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`Case 1:21-cv-05787 Document 1 Filed 07/06/21 Page 1 of 9
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`UNITED STATES DISTRICT COURT
`SOUTHERN DISTRICT OF NEW YORK
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`Case No. ___________
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`JURY TRIAL DEMANDED
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`v.
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`AERPIO PHARMACEUTICALS, INC.,
`STEVE PRELACK, ANUPAM DALAL,
`CALEY CASTELEIN, CHERYL COHEN,
`JOSEPH GARDNER, and PRAVIN DUGEL,
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`Defendants.
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`MATTHEW WHITFIELD,
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`Plaintiff,
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`COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
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`Plaintiff, by his undersigned attorneys, for this complaint against defendants, alleges upon
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`personal knowledge with respect to himself, and upon information and belief based upon, inter
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`alia, the investigation of counsel as to all other allegations herein, as follows:
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`NATURE OF THE ACTION
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`1.
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`On May 16, 2021, Aerpio Pharmaceuticals, Inc.’s (“Aerpio” or the “Company”)
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`Board of Directors (the “Board” or “Individual Defendants”) caused the Company to enter into an
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`agreement and plan of merger (the “Merger Agreement”) with Aadi Bioscience, Inc. (“Aadi”) and
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`Aspen Merger Subsidiary, Inc. (“Merger Sub”).
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`2.
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`Under the terms of the Merger Agreement, among other thing: (i) Aadi will merge
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`with and into Merger Sub, with Aadi surviving as a wholly-owned subsidiary of Aerpio; and (ii)
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`Aerpio will issue shares of Aerpio common stock to the stockholders of Aadi (the “Proposed
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`Transaction”).
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`3.
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`On June 21, 2021, defendants filed a proxy statement (the “Proxy Statement”) with
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`the United States Securities and Exchange Commission (the “SEC”) in connection with the
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`Case 1:21-cv-05787 Document 1 Filed 07/06/21 Page 2 of 9
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`Proposed Transaction.
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`4.
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`The Proxy Statement omits material information with respect to the Proposed
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`Transaction, which renders the Proxy Statement false and misleading. Accordingly, plaintiff
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`alleges herein that defendants violated Sections 14(a) and 20(a) of the Securities Exchange Act of
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`1934 (the “1934 Act”) in connection with the Proxy Statement.
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`JURISDICTION AND VENUE
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`5.
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`This Court has jurisdiction over the claims asserted herein pursuant to Section 27
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`of the 1934 Act because the claims asserted herein arise under Sections 14(a) and 20(a) of the 1934
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`Act and Rule 14a-9.
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`6.
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`This Court has jurisdiction over defendants because each defendant is either a
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`corporation that conducts business in and maintains operations within this District, or is an
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`individual with sufficient minimum contacts with this District so as to make the exercise of
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`jurisdiction by this Court permissible under traditional notions of fair play and substantial justice.
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`7.
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`Venue is proper under 28 U.S.C. § 1391(b) because a portion of the transactions
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`and wrongs complained of herein occurred in this District.
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`PARTIES
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`8.
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`Plaintiff is, and has been continuously throughout all times relevant hereto, the
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`owner of Aerpio common stock.
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`9.
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`Defendant Aerpio is a Delaware corporation and a party to the Merger Agreement.
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`Aerpio’s common stock is traded on the NASDAQ, which is headquartered in New York, New
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`York, under the ticker symbol “ARPO.”
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`10.
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`11.
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`Defendant Steve Prelack is Chairman of the Board of the Company.
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`Defendant Anupam Dalal is a director of the Company.
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`Defendant Caley Castelein is a director of the Company.
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`Defendant Cheryl Cohen is a director of the Company.
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`Defendant Joseph Gardner is Founder, President, and a director of the Company.
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`Defendant Pravin Dugel is a director of the Company.
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`The defendants identified in paragraphs 10 through 15 are collectively referred to
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`12.
