Plaintiff Richard Gole filed suit on Wednesday in the Southern District of New York against defendants La Jolla Pharmaceutical Company, Kevin Tang, Larry Edwards, Craig Johnson, Laura Johnson, David Ramsay, and Robert Rosen (La Jolla Board of Directors). The lawsuit alleges that the defendants’ proposed transaction of a merger with Innoviva, Inc. will result in violations of the Exchange Act.
On July 11, 2022, the defendant filed an 8-K form with the SEC in which they detailed their plans to be acquired as an indirect wholly-owned subsidiary of Innoviva. The terms of the merger agreement note that Innoviva will acquire all outstanding shares of La Jolla stock at $6.23 per share. The 8-K form was followed by a solicitation/recommendation statement being filed with the SEC by the defendant where they expressed their support of the merger.
The plaintiff asserts that the proposed transaction is unfair since La Jolla’s recommendation statement “describes an insufficient process with only one goal in mind – to sell the Company [La Jolla] to Innoviva.” Specifically, plaintiff Gole claims that the recommendation statement does not disclose the powers of the committee that is in charge of managing the sales process, and whether or not they can veto a proposed transaction that is not in the best interest of shareholders like the plaintiff.
Gole also contends that the proposed transaction is intended to solely benefit La Jolla’s senior management without regard for stockholders, since the transaction is set to include terms like all executive officers “[being able] to exchange all Company equity awards for the merger consideration.”
The plaintiff alleges that the recommendation statement filed by the defendants is intentionally materially deficient so that shareholders will tender their shares in support of the proposed transaction. The deficiencies within the recommendation statement include details regarding the sales process, the financial projections for La Jolla, the data and inputs underlying the financial valuation analyses, and more.
Ultimately, Gole argues that the defendants’ “recommendation statement is materially deficient, deprives plaintiff of the information necessary to make an intelligent, informed and rational decision of whether to tender in favor of the proposed transaction, and is thus in violation of the Exchange Act.”
The complaint cites three separate violations of the Exchange Act. Plaintiff Gole is seeking to enjoin the proposed transaction, rescissory damages in the event that the transaction is consummated, an order requiring the defendants to comply with the Exchange Act, litigation fees, a trial by jury, and any other relief deemed just by the court.
The plaintiff is represented by Brodsky & Smith.