`
`Case 1:21-cv-05787 Document 1 Filed 07/06/21 Page 1 of 9
`
`
`
`UNITED STATES DISTRICT COURT
`SOUTHERN DISTRICT OF NEW YORK
`
`
`
`
`Case No. ___________
`
`JURY TRIAL DEMANDED
`
`
`
`
`v.
`
`
`AERPIO PHARMACEUTICALS, INC.,
`STEVE PRELACK, ANUPAM DALAL,
`CALEY CASTELEIN, CHERYL COHEN,
`JOSEPH GARDNER, and PRAVIN DUGEL,
`
`
`
`Defendants.
`
`MATTHEW WHITFIELD,
`
`
`
`
`Plaintiff,
`
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`
`COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
`
`Plaintiff, by his undersigned attorneys, for this complaint against defendants, 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:
`
`NATURE OF THE ACTION
`
`1.
`
`On May 16, 2021, Aerpio Pharmaceuticals, Inc.’s (“Aerpio” or the “Company”)
`
`Board of Directors (the “Board” or “Individual Defendants”) caused the Company to enter into an
`
`agreement and plan of merger (the “Merger Agreement”) with Aadi Bioscience, Inc. (“Aadi”) and
`
`Aspen Merger Subsidiary, Inc. (“Merger Sub”).
`
`2.
`
`Under the terms of the Merger Agreement, among other thing: (i) Aadi will merge
`
`with and into Merger Sub, with Aadi surviving as a wholly-owned subsidiary of Aerpio; and (ii)
`
`Aerpio will issue shares of Aerpio common stock to the stockholders of Aadi (the “Proposed
`
`Transaction”).
`
`3.
`
`On June 21, 2021, defendants filed a proxy statement (the “Proxy Statement”) with
`
`the United States Securities and Exchange Commission (the “SEC”) in connection with the
`
`

`

`Case 1:21-cv-05787 Document 1 Filed 07/06/21 Page 2 of 9
`
`
`
`Proposed Transaction.
`
`4.
`
`The Proxy Statement omits material information with respect to the Proposed
`
`Transaction, which renders the Proxy Statement false and misleading. Accordingly, plaintiff
`
`alleges herein that defendants violated Sections 14(a) and 20(a) of the Securities Exchange Act of
`
`1934 (the “1934 Act”) in connection with the Proxy Statement.
`
`JURISDICTION AND VENUE
`
`5.
`
`This Court has jurisdiction over the claims asserted herein pursuant to Section 27
`
`of the 1934 Act because the claims asserted herein arise under Sections 14(a) and 20(a) of the 1934
`
`Act and Rule 14a-9.
`
`6.
`
`This Court has jurisdiction over defendants because each defendant is either a
`
`corporation that conducts business in and maintains operations within this District, or is an
`
`individual with sufficient minimum contacts with this District so as to make the exercise of
`
`jurisdiction by this Court permissible under traditional notions of fair play and substantial justice.
`
`7.
`
`Venue is proper under 28 U.S.C. § 1391(b) because a portion of the transactions
`
`and wrongs complained of herein occurred in this District.
`
`PARTIES
`
`8.
`
`Plaintiff is, and has been continuously throughout all times relevant hereto, the
`
`owner of Aerpio common stock.
`
`9.
`
`Defendant Aerpio is a Delaware corporation and a party to the Merger Agreement.
`
`Aerpio’s common stock is traded on the NASDAQ, which is headquartered in New York, New
`
`York, under the ticker symbol “ARPO.”
`
`10.
`
`11.
`
`Defendant Steve Prelack is Chairman of the Board of the Company.
`
`Defendant Anupam Dalal is a director of the Company.
`
`
`
`2
`
`

`

`Case 1:21-cv-05787 Document 1 Filed 07/06/21 Page 3 of 9
`
`
`
`Defendant Caley Castelein is a director of the Company.
`
`Defendant Cheryl Cohen is a director of the Company.
`
`Defendant Joseph Gardner is Founder, President, and a director of the Company.
`
`Defendant Pravin Dugel is a director of the Company.
`
`The defendants identified in paragraphs 10 through 15 are collectively referred to
`
`12.
`
`13.
`
`14.
`
`15.
`
`16.
`
`herein as the “Individual Defendants.”
`
`
`Background of the Company and the Proposed Transaction
`
`SUBSTANTIVE ALLEGATIONS
`
`17.
`
`Aerpio is a biopharmaceutical company focused on developing compounds that
`
`activate Tie2 for indications in which Aerpio believes that activation of Tie2 may have therapeutic
`
`potential.
`
`18.
`
`On May 16, 2021, Aerpio’s Board caused the Company to enter into the Merger
`
`Agreement.
`
`19.
`
`Under the terms of the Merger Agreement, among other thing: (i) Aadi will merge
`
`with and into Merger Sub, with Aadi surviving as a wholly-owned subsidiary of Aerpio; and (ii)
`
`Aerpio will issue shares of Aerpio common stock to the stockholders of Aadi.
`
`20.
`
`According to the press release announcing the Proposed Transaction:
`
`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). . . .
`
`
`
`
`3
`
`

