewed the classifications far beyond recognition. See Icon, 2004 WL 5644805, at *27-28
(noting the definition “omits a crucial and indeed distinguishing characteristic of
suggestive marks” and that omission was “no mere technical flaw”); J & J, 220 F. Supp.
2d at 370-71 (noting that the flaws in the definition were “substantial” and “permeated the
entire survey to make its finding completely untrustworthy and unreliable”). Patel’s work
shifted the grades slightly in a manner that favored BTG. A wholesale rejection of Patel’s
analysis is not warranted.
       180
             JX 1077 at 27.



                                             47
as likely to prescribe Vistogard to treat “severe” toxicity (i.e. Grade 4 in the survey) as they

were to treat “moderate” toxicity (Grade 3 in the survey).181 By classifying Grade 3 as

moderate toxicity, rather than severe toxicity, Patel depressed the size of Vistogard’s

patient pool and favored BTG.

       The empirical literature supports this finding. Patel’s survey indicated that only 5%

of all 5-FU patients experience either Grade 3 or Grade 4 toxicity (as defined in the survey),

yet numerous scientific studies have found a 15-20% rate of Grade 3 or Grade 4 toxicity

(as defined in the Common Terminology).182 Similarly, Patel’s survey found that 39% of

physicians would prescribe Vistogard for Grade 3 toxicity (as defined in the survey), yet a

January 2016 pricing study by BTG found that 53% of physicians would prescribe

Vistogard for Grade 3 toxicity (as defined by the Common Terminology).183

       Because Patel’s classification of Grade 3 toxicity favored BTG by reducing the size

of the patient pool, there is no reason to exclude the “moderate” patients from Patel’s

estimate. The treatment of patients suffering from mild toxicity (Grades 1-2) warrants a

different conclusion. Because Grades 1-2 patients did not fall within the indicated use of




       181
          JX 1077 at 57 (73% of physicians reported that they would treat severe toxicity
with Vistogard, compared to 39% for moderate toxicity).
       182
          See, e.g., JX 68 at 20 (BTG presentation citing two scientific studies finding 16%
of patients suffer early-onset severe toxicities); JX 1081 at 31 (noting that literature
generally reports “15-20% incidence of severe early-onset toxicity” and collecting
authorities).
       183
             JX 681 at 19, 22.



                                              48
Vistogard, BTG could not market Vistogard for use by these patients. 184 Even though

physicians are permitted to prescribe Vistogard for off-label use and to purchase Vistogard

for that purpose, the evidence indicates that sales for mild toxicity are likely to be minimal,

because there are cheap and widely available alternative therapeutic treatments.185

Moreover, pharmaceutical companies generally do not include off-label prescriptions in

their sales forecasts.186 Patients receiving Vistogard for mild toxicity are therefore excluded

from Patel’s sales forecast.

       2.       Access Rate

       The second major damages-related dispute concerns the access rate, which is the

rate at which sales representatives can gain access to oncologists to discuss Vistogard. The

rate is expressed as a percentage of oncologists. Wellstat’s expert, Howard Brock,

estimated access rates ranging from 50% to 90%, depending on how frequently the




       184
           See 21 U.S.C. § 355(a); 82 Fed. Reg. 2193 (Jan. 9, 2017) (to be codified at 21
C.F.R. §§ 201, 801, 1100) (amending definition of “intended uses” to read “if the totality
of the evidence establishes that a manufacturer objectively intends that a device introduced
into interstate commerce by him is to be used for conditions, purposes, or uses other than
ones for which it has been approved, cleared, granted marketing authorization, or is exempt
from premarket notification requirements (if any), he is required . . . to provide for such
device adequate labeling that accords with such other intended uses.”).
       185
           See Tr. (Patel) 1222:22-1223:12 (noting that other oncology products involving
off-label use do not have “many viable substitutes”).
       186
             Tr. (Boghigian) 1006:4-9.



