(Bloomberg) -- Biotech billionaire Patrick Soon-Shiong was accused in a shareholder lawsuit of misleading ImmunityBio Inc. investors about the prospects of the company’s flagship cancer drug in order to enrich himself at their expense.
The shareholder claims that Soon-Shiong duped investors into believing that bladder cancer drug Anktiva’s chances for regulatory approval were far lower than he knew them to be. The company’s public filings painted a grimmer picture than was warranted, and he used the resulting decline in the company’s stock to unfairly reap millions of dollars when the shares bounced back, according to the lawsuit.
“Soon-Shiong exploited the temporary dip in the company’s stock price” to make money for himself in violation of his fiduciary duty to the company’s shareholders, according to the suit, unsealed last week in Delaware Chancery Court with portions blacked out.
The suit says “it should have been apparent” to the other directors that his transactions “unfairly benefited” him and his affiliated companies at the expense of most investors in ImmunityBio, in which he holds a controlling stake.
ImmunityBio, where Soon-Shiong is executive chairman and global chief scientific and medical officer, didn’t respond to requests for comment on the suit.
Board’s Blessing
With the blessing of the other board members named in the complaint, the 72-year-old entrepreneur — who owns the Los Angeles Times and holds a minority stake in the NBA’s Lakers — arranged debt financing and a debt-to-equity conversion on terms that benefited him and his companies and diluted the holdings of ordinary shareholders, according to the suit.
Soon-Shiong’s business interests are woven together in a complex web of public and closely held entities. ImmunityBio and another publicly traded firm, NantHealth, account for about a quarter of his $11.8 billion fortune, according to the Bloomberg Billionaires Index.
The suit is the latest against Soon-Shiong over ImmunityBio’s handling of Anktiva. Another was filed in federal court in California in October claiming he and other company officials hid production problems with the immunotherapy treatment.
The Delaware suit stems from problems the US Food and Drug Administration uncovered at the company that ImmunityBio hired to produce Anktiva, where inspectors found chemistry, manufacturing and control issues in May 2023. ImmunityBio’s shares fell by more than 50% after an ImmunityBio filing, which the lawsuit says exaggerated the severity of the regulatory threat to Anktiva.
Soon-Shiong’s Perspective
Since regulators didn’t take issue with the drug’s “clinical results, patient data, safety or efficacy,” Soon-Shiong remained privately confident that Anktiva would be cleared for the US market, but didn’t fully share that perspective with other investors, the lawsuit says.
The suit was filed by shareholder Douglas Carlson, asking that the company be awarded damages he says it sustained as a result of the defendants’ “breaches of fiduciary duties and unjust enrichment.”
Such derivative lawsuits, as they’re called — in which any damages or other remedies go to the company instead of the plaintiff — are common in Chancery Court. The plaintiff is typically an ordinary shareholder.
The case is Carlson v. Soon-Shiong, 2024-1185, Delaware Chancery Court (Wilmington).
--With assistance from Anders Melin.
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