Case 3:22-cv-05019-LB Document 1 Filed 09/02/22 Page 1 of 20
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`BRODSKY & SMITH
`Evan J. Smith, Esquire (SBN 242352)
`esmith@brodskysmith.com
`Ryan P. Cardona, Esquire (SBN 302113)
`rcardona@brodskysmith.com
`9595 Wilshire Boulevard, Suite 900
`Beverly Hills, CA 90212
`Phone: (877) 534-2590
`Facsimile: (310) 247-0160
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`Attorneys for Plaintiff
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`UNITED STATES DISTRICT COURT
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`NORTHERN DISTRICT OF CALIFORNIA
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`Case No.:
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`Complaint For:
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`(1) Violation of § 14 (a) of the Securities
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`Exchange Act of 1934
`(2) Violation of § 20(a) of the Securities
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`Exchange Act of 1934
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`JURY TRIAL DEMANDED
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`SEBASTIAN MEINKING,
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` Plaintiff,
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` vs.
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`CHEMOCENTRYX, INC., THOMAS J.
`SCHALL, THOMAS A. EDWARDS,
`JOSEPH M. FECZKO, JENNIFER L.
`HERRON, RITA I. JAIN, SUSAN M.
`KANAYA, GEOFFREY M. PARKER,
`JAMES L. TYREE, and DAVID E.
`WHEADON,
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`Defendants.
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`Plaintiff, Sebastian Meinking (“Plaintiff”), by and through his attorneys, alleges upon
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`information and belief, except for those allegations that pertain to him, which are alleged upon
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`personal knowledge, as follows:
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`SUMMARY OF THE ACTION
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`Plaintiff brings
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`this
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`stockholder
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`action
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`against ChemoCentryx,
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`Inc.
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`(“ChemoCentryx” or the “Company”) and the Company’s Board of Directors (the “Board” or the
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`“Individual Defendants,”, collectively with the Company, the “Defendants”), for violations of
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`Sections 14(a) and 20(a) of the Securities and Exchange Act of 1934 (the “Exchange Act”) as a
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`result of Defendants’ efforts to sell the Company to Amgen, Inc. (“Parent”) through merger vehicle
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`COMPLAINT
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`Case 3:22-cv-05019-LB Document 1 Filed 09/02/22 Page 2 of 20
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`Carnation Merger Sub, Inc. (“Merger Sub, and collectively with “Parent,” “Amgen”) as a result of
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`an unfair process, and to enjoin an upcoming stockholder vote on a proposed all cash transaction
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`(the “Proposed Transaction”).
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`2.
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`The terms of the Proposed Transaction were memorialized in an August 3, 2022,
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`filing with the Securities and Exchange Commission (“SEC”) on Form 8-K attaching the definitive
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`Agreement and Plan of Merger (the “Merger Agreement”). Under the terms of the Merger
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`Agreement, Amgen will acquire all of the remaining outstanding shares of ChemoCentryx’s
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`common stock at a price of $52.00 per share in cash. As a result, ChemoCentryx will become an
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`indirect wholly-owned subsidiary of Amgen.
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`3.
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`Thereafter, on August 31, 2022, ChemoCentryx filed a Preliminary Proxy
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`Statement on Form PREM14A attaching the proxy statement (the “Preliminary Proxy Statement”)
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`with the SEC in support of the Proposed Transaction.
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`4.
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`The Proposed Transaction is unfair for a number of reasons. Significantly, it
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`appears as though the Board has entered into the Proposed Transaction to procure for itself and
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`senior management of the Company significant and immediate benefits with no thought to
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`Plaintiff, as well as the Company’s public stockholders. For instance, pursuant to the terms of the
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`Merger Agreement, upon the consummation of the Proposed Transaction, Company Board
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`Members and executive officers will be able to exchange all Company equity awards for the
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`merger consideration.
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`5.