                                              49
oncologists prescribe 5-FU.187 BTG’s expert, William Suvari, estimated an average access

rate of 30% across all oncologists.188

       Neither expert offered compelling evidence to support their access rate. Brock

justified his range based on his industry experience. He testified that “doctors have a

tendency to be very interested” in specialty oncology pharmaceuticals.189 He opined that a

higher access rate was appropriate for Vistogard because “the low disease state awareness”

for early-onset 5-FU toxicity would lead doctors to be “more interested to learn about the

product.”190 Brock’s opinion makes intuitive sense, but it would be more powerful if

backed by empirical data.

       Suvari attempted to ground his conclusion in empirical data, but did so

unpersuasively. Suvari pointed to an executive summary of a ZS Associates study that

found that 27% of oncologists were “accessible” to sales representatives. Suvari chose not

to obtain or review the full study, nor did he examine the underlying data. 191 He also does

not appear to have interpreted the 27% figure accurately, because the ZS Associates study

defines an “accessible” oncologist as one that is reached by sales representatives more than




       187
             Tr. (Brock) 1249:6-24.
       188
             JX 806 at 3; Tr. (Suvari) 857:14-860:15.
       189
             Tr. (Brock) 1250:1-20.
       190
             Tr. (Brock) 1252:11-21.
       191
             Tr. (Suvari) 860:20-861:18.



                                              50
70% of the time.192 The ZS Associates study observed that sales representatives still

reached doctors outside of the “accessible” category, albeit with less frequency. The ZS

Associates study, therefore, did not provide meaningful support for Suvari’s access rate.

       The competing expert testimony results in some doubt about the appropriate access

rate, but “doubts about the extent of damages are generally resolved against the breaching

party.”193 That principle applies here. Brock’s arguments for the higher access rate were

logical and his testimony was credible. This decision adopts Brock’s access rate.

       3.          Projections Of Vistogard’s Sales Under The Status Quo

       The final major damages-related issue is what sales forecast to use to determine the

amounts Wellstat would earn under the status quo in light of BTG’s actual efforts to market

Vistogard. Wellstat points to Vistogard’s statements to investors in early 2016 that

Vistogard would generate peak sales of $35 million, but BTG did not create an internal

sales forecast supporting peak sales of $35 million. Instead, one of Wellstat’s experts,

Christopher Gerardi, constructed a forecast by applying a curve that implied peak sales of

$35 million after ten years.194 Gerardi’s top-down forecast is too speculative to be a reliable

measure of what Wellstat would have earned under the status quo.

       The better approach is to use BTG’s actual sales forecast, albeit after removing the

false, hard-coded increase that BTG inserted to mislead Wellstat. Once that deviation is



       192
             Id.
       193
             Siga Techs., 132 A.3d at 1131.
       194
             JX 1082 at 25.


                                              51
removed, the model provides the best evidence of the sales that BTG would achieve based

on its actual efforts. The remainder of the model was prepared in the ordinary course of

business and its assumptions accurately reflect BTG’s actual marketing efforts, including

BTG’s decision to deploy a sixteen-person sales team, with nine of the representatives

phased in over time. This decision adopts BTG’s corrected sales forecast for purposes of

calculating Wellstat’s damages.195

       4.       Other Damages Arguments

       In addition to the three major damages-related issues discussed above, BTG threw

a grocery bag of other arguments against the wall. Wellstat added an argument of its own.

Nothing stuck.

                a.     The Cost Of Vistogard

       BTG criticized Patel’s survey for omitting information about Vistogard’s price.

