Karuna shareholder sues biotech, CEO Bill Meury over $14B BMS merger

A Karuna Therapeutics stockholder is suing the biotech, claiming that the company and its directors didn’t include or misrepresented key information in a proxy statement urging shareholders to vote in favor of the proposed Bristol Myers Squibb merger.

The plaintiff, Shannon Jenkins, alleges that nine Karuna directors—including CEO and President Bill Meury—violated federal securities laws in connection with the proposed acquisition by BMS, according to a legal complaint filed Feb. 13 in Delaware federal court.

In late December, Karuna entered a $14 billion merger agreement with BMS in which Karuna shareholders would receive $330 per share of common stock. The biotech currently awaits an FDA decision for lead asset KarXT, placing the company on the cusp of having the first schizophrenia treatment approved in years.

On Feb. 5, Karuna filed the in-question proxy statement with the Securities and Exchange Commission (SEC). The proxy statement recommends Karuna stockholders vote for the merger at a March 12 special meeting.

However, Jenkins alleges that the document omits or misrepresents material information essential to the vote, such as financial forecasts for Karuna and financial analyses prepared by Karuna’s financial adviser, Goldman Sachs & Co.

The proxy statement also fails to disclose potential conflicts of interest, including whether BMS mentioned management retention for the proposed combined company, according to the lawsuit.

Jenkins also takes issue with the lack of information provided regarding other proposed transactions. In January, an SEC filing showed that another large pharma competed for Karuna before BMS’ bid won out. The other multinational pharmaceutical company was identified only as “Party A.”

The filings don’t quantify how much an initial offer from Party A was nor disclose the details of a final proposal from Party A that was received Dec. 21, according to court documents.

Plaintiff Jenkins is looking to stop Karuna from finalizing the merger unless or until such information is disclosed to stockholders. If the merger goes through, the shareholder is looking to recover damages resulting from the defendants’ alleged violations.

Jenkins is a requesting a jury trial to settle the matter.   

Editor's note: Fierce Biotech has contacted Karuna Therapeutics for comment and will update this article as more information becomes available.