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`In violation of the Exchange Act, Defendants caused to be filed the materially
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`deficient Preliminary Proxy Statement in an effort to convince Plaintiff to vote in favor of the
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`Proposed Transaction. The Preliminary Proxy Statement is materially deficient, deprives Plaintiff
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`of the information necessary to make an intelligent, informed and rational decision of whether to
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`vote in favor of the Proposed Transaction, and is thus in violation of the Exchange Act. As detailed
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`below, the Preliminary Proxy Statement omits and/or misrepresents material information
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`concerning, among other things: (a) the sales process and in particular certain conflicts of interest
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`for management; (b) the financial projections for ChemoCentryx, provided by ChemoCentryx
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`COMPLAINT
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`Case 3:22-cv-05019-LB Document 1 Filed 09/02/22 Page 3 of 20
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`management to the Board and the Board’s financial advisor Goldman Sachs & Co. LLC
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`(“Goldman Sachs”) and (c) the data and inputs underlying the financial valuation analyses, if any,
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`that purport to support the fairness opinions created by Goldman Sachs, if any, and provide to the
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`Company and the Board.
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`Absent judicial intervention, the Proposed Transaction will be consummated,
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`resulting in irreparable injury to Plaintiff. This action seeks to enjoin the Proposed Transaction.
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`7.
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`Plaintiff is a citizen of Ohio and, at all times relevant hereto, has been a
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`PARTIES
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`ChemoCentryx stockholder.
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`8.
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`Defendant ChemoCentryx a biopharmaceutical company, focuses on
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`the
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`development and commercialization of new medications for inflammatory disorders, autoimmune
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`diseases, and cancer in the United States. ChemoCentryx is incorporated under the laws of the
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`State of Delaware and has its principal place of business at 835 Industrial Road, Suite 600, San
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`Carlos, CA. Shares of ChemoCentryx common stock are traded on the Nasdaq Stock Exchange
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`under the symbol “CCXI.”
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`9.
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`Defendant Thomas J. Schall (“Schall”) has been a Director of the Company at all
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`relevant times. Schall also serves as the Company’s Chief Executive Officer (“CEO”) and
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`President.
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`10.
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`Defendant Thomas A. Edwards (“Edwards”) has been a director of the Company
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`at all relevant times.
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`Defendant Joseph M. Feczko (“Feczko”) has been a director of the Company at
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`all relevant times.
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`Defendant Jennifer L. Herron (“Herron”) has been a director of the Company at
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`all relevant times.
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`13.
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`Defendant Rita I. Jain (“Jain”) has been a director of the Company at all relevant
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`times.
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`COMPLAINT
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`Case 3:22-cv-05019-LB Document 1 Filed 09/02/22 Page 4 of 20
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`14.
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`Defendant Susan M. Kanaya (“Kanaya”) has been a director of the Company at all
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`relevant times.
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`Defendant Geoffrey M. Parker (“Parker”) has been a director of the Company at all
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`relevant times.
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`Defendant James L. Tyree (“Tyree”) has been a director of the Company at all
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`relevant times.
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`17.
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`Defendant David E. Wheadon (“Chainey”) has been a director of the Company at
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`all relevant times.
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`18.
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`Defendants identified in ¶¶ 9 - 17 are collectively referred to as the “Individual
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`Defendants.”
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`19.
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`Non-Party Parent discovers, develops, manufactures, and delivers human
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`therapeutics worldwide. Parent is headquartered in Thousand Oaks, CA and its shares are traded
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`on the NasdaqGS Stock Exchange under the symbol “AMGN.”
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`20.
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`Non-Party Merger Sub is a wholly owned subsidiary of Parent created to effectuate
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`the Proposed Transaction.
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`JURISDICTION AND VENUE
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`21.
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`This Court has subject matter jurisdiction pursuant to Section 27 of the Exchange
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`Act (15 U.S.C. § 78aa) and 28 U.S.C. § 1331 (federal question jurisdiction) as Plaintiff alleges
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`violations of Sections 14(a) and 20(a) of the Exchange Act. This action is not a collusive one to
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`confer jurisdiction on a court of the United States, which it would not otherwise have. The Court
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`has supplemental jurisdiction over any claims arising under state law pursuant to 28 U.S.C. § 1367.
