By Joshua Handelsman
On December 22, 2021, the Hon. Jesse M. Furman of the U.S. District Court for the Southern District of New York appointed Cohen Milstein’s client, Mangrove Partners Master Fund (“Mangrove”), as the lead plaintiff in a securities fraud lawsuit against Bristol-Myers Squibb (“BMY”) and its officers and directors.
The security at issue in this case is not common stock, but rather a type of security known as a contingent value right (“CVR”), which former Celgene Corporation shareholders received as part of BMY’s acquisition of Celgene. Each CVR entitled its holder to a $9 payment if BMY received Food and Drug Administration (“FDA”) approval of three drugs (previously in development by Celgene) by specified target dates. Because BMY failed to obtain timely FDA approval for one of those drugs by its target date at the end of 2020—the cancer drug Liso-cel—the company was able to avoid the entire payout to CVR holders, which was estimated to be around $7.4 billion.
In October 2021, a group of investment funds (the “Group”) filed a complaint alleging that BMY had slow-walked the approval process for Liso-cel despite having told investors in a proxy statement about the Celgene acquisition that it would diligently pursue approval of the three drugs on which the CVR payout depended. The initial complaint did not challenge any statements made in the nearly two years between the proxy statement and target date for approval of Liso-cel, even though the defendants had made numerous statements in that time about how they were diligently pursuing FDA approval.
With a few days left before the 60-day statutory deadline to apply to serve as lead plaintiff, Cohen Milstein filed a lawsuit on behalf of individual investor Ehab Khalil with similar claims and a longer class period that encompassed more of defendants’ statements about Liso-cel approval.
Mangrove and the Group filed competing motions for appointment as lead plaintiff. The parties’ briefing centered on two main issues. The first was whether Khalil’s complaint was substantially different from the initial complaint, in which case it would be necessary to issue a new notice and restart the 60-day period to file lead-plaintiff motions. Judge Furman ruled that the allegations in the two complaints arose from the same course of events— misleading statements about the FDA approval process for Lisocel—and thus a new notice was not necessary.
The second issue was whom to select as lead plaintiff. Mangrove was the presumptive lead plaintiff under the statutory scheme and the approach followed by the courts—selecting the movant with the largest financial stake in the litigation as measured by using the longest class period of the related complaints. The Group argued, however, that the court should determine the movants’ financial stake based only on the claims and class period contained in the initial complaint, because only the initial complaint was “properly noticed.” This argument was unsupported by case law, and it was mooted by the court’s ruling that a new notice and notice period were not required for Khalil’s complaint.
The Group also argued that Mangrove should not be appointed lead plaintiff because its claim to having the largest financial stake relied on a class period-expanding complaint filed by another Cohen Milstein client just days before the lead-plaintiff deadline. Judge Furman explained that there was no reason to suspect an improper motive behind the timing of Khalil’s complaint. And, picking up on an argument in Mangrove’s briefs, he probed the Group about why its own complaint had not included more claims and a broader class period—a seemingly strategic choice that maximized the Group’s chances of being appointed lead plaintiff.
Finally, the Group asked the Court to appoint it as a separate lead plaintiff for those Celgene shareholders who received CVR’s in the merger and to appoint Mangrove as a lead plaintiff for those who purchased CVR’s in the open market after the merger became effective. The Court rejected that argument. Ruling from the bench, Judge Furman appointed Mangrove as lead plaintiff for the entire case and all the claims and approved its selection of Cohen Milstein as lead counsel. The case is In re Bristol-Myers Squibb Co. CVR Securities Litigation (S.D.N.Y.) 1:21-cv-8255 (JMF).