Case 3:21-cv-01019-BAS-MSB Document 1 Filed 05/27/21 PageID.1 Page 1 of 35
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`David E. Bower (SBN 119546)
`MONTEVERDE & ASSOCIATES PC
`600 Corporate Pointe, Suite 1170
`Culver City, CA 90230
`Tel: (213) 446-6652
`Fax: (212) 202-7880
`dbower@monteverdelaw.com
`Counsel for Plaintiff
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`UNITED STATES DISTRICT COURT
`FOR THE SOUTHERN DISTRICT OF CALIFORNIA
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`KURT ZIEGLER, Individually and on
`Behalf of All Others Similarly Situated,
`Plaintiff,
`
`v.
`GW PHARMACEUTICALS, PLC,
`JUSTIN GOVER, GEOFFREY GUY,
`CABOT BROWN, DAVID GRYSKA,
`CATHERINE MACKEY, JAMES
`NOBLE, ALICIA SECOR, and LORD
`WILLIAM WALDEGRAVE,
`Defendants.
`
`
`
`
`'21CV1019
`Civil Action No.
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`BAS
`
`MSB
`
`COMPLAINT
`CLASS ACTION
`DEMAND FOR JURY TRIAL
`1. VIOLATIONS OF SECTION
`14(a) OF THE SECURITIES
`EXCHANGE ACT OF 1934
`2. VIOLATIONS OF SECTION
`20(a) OF THE SECURITIES
`EXCHANGE ACT OF 1934
`
`Plaintiff Kurt Ziegler (“Plaintiff”), by his undersigned attorneys, alleges upon
`personal knowledge with respect to himself, and upon information and belief based
`upon, inter alia, the investigation of counsel as to all other allegations herein, as
`follows:
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`NATURE OF THE ACTION
`1.
`This action is brought as a class action by Plaintiff against GW
`Pharmaceuticals, PLC (“GW” or the “Company”) and the members of the Company’s
`board of directors (collectively referred to as the “Board” or the “Individual
`Defendants” and, together with GW, the “Defendants”) for their violations of Sections
`14(a) and 20(a) of the Securities Exchange Act of 1934 (“Exchange Act”), 15 U.S.C.
`§§ 78n(a), 78t(a), and SEC Rule 14a-9, 17 C.F.R. § 240.14a-9. Plaintiff’s claims arise
`in connection with the proposed acquisition (the “Merger”) of GW by Jazz
`Pharmaceuticals, PLC and its subsidiaries (“Jazz”).
`2.
`On February 3, 2021, GW entered into an agreement and plan of merger
`pursuant to which the holders of GW ordinary shares will receive $16.662/3 in cash
`plus an amount of Jazz ordinary shares equal to an exchange ratio that will be
`calculated based upon Jazz’s share price, and holders1 of GW American Depositary
`Shares (“GW ADSs”) will receive approximately $200 per share in cash and $20 in
`Jazz stock in consideration for their shares (the “Merger Consideration”).
`3.
`On March 15, 2021, to convince GW shareholders to vote in favor of the
`Merger, Defendants caused a materially false and misleading Definitive Proxy
`Statement, subsequently amended and supplemented on April 14, 2021 (as amended
`and supplemented, the “Proxy”), to be filed with the SEC and disseminated to GW’s
`shareholders. As set forth below, the Proxy was materially false and misleading with
`respect to GW’s financial projections and operations, the value of GW shareholders’
`stock, and the fairness of the Merger Consideration.
`4.
`The Proxy provided a materially false and misleading valuation picture
`of GW by disseminating unreasonably low financial projections for 2021-2035 (the
`“December Projections”), which were used to frame the Merger Consideration as
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`1 Holders of GW ordinary shares and holders of GW ADSs are referred to herein as
`shareholders.
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`“fair.” In reality, the Merger Consideration significantly undercompensated GW
`shareholders provided them with substantially less than the intrinsic fair value of their
`shares.
`5.
`The changes made to and the numbers reflected in the December
`Projections are contradicted by and inconsistent with statements made by the
`Company and management leading up to the Merger, and reflect just a fraction of the
`actual value of the Company.