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`22.
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`Personal jurisdiction exists over each defendant either because the defendant
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`conducts business in or maintains operations in this District or is an individual who is either present
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`in this District for jurisdictional purposes or has sufficient minimum contacts with this District as
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`to render the exercise of jurisdiction over defendant by this Court permissible under traditional
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`notions of fair play and substantial justice.
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`COMPLAINT
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`Case 3:22-cv-05019-LB Document 1 Filed 09/02/22 Page 5 of 20
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`23.
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`Venue is proper in this District pursuant to 28 U.S.C. § 1391, because
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`ChemoCentryx maintains its principal offices in this district, and each of the Individual
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`Defendants, as Company officers or directors, has extensive contacts within this District.
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`SUBSTANTIVE ALLEGATIONS
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`Company Background
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`24.
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`ChemoCentryx a biopharmaceutical company, focuses on the development and
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`commercialization of new medications for inflammatory disorders, autoimmune diseases, and
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`cancer in the United States. It offers TAVNEOS (avacopan), an orally administered selective C5aR
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`inhibitor for the treatment of adult patients with severe active anti-neutrophil cytoplasmic
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`autoantibody-associated vasculitis. The Company also develops TAVNEOS for the treatment of
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`patients with severe hidradenitis suppurativa, as well as patients with complement 3
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`glomerulopathy, and lupus nephritis. In addition, it develops CCX559, an orally administered
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`inhibitor for programmed death protein 1/programmed death-ligand 1 for the treatment of various
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`cancers; and CCX507, an orally administered inhibitor of the chemokine receptor known as CCR9,
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`which has completed Phase I clinical trial for the treatment of inflammatory bowel disease.
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`Further, the company has early-stage drug candidates that targets Th17 driven diseases and CCR6.
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`ChemoCentryx, Inc. was incorporated in 1996 and is headquartered in San Carlos, California.
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`25.
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`The Company’s most recent financial performance press release, revealing
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`financial results from the quarter preceding the announcement of the Proposed Transaction,
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`indicated sustained and solid financial performance. For example, in the May 5, 2022 press release
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`announcing its 2022 Q1 financial results, the Company highlighted such milestones as a five-fold
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`increase in net sales of TAVNEOS as well as the release of positive Phase I clinical trial data on
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`their Pharmacokinetics drug.
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`Speaking on these positive results, CEO Defendant Schall commented on the
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`Company’s positive financial results as follows, Strong performance was evident in the first
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`quarter,” ……. “The traction to-date is clear: all key performance indicators are up and Q1 revenue
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`exceeded our model. A five-fold increase in net sales occurred versus Q4 2021; there was a nearly
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`COMPLAINT
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`Case 3:22-cv-05019-LB Document 1 Filed 09/02/22 Page 6 of 20
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`three-fold increase in unique prescribers, and a greater than three-fold increase of patients on drug
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`this quarter. Further, referrals are coming from a growing number of first time as well as repeat
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`prescribers. In my view, all of this shows that we are executing on plan – and we believe this is
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`just the start for TAVNEOS.”
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`27.
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`These positive results are not an anomaly, but rather, are indicative of a trend of
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`continued financial success and future potential success by ChemoCentryx. Clearly, based upon
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`these positive financial results and outlook, the Company is likely to have future success.
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`Despite this upward trajectory and continually increasing financial results, the
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`Individual Defendants have caused ChemoCentryx to enter into the Proposed Transaction without
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`providing requisite information to ChemoCentryx stockholders such as Plaintiff.
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`The Flawed Sales Process
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`29.
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`As detailed in the Preliminary Proxy Statement, the process deployed by the
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`Individual Defendants was flawed and inadequate, was conducted out of the self-interest of the
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`Individual Defendants and was designed with only one concern in mind – to effectuate a sale of
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`the Company by any means possible.
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`30.
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`Notably, the Preliminary Proxy Statement fails to disclose whether a committee of
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`disinterested directors was formed to oversee and evaluate the Proposed Transaction, and if so,
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`what powers the committee had in doing so, including whether the committee had the power to
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`veto a transaction that is not in the best interest of common shareholders.
