Securities Suit Filed Over Celgene – Bristol-Myers Merger

On Wednesday, a class action complaint was filed in the Southern District of New York. The case was brought by investors in the Celgene Corporation who were adversely affected by the merger of Celgene with Bristol Myers Squibb Company.

The case specifically alleges material omission of facts from public fillings made with the Securities and Exchange Commission (SEC) seeking approval of the merger and detailing responsibilities being assumed by Bristol Myers Squib regarding specific product lines that the plaintiffs allege were not fulfilled, or were fulfilled poorly, damaging the valuation and standing of the product line and the company’s profitability.

The complaint explained that the plaintiffs were subject to a Contingent Value Rights clause: If the shareholders approved the merger and exchanged their Celgene shares, they would received a certain payment and a right to a future additional payment, contingent upon three drugs that were currently in development by Celgene receiving FDA approval by a certain milestone date. Such CVRs are often employed in the industry as much of the future value of such a corporation and the shares of investors is contingent upon the approval of future treatments and therapies by the FDA and other government bodies.

The plaintiffs allege that Bristol Myers Squibb was deliberately dilatory in pursuing approval of the drug Liso-Cel, a cancer treatment therapy and one of the three milestone drugs. Plaintiffs allege that Bristol Myers Squibb deliberately filed a Biologic License Application that was full of errors and incomplete, which required numerous amended filings and submission of additional information to the FDA for review. Most filings to the FDA require supplemental filings, but the plaintiffs allege that this filing was egregious, requiring 50% more corrective submissions that was typical of other Bristol Myers Squibb submissions as well as those of competitors in the field. This allegedly resulted in a delay in approval of 415 days, which is twice the average for similar products and missed the milestone approval date which would have triggered the additional payment by 34 days.

The plaintiffs are suing for violations of the Securities and Exchange Act Sections 14(a) and 20(a) and are seeking compensatory damages for the materially false statements and allegations of deliberate delay to avoid proper payment for the shares. The plaintiffs are represented by Entwistle & Cappucci LLP and Labaton Sucharow LLP.