`6.
`The December Projections were created solely for use by GW’s financial
`advisors, Goldman Sachs & Co. LLC (“Goldman Sachs”) and Centerview Partners
`LLC (“Centerview” and together with Goldman Sachs, the “Financial Advisors”), to
`perform the valuation analyses underlying their fairness opinions. Without the
`December Projections, which Defendants authorized Goldman Sachs and Centerview
`to use despite knowing that the December Projections did not accurately reflect the
`Company’s long-term financial prospects and value, Goldman Sachs and Centerview
`would have been unable to issue fairness opinions, Defendants would have been
`unable to claim that the Merger Consideration provided shareholders with fair value
`for their holdings, and Goldman Sachs and Centerview would have been forced to
`forego at least $69 million of the $72 million in fees they received.
`7.
`As set forth below, (i) the stated changes justifying the December
`Projections, (ii) the statements in the Proxy conveying that the December Projections
`and their underlying assumptions were “reasonably prepared” and reflected the
`Company’s “best currently available estimates,” and (iii) the implied present value per
`GW ADS ranges that were predicated on the December Projections misled GW
`shareholders about the fair value of their shares, caused them to vote in favor of the
`Merger, and accept the unfair Merger Consideration.
`8.
`The Merger closed on May 5, 2021, and GW shareholders were
`surrendered via the Merger for the inadequate Merger Consideration.
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`9.
`For these reasons and as set forth in detail herein, Defendants violated
`Sections 14(a) and 20(a) of the Exchange Act. Accordingly, Plaintiff seeks to recover
`damages resulting from Defendants’ violations of the Exchange Act.
`JURISDICTION AND VENUE
`10. This Court has original jurisdiction over this action pursuant to Section
`27 of the Exchange Act (15 U.S.C. § 78aa) and 28 U.S.C. § 1331 (federal question
`jurisdiction) as Plaintiff alleges violations of Sections 14(a) and 20(a) of the Exchange
`Act.
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`11. Personal jurisdiction exists over each Defendant either because the
`Defendant conducts business in or maintains operations in this District, or is an
`individual who is either present in this District for jurisdictional purposes or has
`sufficient minimum contacts with this District as to render the exercise of jurisdiction
`over the Defendants by this Court permissible under traditional notions of fair play
`and substantial justice.
`12. Venue is proper in this District under Section 27 of the Exchange Act, 15
`U.S.C. § 78aa, as well as pursuant to 28 U.S.C. § 1391, because: (i) the conduct at
`issue took place and had an effect in this District; (ii) GW maintained its US
`headquarters in this District and each of the Individual Defendants, Company officers
`and/or directors, either resides in this District or has extensive contacts within this
`District; (iii) a substantial portion of the Mergers and wrongs complained of herein
`occurred in this District; (iv) most of the relevant documents pertaining to Plaintiff’s
`claims are stored (electronically and otherwise), and evidence exists, in this District;
`and (v) Defendants have received substantial compensation in this District by doing
`business here and engaging in numerous activities that had an effect in this District.
`CLASS ACTION ALLEGATIONS
`13. Plaintiff brings this class action pursuant to Fed. R. Civ. P. 23 on behalf
`of himself and the other holders of GW (the “Class”). Excluded from the Class are
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`Defendants and any person, firm, trust, corporation, or other entity related to or
`affiliated with any Defendant.
`14. This action is properly maintainable as a class action because:
`a.
`The Class is so numerous that joinder of all members is
`impracticable. As of April 23, 2021, 378,535,952 ordinary shares were
`outstanding, including 368,966,160 ordinary shares held as GW ADSs, each
`representing twelve Ordinary Shares, and 9,569,792 Ordinary Shares, held by
`hundreds to thousands of individuals and entities scattered throughout the
`country. The actual number of GW shareholders will be ascertained through
`discovery;
`b.
