Smart Local Unions & Councils Pension Fund v. Bridgebio Pharma, Inc.
| Decision Date | 29 December 2022 |
| Docket Number | C. A. 2021-1030-PAF |
| Parties | SMART LOCAL UNIONS AND COUNCILS PENSION FUND, on behalf of itself and all other similarly situated former stockholders of EIDOS THERAPEUTICS, INC., Plaintiff, v. BRIDGEBIO PHARMA, INC., NEIL KUMAR, ALI SATVAT, and UMA SINHA, Defendants. |
| Court | Court of Chancery of Delaware |
Date Submitted: September 19 2022
Thomas Curry, Tayler D. Bolton SAXENA WHITE P.A., Wilmington Delaware; David Wales SAXENA WHITE P.A., White Plains, New York; Gregory V. Varallo BERNSTEIN LITOWITZ BERGER &GROSSMANN LLP, Wilmington, Delaware; Mark Lebovitch BERNSTEIN LITOWITZ BERGER &GROSSMANN LLP, New York, New York; Jeremy Friedman OSTER &TEJTEL PLLC, Bedford Hills New York; Attorneys for Plaintiff Smart Local Unions and Councils Pension Fund.
Cliff C. Gardner, Andrew D. Kinsey SKADDEN, ARPS, SLATE, MEAGHER &FLOM LLP, Wilmington, Delaware; Attorneys for Defendants BridgeBio Pharma, Inc., Neil Kumar, Ali Satvat, and Uma Sinha.
A former stockholder of Eidos Therapeutics, Inc. ("Eidos" or the "Company") challenges a January 2021 merger in which BridgeBio Pharma, Inc. ("BridgeBio") acquired the remaining 37% of Eidos's common stock that it did not already own (the "Transaction"). In the Transaction, Eidos stockholders had the right to elect to receive either 1.85 shares of BridgeBio common stock or $73.26 in cash for each share of Eidos common stock.
The plaintiff has asserted claims alleging that BridgeBio breached its fiduciary duties as Eidos's controlling stockholder in connection with the merger. The plaintiff further alleges that three Eidos directors who also served as officers or directors of BridgeBio at the time of the Transaction breached their fiduciary duties by approving the merger.
The defendants have moved to dismiss the complaint under Court of Chancery Rule 12(b)(6) for failure to state a claim upon which relief can be granted. There is no dispute that the merger was an interested transaction involving a controlling stockholder, presumptively subject to review under the exacting entire fairness standard. The only issue on this motion is whether the Transaction complied with the framework established in Kahn v. M &F Worldwide Corp., 88 A.3d 635 (Del. 2014) ("MFW"), so as to subject the claims to business judgment review instead of entire fairness. Plaintiff argues that the defendants have not satisfied four of the six elements of the MFW framework.
Central to plaintiff's opposition is the Company's rejection of multiple proposals by global pharma giant GlaxoSmithKline plc ("GSK") to partner with or acquire Eidos. Plaintiff contends that the Company's treatment of the GSK proposals and the disclosures concerning those proposals in the proxy statement render MFW inapplicable.
For the reasons explained below, the court concludes that the defendants have satisfied MFW. Thus, the Transaction is subject to review under the business judgment standard, and the complaint must be dismissed.