BTG argued that physicians would be less likely to prescribe Vistogard if they knew that

each treatment costs $75,000. This argument is not persuasive. Patel testified credibly that

oncologists are not particularly price-sensitive for specialty products like Vistogard

because they only prescribe them when it is clearly warranted.196 BTG’s January 2015



       195
           Another Wellstat expert, Harry Boghigian, opined in a rebuttal report that BTG’s
sales forecast had other flaws in addition to the hard-coded bump such that a higher figure
should be used. Wellstat did not elicit testimony on this topic during trial. See Tr.
(Boghigian) 988:6-995:22. Wellstat also did not meaningfully address these issues in post-
trial briefing. Wellstat’s other challenges to BTG’s model are therefore waived. See
Emerald P’rs v. Berlin, 726 A.2d 1215, 1224 (Del. 1999).
       196
             Tr. (Patel) 1220:12-1222:4.



                                            52
pricing study for Vistogard supports Patel’s testimony. That study found the greatest price

elasticity for Grade 1 or Grade 2 toxicity, which this decision excluded from Patel’s

model.197 That study also found that more physicians would prescribe Vistogard at the

much higher price of $120,000 than Patel found in his survey.198 Patel’s failure to include

Vistogard’s price in his survey does not undermine the validity of his data. His opinion

regarding the size of the Vistogard market remains conservative.

                b.     The Early Termination Right

       BTG claims that Wellstat’s damages should be limited by the fact that BTG has the

right to terminate the Distribution Agreement “for convenience” five years after FDA

approval of Vistogard.199 Contract damages are determined by the “expectations of the

parties before or at the time of the breach.”200

       When BTG breached the Distribution Agreement, BTG did not intend to exercise

its early termination right. In March 2016, Schneider characterized the Distribution

Agreement as an “evergreen contract for 10 years.”201 In June 2016, BTG analyzed the

financial impact of Wellstat exercising its early termination right, precisely because BTG



       197
             JX 681 at 22.
       198
          Id.; see also Schneider Dep. at 322:18-23 (acknowledging that BTG chose a price
for Vistogard that “for the most part avoided physicians making an economic choice”).
       199
             JX 152 §12.2.
       200
             Siga Techs., 132 A.3d at 1133.
       201
             JX 870.



                                              53
did not want to terminate the Distribution Agreement and was concerned that Wellstat

might. BTG’s analysis showed that BTG would lose at least $79 million if Wellstat

terminated the Distribution Agreement after five years.202

       It would have been economically irrational for BTG to terminate the Distribution

Agreement at a point when Vistogard was approaching its peak sales potential, after BTG

had invested in generating those sales, and when Vistogard needed relatively little

additional investment from BTG. Tellingly, BTG’s damages expert did not model the

possibility of BTG’s early termination and BTG did not advance the argument until trial.203

BTG’s early termination right does not reduce Wellstat’s damages.

                c.     Mitigation

       The Distribution Agreement provides that Wellstat is entitled to the return of

Vistogard’s distribution rights if BTG has materially breached the agreement. 204 BTG

argues that Wellstat’s damages should be reduced to account for any potentially greater

sales of Vistogard that Wellstat could achieve after it recovers the distribution rights and

pursues a new promotional plan.




       202
          JX 1002 at 27. The actual number would be higher if BTG terminated, because
BTG’s analysis assumes that Wellstat would pay BTG 30% of net sales for three years
after Wellstat’s exercise of the early termination right. See JX 152 § 12.2.
       203
             See JX 1084 at 4.
       204
             JX 152 § 12.11(a)(i).



                                            54
       “Failure to mitigate damages is an affirmative defense, and the burden of proving

the failure falls upon the defendant.”205 BTG failed to introduce any evidence or expert

testimony that would quantify how much Wellstat’s damages might be mitigated through

future sales of Vistogard.206 BTG accordingly failed to meet its burden of proof that

Wellstat’s damages should be mitigated by future sales of Vistogard.

                d.     Renewal

       The initial term of the Distribution Agreement was ten years, beginning on the date

the FDA approved Vistogard. The Distribution Agreement provides that it “shall

automatically renew for successive two (2) year periods unless either Party provides notice

three (3) months in advance of the expiration of the then-current Term.”207 To increase the

size of its damages recovery, Wellstat argues that it should receive damages for lost

Vistogard sales during the first two-year renewal period.

