Aerpio Pharmaceuticals, Inc. (Aerpio) and its Board of Directors are under suit from two parties, plaintiff Robin Odach and plaintiff Matthew Whitfield, following the company’s announcement of their intent to merge with Aadi Bioscience, Inc. (Aadi). The suits, both filed Tuesday in the Southern District of New York, allege violations of the Securities Exchange Act of 1934 and an accompanying Securities and Exchange Commission (SEC) rule.
Aerpio is a “biopharmaceutical company focused on developing compounds that activate Tie2 to treat ocular diseases and diabetic complications.” Similarly, Aadi is also a biopharmaceutical company. The terms of the proposed merger, the complaint said, are that Aerpio will acquire Aadi, and Aadi would be the surviving corporation as a “wholly owned subsidiary of Aerpio.” Aerpio would also change its name to Aadi Bioscience, Inc. Individuals who held stock in Aadi are set to receive 5.5096 shares of Aerpio stock for each share of Aadi stock they own, leaving 66.8% of the combined company in the hands of Aadi stockholders whereas 33.2% will belong to Aerpio stockholders.
The plaintiffs asserted that in an effort to gain the approval of its stockholders, Aerpio filed a “materially incomplete and misleading Preliminary Proxy Statement,” which is an inherent violation of the Exchange Act. The information in the proxy was misleading in both its financial projections and its key inputs for the financial analyses.
In response to the allegedly incomplete proxy, the plaintiffs are demanding that the omitted information be provided to stockholders prior to their vote on the merger so that they are able to make an informed decision. They are also seeking litigation costs and to “enjoin Defendants from taking any steps to consummate the Proposed Transaction,” until their demands are granted. In the event that the merger is consummated without the requested information, they are requesting damages due to the violations of the Exchange Act.