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`13.
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`14.
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`15.
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`16.
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`herein as the “Individual Defendants.”
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`Background of the Company and the Proposed Transaction
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`SUBSTANTIVE ALLEGATIONS
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`17.
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`Aerpio is a biopharmaceutical company focused on developing compounds that
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`activate Tie2 for indications in which Aerpio believes that activation of Tie2 may have therapeutic
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`potential.
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`18.
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`On May 16, 2021, Aerpio’s Board caused the Company to enter into the Merger
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`Agreement.
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`19.
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`Under the terms of the Merger Agreement, among other thing: (i) Aadi will merge
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`with and into Merger Sub, with Aadi surviving as a wholly-owned subsidiary of Aerpio; and (ii)
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`Aerpio will issue shares of Aerpio common stock to the stockholders of Aadi.
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`20.
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`According to the press release announcing the Proposed Transaction:
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`Aerpio Pharmaceuticals, Inc. (“Aerpio”) (Nasdaq: ARPO), a biopharmaceutical
`company focused on developing compounds that activate Tie2, and Aadi
`Bioscience, Inc. (“Aadi”), a privately-held biopharmaceutical company focusing
`on precision therapies for genetically-defined cancers with alterations in mTOR
`pathway genes, announced their entry into a definitive merger agreement.
`Following the proposed merger, Aerpio will change its name to “Aadi Bioscience,
`Inc.” and the combined public company will focus on advancing Aadi’s lead
`product candidate, FYARROTM (sirolimus albumin-bound nanoparticles for
`injectable suspension; nab-sirolimus; ABI-009). . . .
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`Leadership
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`Upon closing of the transaction, the combined company will be led by Aadi’s chief
`executive officer, Neil Desai, and headquartered in Los Angeles, California. Aadi’s
`board members Neil Desai and Richard Maroun; Aadi’s board observer Karin
`Hehenberger; and current Aerpio board members Anupam Dalal and Caley
`Castelein will be members of the board of directors of the combined company. In
`addition, Behzad Aghazadeh, managing partner of Avoro Capital Advisors and
`Avoro Ventures, will also join the board of the combined company upon the closing
`of the transaction.
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`Transaction Details
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`Under the terms of the merger agreement, shareholders of Aadi will receive shares
`of newly issued Aerpio common stock. On a pro forma basis, shareholders of Aadi
`will own approximately 66.8% and shareholders of Aerpio will own approximately
`33.2% of the combined company upon the closing of the merger, prior to the
`additional PIPE financing transaction. Following the closing of the concurrent PIPE
`financing, Aerpio shareholders will own approximately 14.7% of the combined
`company. The actual allocation is subject to adjustment based on Aerpio’s cash
`balance at the time of closing. . . .
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`The merger agreement has been approved by the boards of directors of both
`companies. The transaction is expected to close in the third quarter of 2021, subject
`to approval by Aerpio’s shareholders, the completion of the PIPE financing, and
`customary closing conditions. The PIPE financing is expected to close concurrently
`with, and is conditioned upon, the closing of the merger. . . .
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`Advisors
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`Ladenburg Thalmann & Co. Inc. is acting as financial advisor to Aerpio for the
`transaction and Goodwin Procter LLP is serving as its legal counsel. Perella
`Weinberg Partners LP and Piper Sandler & Co. are acting as financial advisors to
`Aadi for the transaction and Wilson Sonsini Goodrich & Rosati, P.C. is serving as
`legal counsel to Aadi. Jefferies LLC; Cowen and Company, LLC; and Piper
`Sandler & Co. are acting as placement agents for the PIPE financing.
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`The Proxy Statement Omits Material Information, Rendering It False and Misleading
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`21.
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`Defendants filed the Proxy Statement with the SEC in connection with the Proposed
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`Transaction.
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`22.
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`As set forth below, the Proxy Statement omits material information.
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`23.