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`31.
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`Additionally, the Preliminary Proxy Statement is silent as to the nature of the
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`confidentiality agreement entered into between the Company and Amgen, whether this agreement
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`differed from any other agreement with potentially interested third parties not specifically
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`mentioned by the Preliminary Proxy Statement, if so in all specific manners, including all specific
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`terms of any such included “don’t-ask, don’t-waive” provisions or standstill provisions contained
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`therein, including, all specific conditions, if any, under which such provisions would fall away.
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`32.
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`It is not surprising, given this background to the overall sales process, that it was
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`conducted in an inappropriate and misleading manner.
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`COMPLAINT
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`Case 3:22-cv-05019-LB Document 1 Filed 09/02/22 Page 7 of 20
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`The Proposed Transaction
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`33.
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`On August 4, 2022, ChemoCentryx and Amgen issued a joint press release
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`announcing the Proposed Transaction. The press release stated, in relevant part:
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`THOUSAND OAKS, Calif. and SAN CARLOS, Calif., Aug. 4, 2022
`/PRNewswire/ -- Amgen (NASDAQ: AMGN) and ChemoCentryx, Inc.,
`(NASDAQ: CCXI), a biopharmaceutical company focused on orally administered
`therapeutics to treat autoimmune diseases, inflammatory disorders and cancer,
`today announced that the companies have entered into a definitive agreement under
`which Amgen will acquire ChemoCentryx for $52 per share in cash, representing
`an enterprise value of approximately $3.7 billion.
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`"The acquisition of ChemoCentryx represents a compelling opportunity for Amgen
`to add to our decades-long leadership in inflammation and nephrology with
`TAVNEOS, a transformative, first-in-class treatment for ANCA-associated
`vasculitis," said Robert A. Bradway, chairman and chief executive officer at
`Amgen. "We are excited to join in the TAVNEOS launch and help many more
`patients with this serious and sometimes life-threatening disease for which there
`remains significant unmet medical need. We also look forward to welcoming the
`highly skilled team from ChemoCentryx that shares our passion for serving patients
`suffering from serious diseases."
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`"A fierce commitment to improving human lives is the bond that unites Amgen and
`ChemoCentryx today," said Thomas J. Schall, Ph.D., president and chief executive
`officer of ChemoCentryx. "Last year, after 25 years of proud history, we at CCXI
`delivered on our founding promise with the approval of TAVNEOS for patients
`with anti-neutrophil cytoplasmic autoantibody-associated vasculitis (ANCA-
`associated vasculitis). It is an honor to now join Amgen's great mission, and
`together begin a bright new era bringing landscape-shaping medicines like
`TAVNEOS to those who will benefit most."
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`TAVNEOS is an orally administered selective complement component 5a receptor
`inhibitor. It was approved by the U.S. Food and Drug Administration in October
`2021 as an adjunctive treatment for adult patients with severe active ANCA-
`associated vasculitis, specifically granulomatosis with polyangiitis (GPA) and
`microscopic polyangiitis (MPA) (the two main forms of ANCA-associated
`vasculitis), in combination with standard therapy.
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`ANCA-associated vasculitis is an umbrella term for a group of multi-system
`autoimmune diseases with small vessel inflammation. Inflamed vessels may
`rupture or become occluded giving rise to a broad array of clinical symptoms and
`signs related to a systemic inflammatory response which may result in profound
`injury and dysfunction in the kidneys, lungs and other organs.
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`COMPLAINT
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`Case 3:22-cv-05019-LB Document 1 Filed 09/02/22 Page 8 of 20
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`Amgen is a leader in inflammation and nephrology. The company's inflammation
`portfolio
`includes Otezla®, ENBREL®, TEZSPIRE®, AMGEVITA™ (a
`biosimilar to HUMIRA®), RIABNI™ (a biosimilar to Rituxan®), and AVSOLA®
`(a biosimilar to REMICADE®). Amgen's pipeline includes four innovative Phase
`2 inflammation medicines – efavaleukin alpha for systemic lupus erythematosus
`and ulcerative colitis, ordesekimab for celiac disease, rocatinlimab for atopic
`dermatitis and rozibafusap alfa for systemic lupus erythematosus – as well as ABP
`654, a biosimilar to STELARA® that is in Phase 3 development. Amgen's
`nephrology portfolio includes EPOGEN®, Aranesp®, Parsabiv® and Sensipar®.
