AKRX-FRE GR – Initial comments on oral argument 8-23-18
AKRX/FRE GR – Initial comments on oral argument, in our opinion: (1) the Judge asked more questions and/or pushed back on AKRX more than FRE GR; that in isolation does not tell you much of anything (remember the ODP trial); we will say that AKRX did not do a very good job of responding to the Judge’s questions which we see as more of a lost opportunity like their poor briefing; the Judge seems frustrated that the parties did not do a better job of laying out the deep contract analysis here; in fact the Judge went to lengths to explain he has not decided yet and has to do a lot of thinking before he does; the Judge then basically asked the parties to settle the case because it is very close; (2) despite the Court’s strong suggestion that the parties settle we do not think the parties are likely to settle because as we explained before FRE GR CEO is likely to be fired unless FRE GR wins outright; perhaps with the Judge’s strong comments at the end of the hearing the supervisory board will come in and force settlement but that is also likely a low probability event; (3) all things being equal given the Judge’s questions and comments it appears the MAC argument has more legs than we think it should have; we still think once the Judge thinks it through the Judge is likely to conclude FRE GR has not established a MAC; and (4) the ordinary course argument did not seem to move much overall; FRE GR did a better job on Silverberg but not a good job on materiality; AKRX did well on the delay argument not being material and defining material but did not spend enough time developing its new argument; we note that much of the argument on the ordinary course issue on both sides was entirely new and should have been in the briefs; the Judge cannot be happy with the sandbagging by the parties.
OG Risk Arb is decreasing our probability of close to 60% from 70% because the Judge seems more concerned with MAC than we believed he would be and AKRX yet again did a poor job. We still think the right legal conclusion is for the Judge to conclude there is no MAC and no “material” ordinary course violation. With little clear guidance from the parties, we think this Judge will probably get to the right outcome but AKRX has made this a much closer
case than it should be. We also note that given his comments on needing to do a lot of work and doing his best to get a decision out quicker than 90 days this Court is very unlikely to rule in August, most likely to rule by the end of September and it is now more likely his decision could come out in October. If you want to discuss this further, please call me at 914-441-1629.