`There are questions of law and fact that are common to the Class
`that predominate over any questions affecting only individual members,
`including the following:
`i)
`whether Defendants misrepresented material information in
`the Proxy, in violation of Section 14(a) of the Exchange Act;
`ii) whether the Individual Defendants violated Section 20(a) of
`the Exchange Act; and
`iii) whether Plaintiff and other members of the Class were
`harmed by the misleading Proxy;
`c.
`Plaintiff is an adequate representative of the Class, has retained
`competent counsel experienced in litigation of this nature, and will fairly and
`adequately protect the interests of the Class;
`d.
`Plaintiff’s claims are typical of the claims of the other members of
`the Class and Plaintiff does not have any interests adverse to the Class;
`e.
`The prosecution of separate actions by individual members of the
`Class would create a risk of inconsistent or varying adjudications with respect
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`to individual members of the Class, which would establish incompatible
`standards of conduct for the party opposing the Class;
`f.
`Defendants have acted on grounds generally applicable to the
`Class with respect to the matters complained of herein, thereby making
`appropriate the relief sought herein with respect to the Class as a whole; and
`g.
`A class action is superior to other available methods for fairly and
`efficiently adjudicating the controversy.
`PARTIES
`15. Plaintiff is, and at all relevant times has been, a shareholder of GW.
`16. Defendant GW is a company that was incorporated in the United
`Kingdom and maintained its principal executive offices at Sovereign House, Vision
`Park, Chivers Way, Histon, Cambridge CB24 9BZ, United Kingdom. The Company
`maintained its U.S. headquarters and an administrative office in Carlsbad, California.
`The Company’s U.S. subsidiary, Greenwich Biosciences, Inc. is also located in
`Carlsbad, California. The Company’s ADSs traded on the Nasdaq stock exchange
`under the ticker symbol “GWPH”.
`17.
`Individual Defendant Justin Gover was, at all relevant times, the Chief
`Executive Officer and Executive Director of the Company. In 2015, Gover relocated
`to open the company’s U.S. headquarters in Carlsbad, California and build the
`Company’s in-house U.S. commercial infrastructure, at least in part to capitalize on
`the regulatory climate regarding CBD.
`18.
`Individual Defendant Geoffrey Guy was, at all relevant times, the
`founder and Executive Chairman of the Company and Chairman of the Board.
`19.
`Individual Defendant Cabot Brown was, at all relevant times, a non-
`executive director of the Company.
`20.
`Individual Defendant David Gryska was, at all relevant times, a non-
`executive director of the Company.
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`I.
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`21.
`Individual Defendant Catherine Mackey was, at all relevant times, a non-
`executive director of the Company.
`22.
`Individual Defendant James Noble was, at all relevant times, the Lead
`Independent Director and Deputy Chairman of the Company.
`23.
`Individual Defendant Alicia Secor was, at all relevant times, a non-
`executive director of the Company.
`24.
`Individual Defendant William Waldegrave was, at all relevant times, a
`non-executive director of the Company.
`25. The Individual Defendants referred to in ¶¶ 17-24 are collectively
`referred to herein as the “Individual Defendants” and/or the “Board”, and together
`with GW they are referred to herein as the “Defendants”.
`SUBSTANTIVE ALLEGATIONS
`Background of the Company and the Merger
`26. GW, founded in 1998, is a biopharmaceutical company focused on
`discovering, developing, and commercializing novel therapeutics from their
`proprietary cannabinoid product platform in a broad range of disease areas. GW
`commercialized the world’s first plant-derived cannabinoid prescription drug,
`Sativex, which is approved for the treatment of spasticity due to multiple sclerosis in
`25 countries. The Company has two primary, more developed products: Epidiolex and
`Nabiximols (Sativex). GW also has a deep pipeline of additional cannabinoid product
`candidates and novel compounds, including compounds in Phase 1, Phase 2, and
`Phase 3 trials.
