A Neos Therapeutics, Inc. shareholder has filed suit against the company and its board of directors for violations of the Securities Exchange Act of 1934, arising from the board’s attempt to sell the company to Aytu BioScience, Inc. through its wholly-owned subsidiary Neutron Acquisition Sub, Inc (together, Aytu). The Southern District of New York complaint, filed on Wednesday, contends that the defendants filed a materially incomplete and misleading registration statement that must be amended in order for shareholders to make an informed decision about the proposed sale.
Neos develops “extended release medication as orally disintegrating tablet or oral suspension forms,” sells a generic cough medicine, and is developing a product to treat chronic sialorrhea, according to the complaint. The companies announced that they had reached a definitive merger agreement on Dec. 10, 2020. Under the terms of the agreement, Neos stockholders are set to receive 0.1088 shares of Aytu common stock for each share of Neos common stock they hold, the filing explains. The deal is reportedly expected to close by the second quarter of this year.
The plaintiff takes issue with the registration statement’s incomplete and misleading information regarding the sales process, financial projections prepared by Neos management, and the financial analyses conducted by MTS Securities LLC, Neos’s financial advisor. For example and with regard to financial forecasts, the shareholder contends that the defendants “failed to disclose the line items used to calculate EBIT and unlevered free cash flow for the Neos Management Unadjusted Neos Projections, Neos Management Risk-Adjusted Neos Projections, Neos Management Unadjusted Aytu Projections, Neos Management Adjusted Aytu Projections, and the Pro Forma Analysis.”
As for the sales process, the complaint argues that certain board members were informed that the deal was going to close several days before it did, but the registration statement does not state which board members were informed and why. The plaintiff claims that without this and other information, stockholders cannot assess whether the sales process was fair and in particular, cannot consider whether actions “that may have been taken in bad faith” impacted the deal.
The plaintiff claims that allowing the proposed sale to proceed will result in irreparable harm, warranting the requested injunction. The shareholder is represented by Rowley Law PLLC.