       Courts will award damages for a renewal term when a plaintiff can prove that the

contract would have been renewed with reasonable certainty.208 In this case, whether the

Distribution Agreement would have been renewed is highly speculative. The Distribution



       205
             Tanner v. Exxon Corp., 1981 WL 191389, at *4 (Del. Super. July 23, 1981).
       206
           At trial, the court rejected BTG’s attempt to introduce previously undisclosed
expert testimony about Wellstat’s failure to mitigate. Tr. (Court) 1319:10-20.
       207
             JX 152 § 12.1.
       208
          See M & G Polymers USA, LLC v. Carestream Health, Inc., 2009 WL 3535466,
at *9 (Del. Super. Aug. 9, 2009); see also Supervalu, Inc. v. Assoc. Grocers, Inc., 2007 WL
624342, at *3 (D. Minn. Jan. 3, 2007).



                                             55
Agreement’s initial term does not expire until December 2025. Predicting how BTG and

Wellstat would approach the renewal right eight years in the future would be, at best, an

educated guess. This fact countenances against awarding Wellstat lost profits for the

renewal period.209

       At the same time, much of the difficulty inherent in assessing whether the

Distribution Agreement would be renewed results from BTG’s breach. The major factor

that BTG and Wellstat would consider when deciding whether to renew is how successful

Vistogard had been and would continue to be. BTG botched Vistogard’s launch, making it

impossible to evaluate Vistogard’s success. Because Delaware law resolves doubts

regarding the amount of damages against the breaching party, a sound argument exists that

Wellstat should receive damages for the renewal term.

       Nonetheless, on the facts of this case, awarding damages for the renewal period

would be too speculative. The damages analysis is already assumption-laden and covers a

ten-year period that extends eight years into the future. Adding damages for a renewal

period is not something that this court can attempt with any degree of confidence.

       5.     The Damages Award




       209
           Cf. Bradshaw v Trover, 1999 WL 463847, at *3 (Del. Super. Apr. 30, 1999)
(disallowing personal injury plaintiff’s evidence on lost profits from the non-renewal of a
contract as a result of her injury; finding that “[a]lthough the contract had previously been
renewed, whether [the contract] would have been renewed further is unknown and
speculative”).


                                             56
         BTG’s expert, Christopher Barry, calculated what Wellstat’s damages would be

under various scenarios depending on how the court resolved the three major damages

issues in this case. Barry helpfully provided a decision tree that illustrated the different

outcomes. Barry’s chart arrives at damages of $55.8 million in a scenario that (i) excludes

mild toxicity patients from Patel’s forecast, (ii) uses Brock’s access rate of 50-90%, and

(iii) uses the corrected BTG model. Wellstat has not objected to Barry’s calculations.

         Barry did not provide a more precise figure than $55.8 million. Barry will provide

Wellstat with his specific figure in dollars and cents, and that figure will be used as the

damages award.

D.       Interest

         Prejudgment interest in Delaware cases is awarded as a matter of right.210 Subject

to the court’s discretion, a party is also entitled to post-judgment interest until the date of

payment on an amount that includes both the amount of the judgment and the amount of

prejudgment interest.211 Unless the parties have specified another rate by contract or the




         210
               Brandywine Smyrna, Inc. v. Millenium Builders, LLC, 34 A.3d 482, 486 (Del.
2011).
         211
               Beard Research, Inc. v. Kates, 8 A.3d 573, 620-21 (Del. Ch. 2010).



                                               57
court determines that a different rate is warranted by the equities, the statutory rate of

interest governs.212 In a breach of contract case, interest runs from the date of breach.213

       In this case, Section 4.8 of the Distribution Agreement specifies a rate of 1% per

month for “payments that are not paid on or before the date such payments are due under

this Agreement.”214 Similar language has been held to be sufficient to specify an interest

rate for purposes of pre- and post-judgment interest.215

       Pre- and post-judgment interest therefore will accrue at a rate of 1% per month,

compounded monthly. Interest shall run from September 15, 2015, when BTG first

breached the Distribution Agreement by failing to provide the Commercial Plan.