`27. The Company’s lead cannabinoid product is Epidiolex, a pharmaceutical
`formulation comprising highly purified plant-derived cannabidiol, or CBD, for which
`they retain global commercial rights. GW initially launched Epidiolex in the U.S. in
`November 2018 for the treatment of seizures associated with Lennox-Gastaut
`syndrome (LGS) and Dravet syndrome for patients two years of age and older. In July
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`2020, the U.S. Food and Drug Administration (FDA) expanded the approval of
`Epidiolex, adding a new indication of seizures associated with Tuberous Sclerosis
`Complex (TSC). The FDA also approved the expansion of all existing indications,
`LGS, Dravet syndrome and TSC, to patients one year of age and older. LGS and
`Dravet syndrome are severe childhood-onset, drug-resistant epilepsy syndromes. TSC
`is a rare genetic disorder that causes non-malignant tumors to form in many different
`organs and affects approximately 50,000 individuals in the United States and one
`million worldwide.
`28. GW’s most advanced pipeline asset in the United States is Nabiximols,
`for which it has commenced two out of five clinical trials for the treatment of spasticity
`due to multiple sclerosis. The three other studies are expected to commence in the first
`half of 2021. GW believes that any one of these studies could enable a new drug
`application (“NDA”) with the FDA, potentially as early as the fourth quarter of 2021
`and anticipates commercializing Nabiximols in the U.S. using their in-house
`commercial organization. Nabiximols is already approved in over 25 countries outside
`the U.S. for the treatment of spasticity due to multiple sclerosis under the brand name
`Sativex. GW is advancing plans to commence an additional clinical program for
`Nabiximols in spasticity due to spinal cord injury in 2021 and evaluating Nabiximols
`for post-traumatic stress disorder.
`29. GW offers a diverse and promising development pipeline for other drug
`candidates and indications, including GWP 42003 in Schizophrenia, GWP42006
`(CBDV) in Autism Spectrum Disorder, Intravenous GWP42003 in Neonatal Hypoxic-
`Ischemic Encephalopathy (NHIE), GWP4202541 in Neuropsychiatric symptoms, and
`Novel Compounds in Epilepsy. Aside from the novel compounds, each of the
`development candidates has show strong results in Phase 1 or Phase 2 clinical trials
`or studies.
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`30.
`Jazz, a public limited company incorporated in the Republic of Ireland,
`is a global biopharmaceutical company dedicated to developing and commercializing
`medicines, with a focus in neuroscience, including sleep and movement disorders, and
`in oncology, including hematologic malignancies and solid tumors. The Company’s
`corporate headquarters are located in Dublin, Ireland, with U.S. operations located in
`Palo Alto, California and Philadelphia, Pennsylvania. Jazz ordinary shares are listed
`on Nasdaq stock exchange under the ticker symbol “JAZZ”.
`The Background of the Merger
`31. On June 30, 2020, GW announced its strategy for bringing Nabiximols
`to the U.S. market and its plans to commence a Phase 3 clinical program, including,
`MS Spasticity Clinical program, Spinal Cord Injury spasticity program and Post
`Traumatic Stress Disorder program which will provide multiple opportunities for an
`NDA submission as early as 2021. In the press release, Defendant Gover stated:
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`We were pleased with the strength of U.S. Epidiolex sales in the second
`quarter in spite of the COVID-19 pandemic. Further, the recent
`approval and imminent launch of Epidiolex for the treatment of seizures
`associated with TSC provides a meaningful new opportunity to
`accelerate momentum through the second half of 2020 and beyond. We
`also continue to be excited about the potential of our product pipeline,
`in particular nabiximols, for which we recently outlined our accelerated
`US development strategy in the treatment of spasticity in patients with
`MS and other conditions. We look forward to commencing the
`nabiximols Phase 3 program as well as multiple other pipeline clinical
`trials in the second half of the year.
`32. On July 6, 2020 Jazz reached out to Defendant Gover, and on July 8,
`2020, Jazz made an initial offer to purchase the Company for $172 per GW ADS.
`33. On July 16, 2020, the Board met and discussed the Jazz offer. At the
`meeting, Scott Giacobello, GW’s Chief Financial Officer, presented background on
`Jazz based on public information, including information about its business and certain
`financial metrics. Giacobello reviewed with the GW Board certain forecasts that had
`been prepared by GW management prior to the receipt of Jazz’s July 8, 2020 proposal
`as part of its strategic planning process (the “July Projections”). Giacobello then
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`presented regarding consideration of available strategic alternatives and financial
`analyses prepared by Company management utilizing the July Projections.
