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Replies to post #673226 on NorthWest Biotherapeutics Inc (NWBO)
02/20/24 10:42 AM
shelf as such , so taking O/S back down to circa 900m so good for us but bad for the Exec.
Chancery Refuses Toss Of Biotech Firm Share Award Suit
By Jeff Montgomery · Listen to article
Law360 (November 17, 2023, 9:10 PM EST) -- Unjust enrichment and fiduciary breach claims against six directors or officers of biotech venture Northwest Biotherapeutics moved toward trial late Friday after a Delaware vice chancellor refused to dismiss claims that they failed to disclose real motives for dealing themselves more than $40 million in stock awards.
Vice Chancellor J. Travis Laster, ruling by telephone after arguments in September, dismissed — because it was deemed redundant — a fourth count seeking a declaratory judgment that the awards, approved by the board in 2020, failed to secure a legally binding, fully informed stockholder ratification in 2022.
According to the direct and derivative complaint, Northwest's board and officers obscured or held back their reasons for the outsized awards, and instead provided bogus justifications, including that they reflected years of service or "peer data."
"I think it's inferable at the pleading stage that this is an unjust benefit," the vice chancellor said, noting separately that the amended complaint filed on the company's behalf "supports an inference that this was just a pure, interested transaction."
Northwest is a clinical stage biotech company headquartered in Bethesda, Maryland, that operates with what the court called "minimal revenues" while seeking to develop lifesaving "personalized" immune therapy for cancers. It has never taken a drug candidate to commercialization.
Detailing the harm and reasons why the transactions were not entirely fair, the vice chancellor said the suit "alleged plausibly, above the reasonably conceivable standard, that the awards for non-employee directors far exceeded yearly compensation for directors at peer companies."
According to the complaint, Northwest depended on equity financing to fund its clinical research and development business, with new share sales diluting a $14.4 million package of awards to directors and officers in 2018. That allegedly prompted an improper, nearly $41 million follow-on option award vote benefiting the same group, supposedly to return, or "true up," the 2018 award to its original value.
Stockholders argued the actual reason for the 2020 awards was to offset the dilution created by public stock issues, in order to true up director and officer holdings group with the same percentage ownership of the company they held in 2018.
"True-up awards aren't a thing. There's no suggestion that people who were insiders get to go around truing themselves up just so they get to keep the same ownership interest in the company. That just doesn't follow — it's straight-up self-dealing," Vice Chancellor Laster said.
Attorneys for the defendants argued stockholders overwhelmingly approved the options in 2022, affording the decision the ordinary deference given to the business judgment of Delaware corporate boards.
Board members sought shareholder ratification only in 2022, after the first version of the suit was filed. Although the vote on the ratification secured a majority, stockholders challenged the ratification based on disclosure violations.
Stockholders, the vice chancellor said, would have wanted to know the real reason company officials were seeking a vote to ratify actions in 2020, with alleged disclosure failures making the approval vote ineffective.
"[The] defendants have relied on the fact that they publicized a copy of plaintiffs' lawsuit, which they say was sufficient to disclose fully and fairly [all the issues]," the vice chancellor said. "That doesn't do the trick. What the stockholders are entitled to is information from their fiduciaries that is true and correct and materially complete."
With the decision, the court rejected claims by defendants that the suit failed to adequately support the stockholders' claims. Also rejected were defense arguments that the suit failed to show it would have been futile to seek company actions on the derivative claims.
"At this stage, it's reasonable to infer that the stock awards for the company officers was a quid pro quo for approval of the director awards, and for pleading needs to be considered as a single act," the vice chancellor said.
The suit alleged plausibly "beyond a reasonably conceivable test" needed to survive dismissal that awards for nonemployee directors far exceed compensation at peer companies, the decision noted. Across similar businesses, director compensation ranges between $52,000 and $560,000. Northwest awards ranged from $1.25 million to $4.1 million, plus a $150,000 retainer.
"Even if I credit that the option awards were allocated across three years, that's still a lot of money, and it's inferably above what would be entirely fair," the vice chancellor said. He added separately that "it's inferable at this stage that there was no justification, and there can be unjust enrichment here."
Counsel for the stockholders and defendants did not comment after the ruling.
The stockholders are represented by David A. Jenkins, Neal C. Belgam and Jason Z. Miller of Smith Katzenstein & Jenkins LLP and Steven Purcell, Robert H. Lefkowitz, Jennifer Leung and Anisha Mirchandani of Purcell & Lefkowitz LLP.
The defendants are represented by Raymond J. DiCamillo, Rudolf Koch, Alexander M. Krischik, Sandy Xu and Nicholas F. Mastria of Richards Layton & Finger PA and Alexander K. Mircheff, Jonathan D. Fortney and Mark H. Mixon Jr. of Gibson Dunn & Crutcher LLP.
The case is In re: Northwest Biotherapeutics Inc. Stockholder Litigation, case number 2022-0193, in the Court of Chancery of the State of Delaware.
02/20/24 11:32 AM
so taking O/S back down to circa 900m so good for us but bad for the Exec
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