Constellation Pharmaceuticals and its Board of Directors have been sued by plaintiff Susan Finger following the announcement of their merger with MorphoSys AG. The complaint, filed on Tuesday in the District of Delaware, include allegations that the company violated federal securities laws.
Constellation is a “clinical-stage biopharmaceutical company using its expertise in epigenetics to discover and develop novel therapeutics that address serious unmet medical needs in patients with cancer associated with abnormal gene expression or drug resistance.” On June 2, Constellation and MorphoSys announced their intentions to merge their respective companies. MorphoSys is a “commercial-stage biopharmaceutical company dedicated to the discovery, development, and commercialization of innovative therapies for people living with cancer and autoimmune diseases.” Constellation would be sold to MorphoSys, and MorphoSys would acquire “all outstanding shares of Constellation for $34.00 in cash per share of Constellation common stock.”
According to the complaint, those who own Constellation stock have until July 14, when the Tender Offer expires, to sell their shares. Following the commencement of the tender offer on June 16, Constellation filed a Solicitation/Recommendation Statement with the SEC. They recommended that their stockholders tender their shares in the Tender Offer. However, the plaintiff explained that the recommendation omitted other important information, including the company’s financial projections, valuation, analyses, and data. Since the defendants willingly authorized the “issuance of the false and misleading Recommendation Statement,” Finger argued, the company violated the Exchange Act.
Without full disclosure of the financial information, the complaint filed by the plaintiff posits that it is difficult for stockholders to properly evaluate their decision where the tender offer is concerned. Due to the perceived violation of the Exchange Act, Finger is requesting that the tender offer be enjoined from expiring until the issues with the recommendation are remedied.
In addition to filing a materially incomplete and misleading recommendation statement through the omission of financial projections for the company, the merger agreement is flawed in that it expressed that when the companies merge, “all vested and unvested company options will be converted into the right to receive cash payments.” Finger argues that this makes Constellation insiders the primary beneficiaries from the proposed transaction rather than Constellation’s public stockholders.
The plaintiff is ultimately alleging violations of both the Exchange Act and an SEC rule. She is demanding judgement and preliminary and permanent relief in her favor. She is further seeking an order enjoining the defendants from closing the proposed transaction, litigation costs, and any other relief deemed just and proper. Finger is also demanding a trial by jury.
The plaintiff is represented by Long Law LLC.