`34. After these presentations, the GW Board unanimously concluded that
`Jazz’s offer fundamentally undervalued GW and the GW Board expressed confidence
`in GW’s standalone plan and prospects.
`35. On July 20, 2020, Evercore analysts issued a $275 price target for GW.
`36. On July 31, 2020, GW announced that the FDA approved a new
`indication Epidiolex oral solution to treat seizures associated with tuberous sclerosis
`complex (TSC) in patients one year of age and older.
`37. On August 6, 2020, the Company announced its Second Quarter 2020
`financial results and operational progress, reporting a 68% increase in total revenue
`and a decrease in costs of sales from 9% of net product sales to only 7% of net product
`sales. These improvements were driven by the substantial increase in Epidiolex net
`sales. In the press release, Defendant Gover stated:
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`We were pleased with the strength of U.S. Epidiolex sales in the second
`quarter in spite of the COVID-19 pandemic. Further, the recent
`approval and imminent launch of Epidiolex for the treatment of seizures
`associated with TSC provides a meaningful new opportunity to
`accelerate momentum through the second half of 2020 and beyond. We
`also continue to be excited about the potential of our product pipeline,
`in particular nabiximols, for which we recently outlined our accelerated
`US development strategy in the treatment of spasticity in patients with
`MS and other conditions. We look forward to commencing the
`nabiximols Phase 3 program as well as multiple other pipeline clinical
`trials in the second half of the year.
`38. On August 13, 2020, Jazz made another offer, which the Board again
`rejected. On September 11, 2020, Jazz reiterated its revised August 13 offer and
`indicated that it was willing to consider an increase in its proposal if GW would permit
`Jazz to conduct limited due diligence. Although the Board again rejected this proposal
`on September 17, 2020, privately, it became interested in exploring a sale and engaged
`the Financial Advisors following Jazz’s August 13, 2020 proposal.
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`39. Having apparently decided to pursue a potential sale, in October 2020,
`GW engaged Radford, the independent compensation consultant of the Remuneration
`Committee to review GW’s severance plans and programs, relating to both change in
`control and non-change in control scenarios, and to make recommendations regarding
`potential changes to those plans and programs.
`40. On November 3, 2020, the Company announced its Second Quarter 2020
`financial results and operational progress, outperforming revenue and earnings
`estimates, and reporting a sequential increase to revenue (up 51%) and decrease to
`costs (down to 6% of net product sales). In the press release, Defendant Gover stated:
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`We are pleased to report strong revenue growth in the 3rd quarter
`despite the challenges presented by COVID-19. Epidiolex meets a
`serious unmet need within the field of epilepsy and we expect the
`product to demonstrate continued strong growth in the months and
`years ahead. The recent expanded indication for the treatment of
`seizures associated with TSC has been very well received by patients,
`clinicians and payers. We have also now commenced the pivotal Phase
`3 program for nabiximols in the treatment of multiple sclerosis
`spasticity, which provides multiple opportunities for an NDA
`submission, including as early as next year. Beyond nabiximols, we are
`advancing several clinical-stage pipeline candidates, including the
`recent start of a Phase 2 trial in schizophrenia.
`41. On December 1, 2020, Jazz made a renewed offer for $205 per GW ADS.
`42. A week later, on December 8, 2020, the GW Board met with members
`of management, financial advisors, and legal advisors. At the end of the meeting, after
`considering the $205 per GW ADS offer, GW concluded that it needed new, lower
`financial projections for Goldman Sachs and Centerview to use to prepare the
`valuation analyses that would eventually underlie their fairness opinions.
`43. On December 13, 2020, the GW Board met again with members of
`management, financial advisors, and legal advisors. Armed with newly minted and
`drastically reduced financial projections (the “December Projections”) Goldman
`Sachs and Centerview presented financial analyses of GW based upon the December
`Projections, and discussion ensued regarding the analyses, the drivers and
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`assumptions underlying them, and various sensitivities presented by each financial
`advisor. Even after reviewing these drastically lowered financial valuations of GW,
`the Board was forced to concede that the latest Jazz offer still fundamentally
`undervalued GW.