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`First, the Proxy Statement omits material information regarding the Company’s and
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`Aadi’s financial projections.
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`24.
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`The Proxy Statement fails to disclose the Company’s financial projections.
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`25. With respect to Aadi’s financial projections, the Proxy Statement fails to disclose:
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`(i) all line items used to calculate the projections; and (ii) all assumptions underlying the
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`projections.
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`26.
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`The disclosure of projected financial information is material because it provides
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`stockholders with a basis to project the future financial performance of a company, and allows
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`stockholders to better understand the financial analyses performed by the company’s financial
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`advisor in support of its fairness opinion.
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`27.
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`Second, the Proxy Statement omits material information regarding the analyses
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`performed by the Company’s financial advisor, Ladenburg Thalmann & Co. Inc. (“Ladenburg”).
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`28. With respect to Ladenburg’s Discounted Cash Flow Analysis, the Proxy Statement
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`fails to disclose: (i) the assumptions underlying the adjustments made to the projections; (ii) the
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`basis for assuming a 28.0% corporate tax rate; (iii) the individual inputs and assumptions
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`underlying the discount rates; and (iv) the basis for assuming no terminal value.
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`29. When a banker’s endorsement of the fairness of a transaction is touted to
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`shareholders, the valuation methods used to arrive at that opinion as well as the key inputs and
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`range of ultimate values generated by those analyses must also be fairly disclosed.
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`30.
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`Third, the Proxy Statement omits material information regarding the Company’s
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`“second financial advisor.”
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`31.
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`The Proxy Statement fails to disclose: (i) the amount of compensation the second
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`financial advisor has received or will receive in connection with its engagement; (ii) the amount
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`of the second financial advisor’s compensation that is contingent upon the consummation of the
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`Proposed Transaction; (iii) whether the second financial advisor has performed past services for
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`any parties to the Merger Agreement or their affiliates; (iv) the timing and nature of such services;
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`and (v) the amount of compensation received by the second financial advisor for providing such
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`services.
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`32.
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`The omission of the above-referenced material information renders the Proxy
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`Statement false and misleading.
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`33.
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`The above-referenced omitted information, if disclosed, would significantly alter
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`the total mix of information available to the Company’s stockholders.
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`COUNT I
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`Claim for Violation of Section 14(a) of the 1934 Act and Rule 14a-9 Promulgated
`Thereunder Against the Individual Defendants and Aerpio
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`34.
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`35.
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`Plaintiff repeats and realleges the preceding allegations as if fully set forth herein.
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`The Individual Defendants disseminated the false and misleading Proxy Statement,
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`which contained statements that, in violation of Section 14(a) of the 1934 Act and Rule 14a-9, in
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`light of the circumstances under which they were made, omitted to state material facts necessary
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`to make the statements therein not materially false or misleading. Aerpio is liable as the issuer of
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`these statements.
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`36.
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`The Proxy Statement was prepared, reviewed, and/or disseminated by the
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`Individual Defendants. By virtue of their positions within the Company, the Individual Defendants
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`were aware of this information and their duty to disclose this information in the Proxy Statement.
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`37.
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`The Individual Defendants were at least negligent in filing the Proxy Statement
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`with these materially false and misleading statements.
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`38.
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`The omissions and false and misleading statements in the Proxy Statement are
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`material in that a reasonable stockholder will consider them important in deciding how to vote on
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`the Proposed Transaction. In addition, a reasonable investor will view a full and accurate
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`disclosure as significantly altering the total mix of information made available in the Proxy
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`Statement and in other information reasonably available to stockholders.
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`39.
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`The Proxy Statement is an essential link in causing plaintiff to approve the Proposed
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`Transaction.
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`40.
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`By reason of the foregoing, defendants violated Section 14(a) of the 1934 Act and
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`Rule 14a-9 promulgated thereunder.
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`41.
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`Because of the false and misleading statements in the Proxy Statement, plaintiff is
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`threatened with irreparable harm.
