BioDelivery Sciences Faces Security Litigation

Last Friday, Shiva Stein filed an action in the Southern District of New York against BioDelivery Sciences International, Inc. and its board of directors. The plaintiff alleges that Defendants, in violation of federal securities laws, have disseminated a “materially incomplete and misleading Solicitation Statement” to shareholders “in connection with proposed acquisition of BioDelivery by affiliates of Collegium Pharmaceuticals, Inc. (‘Collegium’).”

Plaintiff alleges that she is a shareholder of BioDelivery.  Unlike many merger objection suits, this action is not brought on behalf of a purported class.  One of the individual defendants, Jeffrey A. Bailey, is alleged to be BioDelivery’s CEO.  The complaint does not allege that any of the other seven individual director defendants were also officers.

Plaintiff alleges that the Defendants filed the Solicitation Statement on Schedule 14D-9 with the SEC on February 18, 2022 in support of the proposed transaction with Collegium, which, like BioDelivery, is a pharmaceutical company.  As described in the complaint, the transaction is to be effected by Collegium’s making a tender offer for all outstanding shares of BioDiversity at $5.60 a share.  Collegium will acquire any shares not tendered in a “second step” merger between BioDiversity and Collegium’s acquisition vehicle.   BioDiversity will be the surviving entity in the merger and will continue as a wholly owned subsidiary of Collegium.

Plaintiff alleges that the Solicitation Statement, which “was furnished to the Company’s [BioDiversity] stockholders and solicits the stockholders to tender their shares in support of the Proposed Transaction,” failed “to provide material information concerning financial projections by BioDiversity management and relied upon by the financial advisors in their analyses.”  The Complaint alleges three causes of action:  violations of Section 14(e) of the Securities Exchange Act (the Exchange Act); violations of Section 14(d)(4) of the Exchange Act and related Regulation 14d-9; and, against the individual defendants only, violations of Section 20 (a) of the Exchange Act, which pertains to Controlling Persons liability.

Plaintiff seeks, among other things, injunctive relief against the transaction “unless and until Defendants disclose the [omitted] material information,” rescission of the Merger Agreement “to the extent already implemented,” or rescissory damages.

Plaintiff’s counsel is Melwani & Chan LLP.