The facts are drawn from the Verified Stockholder Class Action Complaint (the "Complaint")[1] and documents integral thereto, including documents produced to the plaintiff in response to a books and records demand under 8 Del. C. § 220, and documents otherwise subject to judicial notice.[2]
A. The Parties
Immediately prior to the closing of the Transaction, Eidos was a Delaware corporation and its shares were publicly traded on Nasdaq Global Select Market under the ticker symbol "EIDX." Eidos is a development-stage biopharmaceutical company focused on developing a product to treat transthyretin amyloidosis, a progressive condition that can lead to heart failure and other life-threatening conditions.[3] The Eidos drug, known as acoramidis or AG10, seeks to slow the progression of the disease by stabilizing the proteins that cause the disease's symptoms.[4]
Defendant BridgeBio is a Delaware corporation headquartered in Palo Alto, California.[5] Its shares are publicly traded on the Nasdaq Global Select Market. BridgeBio develops and commercializes treatments for genetic diseases and houses each drug development program in a separate dedicated subsidiary.[6] Immediately prior to the Transaction, BridgeBio owned approximately 63.2% of the outstanding shares of Eidos.[7]
Defendants Neil Kumar, Ali Satvat, and Uma Sinha were three of the six members of the Eidos board of directors (the "Eidos Board") at the time of the Transaction.[8] At that time, all three served simultaneously as a director, officer, or both, of BridgeBio.[9]
Kumar served as CEO of Eidos and a director on the Eidos Board beginning in April 2015 and continuing through the closing of the Transaction, while also serving as a director and CEO of BridgeBio, which he co-founded.[10] Satvat served on the Eidos Board from June 2018 through the closing of the Transaction, during which time he also served as a director of BridgeBio.[11] Satvat is a partner at Kohlberg Kravis Roberts & Co. LP ("KKR"), a private equity firm that owns approximately 28% of BridgeBio's stock.[12] Sinha served as a director on the Eidos Board from December 2019 through the closing of the Transaction.[13] During that time, she also served as the Chief Scientific Officer of Eidos and BridgeBio.[14]
B. Early History of Eidos
Eidos was founded in 2013. In 2017, BridgeBio invested $27 million in Eidos in exchange for a majority equity stake.[15] In 2018, AG10 continued to progress through the initial stages of testing in order to obtain approval from the U.S. Food and Drug Administration and began Phase II trials in early May 2018.[16] One month later, BridgeBio sold a minority stake in Eidos in an initial public offering (the "IPO"), reducing BridgeBio's majority ownership to 54.8%.[17] Nine months later, AG10 began a Phase III clinical trial for treatment of a particular type of ATTR, which, if successful, would be the last step before seeking regulatory approval.[18]
These rapid clinical successes set the stage for a sale of Eidos. On August 8, 2019, just fourteen months after the IPO, BridgeBio offered to acquire Eidos's minority shares at an exchange rate of 1.30 BridgeBio shares for each Eidos share.[19]In presenting its proposal, BridgeBio indicated that it intended to retain control of Eidos and was unwilling to participate in any alternative transactions.[20] On August 11, 2019, the Eidos Board formed a special committee, consisting of directors William Lis and Rajeev Shah, to evaluate BridgeBio's offer (the "2019 Special Committee").[21]
The 2019 Special Committee hired Centerview Partners LLC ("Centerview") as a financial adviser, Cravath, Swaine & Moore LLP ("Cravath") as a legal adviser, and Navigant Consulting, Inc. as an industry consultant.[22] After deliberation, the committee rejected the August 2019 proposal as inadequate to compensate minority stockholders for their stakes in the Company.[23] Negotiations between the Special Committee and BridgeBio continued through September and early October. BridgeBio and the committee could not agree on merger terms, and on October 14, 2019, BridgeBio publicly announced it was no longer pursuing a merger with Eidos.[24] Thereafter, the 2019 Special Committee was dissolved.[25]
In the summer of 2020, GSK set its sights on Eidos. After exchanging confidential information with Eidos, on August 16, 2020, GSK proposed a licensing and collaboration agreement with the Company.[26] The proposal contemplated $1 billion in upfront payments to Eidos and up to $700 million in milestone payments in exchange for Eidos's continued funding of all research and development activities.[27] The proposal specified terms for a commercialization cost and profit sharing arrangement upon AG10 reaching the market.[28] At the time, Eidos had a market capitalization of around $1.6 million.[29] The proposal was immediately shared with the Eidos Board.[30] According to the joint proxy statement disseminated to and soliciting votes of the Eidos and BridgeBio stockholders in favor of the transactions necessary to effectuate the terms of the Merger Agreement (the "Proxy"), the Eidos Board rejected the GSK proposal shortly after receiving it:
On August 18, 2020, the Eidos board held a videoconference meeting during which, among other things, the Eidos board discussed the August 16 collaboration proposal. Following such discussion, the Eidos board unanimously determined that the August 16 collaboration proposal was not in the best interests of Eidos and its stockholders and determined not to pursue the August 16 collaboration proposal. Dr. Kumar, on behalf of BridgeBio, informed the Eidos board that while no decision had been made, BridgeBio management was preliminarily considering potential alternatives with respect to Eidos, including the possibility of proposing a potential transaction, and that any potential transaction would be conditioned on approval by a special committee of independent directors and would be subject to a non-waivable condition requiring approval by the holders of a majority of the aggregate voting power represented by shares of Eidos common stock that are not owned by BridgeBio.[31]
The GSK proposal is not explicitly mentioned in the minutes of the August 18, 2020 Board meeting.[32] The minutes do describe that the board meeting was adjourned temporarily for a meeting of the compensation committee, following which the executive session was reconvened and "[a] variety of additional topics were discussed."[33] C. The Special Committee Process
At an August 24, 2020 Eidos Board meeting, Kumar formally disclosed[34]BridgeBio's renewed interest in acquiring Eidos.[35] BridgeBio's proposal was "conditioned on approval of a special committee of...
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