`44. On December 23, 2020, Jazz increased its proposal to $220 per GW
`ADS, consisting of $200 in cash with the remainder in Jazz ordinary shares.
`45. On January 11, 2021, one day ahead of the 39th Annual J.P. Morgan
`Healthcare Conference, GW announced improved guidance for 2021 financial
`performance that exceeded expectations. In the press release, Defendant Gover stated:
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`Epidiolex sales increased by over 70% in 2020 despite the challenges
`of COVID-19, reflecting the positive impact this medicine has on
`patients as well as the performance of our commercial team. We remain
`encouraged by our patients’ experience on
`this product, as
`demonstrated by high persistence and refill rates. This, combined with
`our expansion of payer coverage and the recently approved Tuberous
`Sclerosis Complex indication, leads us to expect continued strong
`growth in 2021 in both the US and Europe. Our goals in 2021 include
`driving further Epidiolex growth and advancing multiple US pivotal
`trials for nabiximols in the treatment of MS spasticity, with the first
`data readout expected this year. In addition to our previously
`announced pipeline activities, we are leveraging our world leadership
`in cannabinoid science to design and synthesize novel cannabinoid
`molecules and expect our first novel product candidate to enter the
`clinic in 2021.
`46. As negotiations with Jazz drew closer, Radford made certain
`recommendations, which the Renumeration Committee discussed and ultimately
`adopted, including GW entering into a new employment agreement with Defendant
`Gover—the CEO ultimately in charge of both the financial projections and
`negotiations with Jazz. Indeed, on January 25, 2021, as negotiations with Jazz reached
`finality, the Remuneration Committee specifically identified the adoption of a
`company-wide severance program as had been recommended by Radford and
`discussed at previous meetings, matters relating to GW’s incentive programs and other
`employee benefits matters as relating to the proposed transaction with Jazz, and
`authorized senior management to discuss and negotiate these matters with Jazz.
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`Case 3:21-cv-01019-BAS-MSB Document 1 Filed 05/27/21 PageID.13 Page 13 of 35
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`Thereafter, Defendant Gover and others negotiated these matters from January 26
`through February 2, during which Jazz requested that members of GW management
`remain with the combined company after the completion of the Merger, some on a
`transitional basis and some on a more long-term basis, with Defendant Gover
`remaining for a transitional period—for a $7,600,00.00 fee.
`47. On February 2, 2021, during the same meeting at which they approved
`the Merger Agreement, the Board’s counsel reviewed the employee compensation and
`benefits related matters that had previously been discussed, including GW’s ability to
`implement a company-wide severance program as recommended by Radford and as
`previously discussed, the timing of GW’s 2021 long-term incentive grants and the
`treatment of incentive awards and other employee benefit programs in the Merger, as
`well as certain contractual provisions and incentives that had been negotiated with
`Jazz so that the senior management team would remain with the combined company.
`48. The following day the parties executed the Merger Agreement. Then,
`later in February 2021, the Board adopted the Greenwich Biosciences Amended and
`Restated Change in Control and Severance Benefit Plan and the GW Change in
`Control and Severance Benefit Plan.
`49. Through the combination of these changes and the Merger, GW’s
`officers and directors earned millions of dollars, not shared with GW holders.