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`U.S. sales of TAVNEOS in the first quarter of 2022, the first full quarter of sales,
`were $5.4 million. TAVNEOS is also approved in major markets outside the U.S.,
`including the European Union and Japan. Vifor Fresenius Medical Care Renal
`Pharma Ltd. will retain exclusive rights to commercialize TAVNEOS outside the
`U.S., except
`in Japan where Kissei Pharmaceutical Co., Ltd. holds
`commercialization rights and Canada where Otsuka Canada Pharmaceutical holds
`commercialization rights.
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`In addition to TAVNEOS, ChemoCentryx has three early-stage drug candidates
`that target chemoattractant receptors in other inflammatory diseases and an oral
`checkpoint inhibitor for cancer.
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`The transaction has been unanimously approved by each company's board of
`directors. The transaction is subject to ChemoCentryx stockholder approval,
`regulatory approvals and other customary closing conditions, and is expected to
`close in the fourth quarter of 2022.
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`Amgen management will comment further on the ChemoCentryx transaction on its
`Q2 earnings call today.
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`PJT Partners acted as financial advisor to Amgen and Wachtell, Lipton, Rosen &
`Katz is serving as its legal advisor. Goldman Sachs & Co. LLC acted as financial
`advisor to ChemoCentryx, and Latham & Watkins LLP is serving as its legal
`advisor.
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`Potential Conflicts of Interest
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`The breakdown of the benefits of the deal indicate that ChemoCentryx insiders are
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`the primary beneficiaries of the Proposed Transaction, not the Company’s public stockholders
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`such as Plaintiff. The Board and the Company’s executive officers are conflicted because they
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`will have secured unique benefits for themselves from the Proposed Transaction not available to
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`Plaintiff as a public stockholder of ChemoCentryx.
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`COMPLAINT
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`Case 3:22-cv-05019-LB Document 1 Filed 09/02/22 Page 9 of 20
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`35.
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`Company insiders, currently own large, illiquid portions of Company stock all of
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`which will be exchanged for the merger consideration upon the consummation of the Proposed
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`Transaction, not shared amongst Plaintiff and other public stockholders of the Company. Notably,
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`while the Preliminary Proxy Statement provides the following information, it fails to account for
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`the cash consideration which such shares will be exchanged for:
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`Name and Address of
`Beneficial Owner
`Named Executive Officers and Directors
`Thomas J. Schall, Ph.D.
`Tausif Butt(7)
`Rita I. Jain, M.D.
`Susan M. Kanaya
`Markus J. Cappel, Ph.D.
`Thomas A. Edwards
`Joseph M. Feczko, M.D.
`Jennifer L. Herron
`Geoffrey M. Parker
`James L. Tyree
`David E. Wheadon, M.D.
`All directors and executive officers as a group (11 persons)
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`Number of
`Shares
`Beneficially
`Owned
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`Percentage
`of Shares
`Beneficially
`Owned
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`4,402,020
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`72,120
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`66,792
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`600,210
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`191,905
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`176,337
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`193,658
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`17,237
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`188,294
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`54,669
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`—
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` 5,970,968
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`6.0%
`*
`*
`*
`*
`*
`*
`*
`*
`*
`*
`8.0%
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`36.
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`Additionally, Company insiders, currently own large amounts of company options,
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`restricted stock units, and other equity awards, all of which will be exchanged for the merger
`
`consideration upon the consummation of the Proposed Transaction, not shared amongst Plaintiff
`
`and other public stockholders of the Company. The Preliminary Proxy Statement accounts for
`
`these awards as follows:
`
`Name
`Non-Employee Directors
`Thomas A. Edwards
`Joseph M. Feczko, M.D.
