Investors of Padlock Therapeutics have initiated legal action against Bristol Myers Squibb (BMS) in a Delaware Chancery Court, alleging the pharmaceutical giant has failed to honor milestone payment obligations from their 2016 acquisition agreement.
The lawsuit, spearheaded by Atlas Venture and other investors, claims that BMS has "reneged" on its commitments following the $150 million cash acquisition. The original deal structure included potential additional payments of up to $450 million tied to specific development and commercial milestones.
Deal Structure and Dispute Details
The acquisition agreement, signed in 2016, represented a significant investment in Padlock's innovative therapeutic platform. The total potential value of $600 million was structured with a $150 million upfront payment and $450 million in milestone-based compensation, a common arrangement in biotech acquisitions.
Industry Implications
Michael Gilman, Padlock's founding CEO and current head of Arrakis Therapeutics, emphasized the broader implications of this dispute for the biotechnology sector. "The upfront/milestone structure is a blueprint for our industry," Gilman stated, noting that such arrangements typically benefit all parties involved and rely heavily on buyer trustworthiness post-acquisition.
Impact on Future Deals
While Gilman indicated that such disputes are not common in the industry, he expressed concern about the current situation's potential impact. "That there's a breakdown in trust and good faith here is probably obvious. And it's unfortunate for everyone involved," he commented, highlighting the importance of maintaining integrity in milestone payment structures for future biotech acquisitions.
Bristol Myers Squibb has indicated its intention to address the allegations through legal channels, with the company expected to file its response in court. The outcome of this case could set important precedents for future biotech acquisition agreements and milestone payment structures within the industry.