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`COUNT II
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`Claim for Violation of Section 20(a) of the 1934 Act
`Against the Individual Defendants
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`42.
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`43.
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`Plaintiff repeats and realleges the preceding allegations as if fully set forth herein.
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`The Individual Defendants acted as controlling persons of Aerpio within the
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`meaning of Section 20(a) of the 1934 Act as alleged herein. By virtue of their positions as officers
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`and/or directors of Aerpio and participation in and/or awareness of the Company’s operations
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`and/or intimate knowledge of the false statements contained in the Proxy Statement, they had the
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`power to influence and control and did influence and control, directly or indirectly, the decision
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`making of the Company, including the content and dissemination of the various statements that
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`plaintiff contends are false and misleading.
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`44.
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`Each of the Individual Defendants was provided with or had unlimited access to
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`copies of the Proxy Statement alleged by plaintiff to be misleading prior to and/or shortly after
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`Case 1:21-cv-05787 Document 1 Filed 07/06/21 Page 8 of 9
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`these statements were issued and had the ability to prevent the issuance of the statements or cause
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`them to be corrected.
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`45.
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`In particular, each of the Individual Defendants had direct and supervisory
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`involvement in the day-to-day operations of the Company, and, therefore, is presumed to have had
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`the power to control and influence the particular transactions giving rise to the violations as alleged
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`herein, and exercised the same. The Proxy Statement contains the unanimous recommendation of
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`the Individual Defendants to approve the Proposed Transaction. They were thus directly involved
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`in the making of the Proxy Statement.
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`46.
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`By virtue of the foregoing, the Individual Defendants violated Section 20(a) of the
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`1934 Act.
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`47.
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`As set forth above, the Individual Defendants had the ability to exercise control
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`over and did control a person or persons who have each violated Section 14(a) of the 1934 Act and
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`Rule 14a-9, by their acts and omissions as alleged herein. By virtue of their positions as controlling
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`persons, these defendants are liable pursuant to Section 20(a) of the 1934 Act. As a direct and
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`proximate result of defendants’ conduct, plaintiff is threatened with irreparable harm.
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`PRAYER FOR RELIEF
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`WHEREFORE, plaintiff prays for judgment and relief as follows:
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`A.
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`Preliminarily and permanently enjoining defendants and all persons acting in
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`concert with them from proceeding with, consummating, or closing the Proposed Transaction;
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`B.
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`In the event defendants consummate the Proposed Transaction, rescinding it and
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`setting it aside or awarding rescissory damages;
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`C.
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`Directing the Individual Defendants to disseminate a Proxy Statement that does not
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`contain any untrue statements of material fact and that states all material facts required in it or
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`Case 1:21-cv-05787 Document 1 Filed 07/06/21 Page 9 of 9
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`necessary to make the statements contained therein not misleading;
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`D.
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`Declaring that defendants violated Sections 14(a) and/or 20(a) of the 1934 Act, as
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`well as Rule 14a-9 promulgated thereunder;
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`E.
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`Awarding plaintiff the costs of this action, including reasonable allowance for
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`plaintiff’s attorneys’ and experts’ fees; and
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`F.
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`Granting such other and further relief as this Court may deem just and proper.
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`Plaintiff hereby requests a trial by jury on all issues so triable.
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`JURY DEMAND
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`Dated: July 6, 2021
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`By:
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`RIGRODSKY LAW, P.A.
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`/s/ Gina M. Serra
`Seth D. Rigrodsky
`Timothy J. MacFall
`Gina M. Serra
`Vincent A. Licata
`825 East Gate Boulevard, Suite 300
`Garden City, NY 11530
`Telephone: (516) 683-3516
`Email: sdr@rl-legal.com
`Email: tjm@rl-legal.com
`Email: gms@rl-legal.com
`Email: vl@rl-legal.com
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`Attorneys for Plaintiff
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`9
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