`Jennifer L. Herron
`Geoffrey M. Parker
`James L. Tyree
`David E. Wheadon, M.D.
`
`
`
`Name
`
`Vested
`Stock
`Options
`(#)
`
`
`
`Value of
`Vested
`Stock
`Options
`($)(1)
`
`Unvested
`Stock
`Options
`(#)
`
`Value of
`Unvested
`Stock
`Options
`($)
`
`Unvested
`RSUs/
`Restricted
`
`
`Stock (#)
`
`
`
`
`
`
`
`
`
` 30,143 1,206,822 8,342 247,007 15,723 817,596
` 42,643 1,682,572 8,342 247,007 15,723 817,596
` —
`— — — 17,237 896,324
` 42,643 1,682,572 8,342 247,007 15,723 817,596
` 42,643 1,682,572 8,342 247,007 15,723 817,596
` —
`— — — 22,274 1,158,248
`
`Value of
`Unvested
`RSUs/
`Restricted
`Stock ($)
`
`Total Value of
`Outstanding
`Stock Options
`and Unvested
`RSUs/Restricted
`Stock ($)
`
`
`
`
`2,271,424
`2,747,174
`896,324
`2,747,174
`2,747,174
`1,158,248
`
`Vested
`Stock
`
`
`
`
`
`Value of
`Vested
`Stock
`
`Unvested
`
`Stock
`
`
`
`Value of
`Unvested
`Stock
`
`Unvested
`RSUs
`(#)
`
`
`
`
`
`Value of
`Unvested
`
`
`
`Total Value of
`Outstanding
`Stock Options
`
`- 9 -
`COMPLAINT
`
`

`

`Case 3:22-cv-05019-LB Document 1 Filed 09/02/22 Page 10 of 20
`
`
`
`Executive Officers
`Thomas J. Schall, Ph.D.
`Tausif Butt
`Rita I. Jain, M.D.
`Markus J. Cappel, Ph.D.
`Susan M. Kanaya
`
`
`Options
`(#)
`
`Options
`($)(1)
`
`Options
`(#)
`
`Options
`($)
`
`RSUs
`($)
`
`and Unvested
`RSUs ($)
`
`
`
`
`
`
`
` 1,972,218 85,315,278 241,882 5,388,779 239,934 12,476,568 103,180,625
`
`
`21,875
`849,406 105,325 3,220,118 41,400 2,152,800 6,222,324
`
`16,791
`685,293 59,700 1,810,899 11,600
`603,200 3,099,392
`
`94,753 3,642,303 64,395 1,469,217 61,467 3,196,284 8,307,805
` 362,457 15,694,004 91,114 2,049,719 90,968 4,730,336 22,474,059
`
`37.
`
`In addition, certain employment agreements with certain ChemoCentryx
`
`executives, entitle such executives to severance packages should their employment be terminated
`
`under certain circumstances. These ‘golden parachute’ packages are significant, and will grant
`
`several directors or officers entitled to them millions of dollars, compensation not shared by
`
`Plaintiff and will be paid out as follows:
`
`Name
`Thomas J. Schall, Ph.D.
`Tausif Butt
`Rita I. Jain, M.D.
`Markus J. Cappel, Ph.D.
`Susan M. Kanaya
`
`
`Perquisites /
`Total
`Benefits
`Equity
`Cash
`
`($)
`
`($)
`
`($)
`
`($)
`
` 2,304,525 17,865,347 44,161 20,214,033
`
` 1,091,350 5,372,918 44,215 6,508,483
`
` 967,706 2,414,099
`994 3,382,799
`
` 1,159,928 4,665,501 21,014 5,846,443
`
` 1,455,233 6,780,055 62,421 8,297,709
`
`38.
`
`The Preliminary Proxy Statement also fails to adequately disclose communications
`
`regarding post-transaction employment during the negotiation of the underlying transaction must
`
`be disclosed to stockholders. Communications regarding post-transaction employment during the
`
`negotiation of the underlying transaction must be disclosed to stockholders. This information is
`
`necessary for Plaintiff to understand potential conflicts of interest of management and the Board,
`
`as that information provides illumination concerning motivations that would prevent fiduciaries
`
`from acting solely in the best interests of the Company’s stockholders.
