Shareholder Sues BioSpecifics Technologies to Halt Proposed Merger

A Southern District of New York complaint claims that the proposed acquisition of BioSpecifics Technologies Corp. (BSTC) by a wholly-owned subsidiary of pharmaceutical company Endo International PLC (Endo), violates federal securities laws because the transaction fails to disclose material information to shareholders. Wednesday’s suit was filed against BSTC and a handful of its officers and directors.

The filing explains that BSTC is “a commercial-stage biopharmaceutical company,” that discovered and developed a drug, XIAFLEX®, to treat Dupuytren’s contracture and Peyronie’s disease. Endo currently markets XIAFLEX®, the complaint states. Endo reportedly “develops, manufactures, and distributes prescription pharmaceutical products” for a range of conditions including “insomnia, pain, urology, men’s and women’s health, pelvic pain, dermatology, and orthopedics.”

The shareholder’s complaint contends that on Oct. 19, BSTC announced its intention to merge with Endo pursuant to a tender offer to purchase all outstanding BSTC common stock for $88.50 per share. The tender offer is allegedly set to expire on Dec. 1, 2020. BSTC’s subsequently filed Securities and Exchange Commission (SEC)-required solicitation statement falls short of disclosure requirements, rendering it false and misleading, the complaint avers.

The plaintiff makes multiple arguments for why the deal should not proceed under the proposed terms. The complaint first states that the offer price is unfair because, “among other things, the intrinsic value of the Company is in excess of the amount [BSTC’s] stockholders will receive in connection with the Tender Offer.”

In addition, the merger agreement contains a non-solicitation clause that prevents BSTC from seeking “alternative proposals and constraints [sic] its ability to negotiate with potential buyers.” The agreement also requires BSTC to pay more than $23 million as a termination fee in the event that it declines to go through with the deal and also prevents BSTC “from obtaining a superior offer.”

Finally, the plaintiff argues that the solicitation statement omits material information, including financial projections and information regarding the analyses performed by the transaction’s financial advisors. Without those details, shareholders cannot accurately adjudge whether the offer price is fair, the plaintiff contends.

The complaint seeks to preliminarily and permanently enjoin the defendants from finalizing the tender offer, and alternatively, in the event that the deal is consummated, rescind, set it aside, or award rescissory damages. The filing also seeks declaratory relief and reimbursement of the plaintiff’s litigation costs and attorneys’ fees.

The plaintiff is represented by Moore Kuehn, PLLC.