`

`Case 1:21-cv-05787 Document 1 Filed 07/06/21 Page 4 of 9
`
`
`
`Leadership
`
`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.
`
`Transaction Details
`
`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. . . .
`
`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. . . .
`
`Advisors
`
`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.
`
`The Proxy Statement Omits Material Information, Rendering It False and Misleading
`
`21.
`
`Defendants filed the Proxy Statement with the SEC in connection with the Proposed
`
`Transaction.
`
`22.
`
`As set forth below, the Proxy Statement omits material information.
`
`
`
`4
`
`

`

`Case 1:21-cv-05787 Document 1 Filed 07/06/21 Page 5 of 9
`
`
`
`23.
`
`First, the Proxy Statement omits material information regarding the Company’s and
`
`Aadi’s financial projections.
`
`24.
`
`The Proxy Statement fails to disclose the Company’s financial projections.
`
`25. With respect to Aadi’s financial projections, the Proxy Statement fails to disclose:
`
`(i) all line items used to calculate the projections; and (ii) all assumptions underlying the
`
`projections.
`
`26.
`
`The disclosure of projected financial information is material because it provides
`
`stockholders with a basis to project the future financial performance of a company, and allows
`
`stockholders to better understand the financial analyses performed by the company’s financial
`
`advisor in support of its fairness opinion.
`
`27.
`
`Second, the Proxy Statement omits material information regarding the analyses
`
`performed by the Company’s financial advisor, Ladenburg Thalmann & Co. Inc. (“Ladenburg”).
`
`28. With respect to Ladenburg’s Discounted Cash Flow Analysis, the Proxy Statement
`
`fails to disclose: (i) the assumptions underlying the adjustments made to the projections; (ii) the
`
`basis for assuming a 28.0% corporate tax rate; (iii) the individual inputs and assumptions
`
`underlying the discount rates; and (iv) the basis for assuming no terminal value.
`
`29. When a banker’s endorsement of the fairness of a transaction is touted to
`
`shareholders, the valuation methods used to arrive at that opinion as well as the key inputs and
`
`range of ultimate values generated by those analyses must also be fairly disclosed.
`
`30.
`
`Third, the Proxy Statement omits material information regarding the Company’s
`
`“second financial advisor.”
`
`31.
`
`The Proxy Statement fails to disclose: (i) the amount of compensation the second
`
`financial advisor has received or will receive in connection with its engagement; (ii) the amount
`
`
`
`5
`
`

`

`Case 1:21-cv-05787 Document 1 Filed 07/06/21 Page 6 of 9
`
`
`
`of the second financial advisor’s compensation that is contingent upon the consummation of the
`
`Proposed Transaction; (iii) whether the second financial advisor has performed past services for
`
`any parties to the Merger Agreement or their affiliates; (iv) the timing and nature of such services;
`
`and (v) the amount of compensation received by the second financial advisor for providing such
`
`services.
`
`32.
`
`The omission of the above-referenced material information renders the Proxy
`
`Statement false and misleading.
`
`33.
`
`The above-referenced omitted information, if disclosed, would significantly alter
`
`the total mix of information available to the Company’s stockholders.
`
`COUNT I
`
`Claim for Violation of Section 14(a) of the 1934 Act and Rule 14a-9 Promulgated
`Thereunder Against the Individual Defendants and Aerpio
`
`34.
`
`35.
`
`Plaintiff repeats and realleges the preceding allegations as if fully set forth herein.
`
`The Individual Defendants disseminated the false and misleading Proxy Statement,
`
`which contained statements that, in violation of Section 14(a) of the 1934 Act and Rule 14a-9, in
`
`light of the circumstances under which they were made, omitted to state material facts necessary
`
`to make the statements therein not materially false or misleading. Aerpio is liable as the issuer of
`
`these statements.
`
`36.
`
`The Proxy Statement was prepared, reviewed, and/or disseminated by the
`
`Individual Defendants. By virtue of their positions within the Company, the Individual Defendants
`
`were aware of this information and their duty to disclose this information in the Proxy Statement.
`
`37.
`
`The Individual Defendants were at least negligent in filing the Proxy Statement
`
`with these materially false and misleading statements.
`
`
`
`6
`
`