`
`39.
`
`Thus, while the Proposed Transaction is not in the best interests of ChemoCentryx,
`
`Plaintiff or Company stockholders, it will produce lucrative benefits for the Company’s officers
`
`and directors.
`
`- 10 -
`COMPLAINT
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`
`
`

`

`Case 3:22-cv-05019-LB Document 1 Filed 09/02/22 Page 11 of 20
`
`
`
`1
`
`The Materially Misleading and/or Incomplete Preliminary Proxy Statement
`
`2
`
`40.
`
`On August 31, 2022, the ChemoCentryx Board caused to be filed with the SEC a
`
`3
`
`materially misleading and incomplete Preliminary Proxy Statement that, in violation the Exchange
`
`4
`
`Act, failed to provide Plaintiff in his capacity as a Company stockholder with material information
`
`5
`
`and/or provides materially misleading information critical to the total mix of information available
`
`6
`
`to Plaintiff concerning the financial and procedural fairness of the Proposed Transaction.
`
`7
`
`8
`
`9
`
`Omissions and/or Material Misrepresentations Concerning the Sales Process leading up
`
`to the Proposed Transaction
`
`41. Specifically, the Preliminary Proxy Statement fails to disclose material information
`
`10
`
`concerning the process conducted by the Company and the events leading up to the Proposed
`
`11
`
`Transaction. In particular, the Preliminary Proxy Statement fails to disclose:
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`a. Whether a committee of disinterested directors was formed in order to evaluate
`
`the Proposed transaction and if so, what powers it had in doing so;
`
`b. Whether the confidentiality agreements entered into by the Company with
`
`Amgen differed from any other unnamed confidentiality agreement entered into
`
`between the Company and an interested third parties;
`
`c. All specific conditions under which any standstill provision contained in any
`
`entered confidentiality agreement entered into between the Company and
`
`potentially interested third parties throughout the sales process, including
`
`Amgen, would fall away; and
`
`d. Adequate and complete disclosure of communications regarding post-
`
`transaction employment during the negotiation of the underlying transaction
`
`must be disclosed to stockholders.
`
`Omissions and/or Material Misrepresentations Concerning ChemoCentryx’s Financial
`
`Projections
`
`42. The Preliminary Proxy Statement fails to provide material information concerning
`
`27
`
`financial projections for ChemoCentryx provided by ChemoCentryx management to the Board
`
`28
`
`
`
`- 11 -
`COMPLAINT
`
`

`

`Case 3:22-cv-05019-LB Document 1 Filed 09/02/22 Page 12 of 20
`
`
`
`1
`
`and Goldman Sachs and relied upon by Goldman Sachs in its analyses. The Preliminary Proxy
`
`2
`
`Statement discloses management-prepared financial projections for the Company which are
`
`3
`
`materially misleading.
`
`4
`
`43. Notably the Preliminary Proxy Statement reveals that as part of its analyses,
`
`5
`
`Goldman Sachs reviewed, “certain internal financial analyses and forecasts for the Company,
`
`6
`
`including assumed probabilities associated with certain future events contemplated by such
`
`7
`
`forecasts and certain analyses related to the expected utilization by the Company” prepared by
`
`8
`
`Company management.
