A stockholder in pharmaceuticals company Sunesis has filed suit against the company and its Board of Directors, alleging securities violations in connection with the proposed sale of the company to Viracta Therapeutics. The complaint alleged that the company, which describes itself as a “precision oncology company targeting virus-associated malignancies,” made material false or misleading statements or omissions in its Registration Statement.
The transaction at issue was announced via press release on November 30, 2020, and the Registration Statement was filed last week. The plaintiff took particular issue with the use of non-GAAP projections, or projections made outside of generally accepted accounting principles. The plaintiff said the defendant must include a reconciliation table that aligns non-GAAP projections with the GAAP measurements that are most comporable. They cited SEC guidance to support its claim.
The plaintiff specifically requested that the defendant disclose the company’s gross profit, operating income, net income, and unlevered free cash flow, which were used to calculate non-GAAP measures allegedly used in the Registration Statement.
The stockholder also complained that no projection information was provided for Sunesis itself beyond a “liquidation analysis.” Thy pointed to allegedly false or misleading statements made in the statement pertaining to MTS Health Partners, which advised on the transaction. According to the plaintiff, MTS was directed to assume “’that the only material assets of Sunesis were its cash and any proceeds of monetization of the Day One Agreement and the Equity Stake, that no other assets of Sunesis have any material value and that Sunesis does not currently, and does not intend in the future to, conduct any activity that may result in the generation of revenue other than the receipt of royalties and/or proceeds from the Day One Agreement’.” The plaintiff sought additional information as to why that assumption was made.
The plaintiff has requested an injunction of the transaction, an amendment to the Registration Statement addressing alleged material errors, and damages and costs for the plaintiff. The plaintiff is represented by Lifshitz Law Firm.