`

`Case 1:21-cv-05787 Document 1 Filed 07/06/21 Page 7 of 9
`
`
`
`38.
`
`The omissions and false and misleading statements in the Proxy Statement are
`
`material in that a reasonable stockholder will consider them important in deciding how to vote on
`
`the Proposed Transaction. In addition, a reasonable investor will view a full and accurate
`
`disclosure as significantly altering the total mix of information made available in the Proxy
`
`Statement and in other information reasonably available to stockholders.
`
`39.
`
`The Proxy Statement is an essential link in causing plaintiff to approve the Proposed
`
`Transaction.
`
`40.
`
`By reason of the foregoing, defendants violated Section 14(a) of the 1934 Act and
`
`Rule 14a-9 promulgated thereunder.
`
`41.
`
`Because of the false and misleading statements in the Proxy Statement, plaintiff is
`
`threatened with irreparable harm.
`
`COUNT II
`
`Claim for Violation of Section 20(a) of the 1934 Act
`Against the Individual Defendants
`
`42.
`
`43.
`
`Plaintiff repeats and realleges the preceding allegations as if fully set forth herein.
`
`The Individual Defendants acted as controlling persons of Aerpio within the
`
`meaning of Section 20(a) of the 1934 Act as alleged herein. By virtue of their positions as officers
`
`and/or directors of Aerpio and participation in and/or awareness of the Company’s operations
`
`and/or intimate knowledge of the false statements contained in the Proxy Statement, they had the
`
`power to influence and control and did influence and control, directly or indirectly, the decision
`
`making of the Company, including the content and dissemination of the various statements that
`
`plaintiff contends are false and misleading.
`
`44.
`
`Each of the Individual Defendants was provided with or had unlimited access to
`
`copies of the Proxy Statement alleged by plaintiff to be misleading prior to and/or shortly after
`
`
`
`7
`
`

`

`Case 1:21-cv-05787 Document 1 Filed 07/06/21 Page 8 of 9
`
`
`
`these statements were issued and had the ability to prevent the issuance of the statements or cause
`
`them to be corrected.
`
`45.
`
`In particular, each of the Individual Defendants had direct and supervisory
`
`involvement in the day-to-day operations of the Company, and, therefore, is presumed to have had
`
`the power to control and influence the particular transactions giving rise to the violations as alleged
`
`herein, and exercised the same. The Proxy Statement contains the unanimous recommendation of
`
`the Individual Defendants to approve the Proposed Transaction. They were thus directly involved
`
`in the making of the Proxy Statement.
`
`46.
`
`By virtue of the foregoing, the Individual Defendants violated Section 20(a) of the
`
`1934 Act.
`
`47.
`
`As set forth above, the Individual Defendants had the ability to exercise control
`
`over and did control a person or persons who have each violated Section 14(a) of the 1934 Act and
`
`Rule 14a-9, by their acts and omissions as alleged herein. By virtue of their positions as controlling
`
`persons, these defendants are liable pursuant to Section 20(a) of the 1934 Act. As a direct and
`
`proximate result of defendants’ conduct, plaintiff is threatened with irreparable harm.
`
`PRAYER FOR RELIEF
`
`
`
`WHEREFORE, plaintiff prays for judgment and relief as follows:
`
`A.
`
`Preliminarily and permanently enjoining defendants and all persons acting in
`
`concert with them from proceeding with, consummating, or closing the Proposed Transaction;
`
`B.
`
`In the event defendants consummate the Proposed Transaction, rescinding it and
`
`setting it aside or awarding rescissory damages;
`
`C.
`
`Directing the Individual Defendants to disseminate a Proxy Statement that does not
`
`contain any untrue statements of material fact and that states all material facts required in it or
`
`
`
`8
`
`

`

`Case 1:21-cv-05787 Document 1 Filed 07/06/21 Page 9 of 9
`
`
`
`necessary to make the statements contained therein not misleading;
`
`D.
`
`Declaring that defendants violated Sections 14(a) and/or 20(a) of the 1934 Act, as
`
`well as Rule 14a-9 promulgated thereunder;
`
`E.
`
`Awarding plaintiff the costs of this action, including reasonable allowance for
`
`plaintiff’s attorneys’ and experts’ fees; and
`
`F.
`
`Granting such other and further relief as this Court may deem just and proper.
`
`
`
`Plaintiff hereby requests a trial by jury on all issues so triable.
`
`JURY DEMAND
`
`Dated: July 6, 2021
`
`
`
`
`
`
`
`By:
`
`
`
`RIGRODSKY LAW, P.A.
`
`/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
`
`Attorneys for Plaintiff
`
`9
`
`