`
`9
`
`44. The Preliminary Proxy Statement should have, but fails to provide, certain
`
`10
`
`information in the projections that ChemoCentryx management provided to the Board and
`
`11
`
`Goldman Sachs. Courts have uniformly stated that “projections … are probably among the most
`
`12
`
`highly-prized disclosures by investors. Investors can come up with their own estimates of discount
`
`13
`
`rates or [] market multiples. What they cannot hope to do is replicate management’s inside view
`
`14
`
`of the company’s prospects.” In re Netsmart Techs., Inc. S’holders Litig., 924 A.2d 171, 201-203
`
`15
`
`(Del. Ch. 2007)
`
`16
`
`45. With regard to the Unaudited Prospective Financial Information prepared by
`
`17
`
`ChemoCentryx, the Preliminary Proxy Statement fails to disclose material line items, including
`
`18
`
`the following:
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`
`
`a. With respect to the projections which assume estimates of net revenue and
`
`EBIT with respect to the commercialization of TAVNEOS (including in
`
`indications other than ANCA-associated vasculitis) and ChemoCentryx’s
`
`CCX559 and CCX507 pipeline drug candidates for the third and fourth quarter
`
`of fiscal year 2022 and for fiscal years 2023 through 2044, the Preliminary
`
`Proxy Statement fails to disclose the following:
`
`i. EBIT, including all underlying inputs, metrics, and assumptions used to
`
`calculate this metric, including specifically: gross profit, interest
`
`expenses, taxes, and ChemoCentryx’s total operating expenses; and
`
`- 12 -
`COMPLAINT
`
`

`

`Case 3:22-cv-05019-LB Document 1 Filed 09/02/22 Page 13 of 20
`
`ii. Unlevered Free Cash Flow, including all underlying inputs, metrics, and
`
`assumptions used to calculate this metric, including specifically: tax
`
`expense, depreciation and amortization, capital expenditures, and
`
`changes in net working capital.
`
`b. With respect to the Projections that include the commercialization of
`
`TAVNEOS for ANCA-associated vasculitis for the third and fourth quarter of
`
`fiscal year 2022 and for fiscal years 2023 through 2044, as well as estimates of
`
`unlevered free cash flow with respect to the commercialization of TAVNEOS
`
`for ANCA-associated vasculitis for the same period, as approved by
`
`ChemoCentryx, the Preliminary Proxy Statement fails to disclose the following:
`
`i. EBIT, including all underlying inputs, metrics, and assumptions used to
`
`calculate this metric, including specifically: gross profit, interest
`
`expenses, taxes, and ChemoCentryx’s total operating expenses; and
`
`ii. Unlevered Free Cash Flow, including all underlying inputs, metrics, and
`
`assumptions used to calculate this metric, including specifically: tax
`
`expense, depreciation and amortization, capital expenditures, and
`
`changes in net working capital.
`
`46.
`
`The Preliminary Proxy Statement also fails to provide the specific bases and
`
`
`
`1
`
`2
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`adjustments upon which the assumptions underlying the various cases of projections rely.
`
`20
`
`47. The Preliminary Proxy Statement also fails to disclose a reconciliation of all non-
`
`21
`
`GAAP to GAAP metrics utilized in the projections.
`
`22
`
`48. This information is necessary to provide Plaintiff, in his capacity as a Company
`
`23
`
`stockholder, a complete and accurate picture of the sales process and its fairness. Without this
`
`24
`
`information, Plaintiff is not fully informed as to Defendants’ actions, including those that may
`
`25
`
`have been taken in bad faith, and cannot fairly assess the process.
`
`26
`
`49. Without accurate projection data presented in the Preliminary Proxy Statement,
`
`27
`
`Plaintiff is unable to properly evaluate the Company’s true worth, the accuracy of the Goldman
`
`28
`
`
`
`- 13 -
`COMPLAINT
`
`

`

`Case 3:22-cv-05019-LB Document 1 Filed 09/02/22 Page 14 of 20
`
`
`
`1
`
`Sachs’s financial analyses, or make an informed decision whether to vote in favor of the Proposed
`
`2
`
`Transaction. As such, the Board has violated the Exchange Act by failing to include such
`
`3
`
`information in the Preliminary Proxy Statement.
`
`4
`
`5
`
`6
`
`Omissions and/or Material Misrepresentations Concerning the Financial Analyses by
`
`Goldman Sachs
`
`50.
`
`In the Preliminary Proxy Statement, Goldman Sachs describes its fairness opinion
`
`7
`
`and the various valuation analyses performed to render such opinion. However, the descriptions
`
`8
`
`fail to include