`Moreover, in addition to the re-negotiated severance agreements, GW granted each
`executive officer a special transition incentive bonus: Defendant Gover—$7,600,000;
`U.S. Chief Commercial Officer Darren Cline—$2,300,000; CFO Giacobello—
`$2,550,000; Chief Legal Officer Douglas Snyder—$2,600,000; and CMO
`Knappertz—$2,600,000. As a result of these incredibly lucrative arrangements made
`at the time of the Merger, Defendant Gover was classified as a “Tier 1” benefit
`recipient entitling him nearly $40 million in benefits—more than any other GW
`executive officer:
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`Case 3:21-cv-01019-BAS-MSB Document 1 Filed 05/27/21 PageID.14 Page 14 of 35
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`Name
`Geoffrey Guy
`Justin Gover
`Scott Giacobello
`Volker Knappertz
`Douglas Snyder
`
`Perquisites /
`Total ($)
`Benefits ($)
`Equity ($)
`Cash ($)
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` $ 1,215,113 $ 14,667,437 $
`6,210 $ 15,888,760
` $ 10,071,472 $ 28,944,224 $ 42,240 $ 39,057,936
` $ 3,637,101 $ 8,621,346 $ 46,680 $ 12,305,127
` $ 3,798,681 $ 9,326,794 $ 46,680 $ 13,172,155
` $ 3,742,806 $ 8,953,618 $ 46,680 $ 12,743,104
`
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`II. The Materially Misleading Proxy
`50. On March 15, 2021, Defendants filed the materially misleading Proxy
`with the SEC to solicit shareholder approval of the Merger.
`51. Each of the Defendants reviewed the Proxy before it was disseminated
`to the Company’s shareholders, as they each had a duty to review the Proxy and ensure
`it did not contain any materially false or misleading statements. Defendants caused
`the materially false and misleading Proxy to be filed with the SEC and disseminated
`to GW’s shareholders. Indeed, the Proxy could not have been disseminated without
`Defendants’ approval, and it repeatedly discussed the actions and beliefs of the full
`GW Board, and stated that for the reasons described in the Proxy the Board
`unanimously recommended that the Company’s shareholders vote in favor of the
`Merger. As set forth herein, the Proxy contained materially false and misleading
`statements which influenced GW shareholders’ decision concerning how to vote their
`shares, in violation of Section 14(a) and SEC Rule 14a-9.
`52.
`In conjunction with approving the Merger, Defendants elected to obtain
`a “fairness opinion” from their financial advisors, Goldman Sachs and Centerview.
`Fairness opinions are not required by law, but are often obtained by boards of directors
`anyway so that they can be touted to shareholders as evidence that the merger they
`approved is purportedly fair. As has been well documented, fairness opinions are often
`“deeply flawed”, as they “are frequently prepared utilizing methodologies [and inputs]
`that simply do not jibe with best practices. These defects are exacerbated by the
`recurring problem of investment banks who are conflicted in their provision of
`fairness opinions.” Steven M. Davidoff, Fairness Opinions, 55 Am. U. L. Rev. 1557,
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`Case 3:21-cv-01019-BAS-MSB Document 1 Filed 05/27/21 PageID.15 Page 15 of 35
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`1573-78 (2006). As one scholar put it, “obtaining a fairness opinion has become like
`the practice of buying indulgences prior to the Protestant Reformation, but for sins
`that one is about to commit instead of for past sins. The practice is very
`widespread but is not entirely legitimate.” Jonathan R. Macey, The Regulator Effect
`In Financial Regulation, 98 CORNELL L. REV. 591, 618-19 (March, 2013).
`53. For acting in their roles as financial advisors and providing fairness
`opinions to the board, each of the Financial advisors was paid $36 million. However,
`only $1.5 million was paid upon execution of the Merger Agreement. The remaining
`$34.5 million owed to each Financial Advisor was contingent upon the consummation
`of the Merger. Therefore, 95.8% of the Financial Advisors’ compensation (a
`combined $69 million) would only be paid to them if they provided the Board with a
`fairness opinion blessing the Merger as “fair” from a financial point of view to GW
`shareholders.
`54. As stated herein, the Financial Advisors would not have been able to
`provide, and the Defendants would not have been able to obtain, a fairness opinion
`without the significantly lower December Projections.
`The Financial Projections
`55.
`In connection with GW’s ordinary strategic planning process, Defendant
`Gover and his management team prepared the July Projections reflecting the
`Company’s anticipated future operations as a standalone entity. The July Projections
`included management projections for the following products and product candidates:
`(i) Epidiolex in Lennox-Gastaut Syndrome, Dravet Synd