       212
           See 6 Del. C. § 2301(a) (establishing legal rate); Summa Corp. v. Trans World
Airlines, Inc., 540 A.2d 403, 409 (Del. 1988) (“While the legal rate of interest has
historically been the benchmark for pre-judgment interest, a court of equity has broad
discretion, subject to principles of fairness, in fixing the rate to be applied.” (citations
omitted)); Brandin v. Gottlieb, 2000 WL 1005954, at *29 (Del. Ch. July 13, 2000) (“In the
Court of Chancery the legal rate is a mere guide, not the inflexible rule.” (internal quotation
marks omitted)).
       213
        Citadel Hldg. Corp. v. Roven, 603 A.2d 818, 826 (Del. 1992); Wilson v. Pepper,
1995 WL 562235, at *6 (Del. Super. Aug. 21, 1995).
       214
             JX 152 § 4.8.
       215
          See Miller v. Silverside, 2016 WL 4502012, at *9 (Del. Super. Aug. 26, 2016);
see also Bride One, LLC v. Regency Ctrs., L.P., 2017 WL 3189230, at *5 (Del. Super. July
20, 2017); Millcreek Shopping Ctr. LLC. v Jenner Enters., Inc., 2017 WL 1282068, at *2
(Del. Super. Mar. 31, 2017).



                                              58
E.     Attorneys’ Fees

       Wellstat sought attorneys’ fees under the bad faith exception to the American Rule.

“The bad faith exception to the American Rule applies in cases where the court finds

litigation to have been brought in bad faith or finds that a party conducted the litigation

process itself in bad faith, thereby unjustifiably increasing the costs of litigation.”216

       Wellstat correctly points out that BTG acted aggressively and took disingenuous

positions during the litigation. In discovery, BTG refused to produce documents relating

to BTG’s strategic shift away from specialty pharmaceuticals or provide a witness pursuant

to Court of Chancery Rule 30(b)(6) on the topic, claiming that the subject was not relevant.

BTG also objected to Makin being identified as a custodian for documents, claiming that

she did not possess relevant information. These positions could not have been asserted in

good faith, yet BTG forced Wellstat to prevail on a motion to compel before BTG complied

with its discovery obligations.217 Equally concerning, at trial BTG presented a misleading

demonstrative regarding the calculation of Wellstat’s damages.218

       Although these instances of misconduct were problematic, it would be

disproportionate to shift attorneys’ fees broadly in favor of Wellstat. A more tailored

remedy would address these problems. The parties shall confer regarding an award of




       216
             Beck v. Atl. Coast PLC, 868 A.2d 840, 850-51 (Del. Ch. 2005) (Strine, V.C.).
       217
          See Dkt. 140 (granting Wellstat’s first and second motions to compel); Dkt. 219
(granting Wellstat’s third motion to compel).
       218
             See Tr. (Gerardi & Court) 1299:14-1302:4; Tr. (Court) 1319:10-1320:1-2.


                                              59
attorneys’ fees that will remedy the harm that Wellstat suffered. If the parties cannot agree,

then Wellstat may make a targeted application.

                                 III.     CONCLUSION

       Judgment is entered in favor of Wellstat on its claim for breach of contract. BTG is

liable for damages of $55.8 million plus compound interest at a rate of 1% per month from

September 15, 2015, until the date of payment. Wellstat is awarded its costs as a prevailing

party. BTG and Wellstat shall confer regarding the limited award of attorneys’ fees

contemplated by this decision. If there are other outstanding issues that the court needs to

address before a final order can be entered, then the parties shall submit a joint letter within

thirty days that identifies the issues and proposes a path that will enable the court to bring

this case to a conclusion. Otherwise, the parties shall confer regarding a final order to

implement these rulings.




                                              60
