Portola Investor Wants Docs About $1.4B Alexion Deal

By Rose Krebs
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Law360 (July 1, 2020, 6:32 PM EDT) -- A Portola Pharmaceuticals investor filed a lawsuit Tuesday in Delaware Chancery Court seeking records from the biotech company to probe possible wrongdoing related to its proposed $1.4 billion purchase by Alexion Pharmaceuticals, asserting Portola's directors seemed driven to sell by "COVID-19 pandemic-driven fear."

Zhiqiang Han asserts that the sale was pursued despite Portola's promising long-term prospects and after Portola abandoned efforts in Europe to secure a licensing partner for its drug Andexxa — which is marketed in Europe as Ondexxya. The suit said he is seeking documents per Section 220 of Delaware General Corporation Law to determine if there was mismanagement in connection with the deal and whether he should file a lawsuit against company directors.

Under Section 220, an investor can seek to have the Chancery Court compel a company to turn over records if the investor can show a proper purpose such as investigating wrongdoing.

"After abandoning efforts to secure a licensing partner in the EU for Ondexxya, the board took the opportunity presented by the COVID-19 pandemic to push Portola into a sale to Alexion," the records suit said. "The board did so despite knowing that the consideration offered by Alexion vastly undervalued the company in relation to its long range plan."

The suit asserts that "to justify the low deal price," Portola downwardly adjusted its future financial outlook even beyond what was recommended by the company's financial adviser.

"And the board attempted to justify the revisions by citing short-term concerns caused by the COVID-19 pandemic, even though the revisions inexplicably infect every year of the 12-year LRP [long range plan]," the suit contends.

The investor said he needs the records "to investigate his credible suspicion of wrongdoing in the process that led to the merger agreement and acquisition, and to investigate the independence and disinterestedness of Portola's directors and officers."

In May, the companies announced a deal for Alexion to buy Portola for roughly $1.41 billion, in an agreement they said is aimed to strengthen Alexion's ability to develop treatments for life-threatening blood-related disorders.

The agreement sees Boston-based Alexion picking up San Francisco-based Portola, which has developed a drug that has shown promise in treating severe and uncontrolled bleeding, according to a statement.

Under the terms of the transaction, a subsidiary of Alexion launched an $18-per-share tender offer for all of the outstanding shares of Portola common stock. Based on the number of outstanding shares listed in Portola's most recent 10-K filed with the U.S. Securities and Exchange Commission in February, the tender offer is valued at a total of roughly $1.41 billion. Once the tender offer has been successfully completed, Alexion intends to acquire all remaining shares not tendered for the same price of $18 per share by way of a merger.

The agreement is subject to customary conditions, including the tender of a majority of the outstanding shares of Portola common stock. It must also pass regulatory muster. The companies expect to complete the deal during the third quarter of 2020.

The investor's records suit contends the Alexion deal undervalues Portola and that Portola's officers have overplayed the coronavirus outbreak's impact on the company's outlook.

Portola has made "unsupportable assumptions, such as the notion that 'intracerebral hemorrhages and bleedings' that require [the company's drug] Andexxa would decline due to COVID-19."

"In fact, Andexxa's use may actually increase due to the pandemic because of the prevalence of blood clots in pandemic victims, who could require Andexxa to counteract the effect of blood thinners used to treat blood clots," the suit asserts.

On June 22, the investor sent a demand to Portola seeking records, including board minutes related to the merger deal and documents detailing the drafting of a public disclosure filed with the U.S. Securities and Exchange Commission in support of the deal.

The investor contends that the disclosure said Portola was moving forward with the deal due to "risks and uncertainty to Portola's business as a result of the COVID-19 pandemic." He also asserts that the stock price in the deal was below what a financial adviser had assessed its value.

In a letter sent to the investor's counsel on Monday, attorney Sarah M. Lightdale of Cooley LLP argued that the records demand "misstates and ignores critical facts," including those related to financial revisions made due to the COVID-19 pandemic, and that the demand was overbroad and lacked a proper purpose.

Lightdale, representatives for Portola, and counsel for the investor did not immediately respond to requests for comment Wednesday.

Counsel information for Portola was not available Wednesday.

The investor is represented by Nathan A. Cook of Block Leviton LLP, Randall J. Baron, David T. Wissbroecker and Christopher H. Lyons of Robbins Geller Rudman & Dowd LLP, and Brett M. Middleton of Johnson Fistel LLP.

The case is Zhiqiang Han v. Portola Pharmaceuticals Inc., case number 2020-0529, in the Court of Chancery of the State of Delaware.

--Additional reporting by Benjamin Horney. Editing by Michael Watanabe.

Correction: This story has been updated to correct the counsel information for the investor.

For a reprint of this article, please contact reprints@law360.com.

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