March 28, 2023

Volume XIII, Number 87


March 27, 2023

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SPAC Securities Class Action Comes for Private Equity Sponsor

Pharmaceutical and biotech companies, with proprietary and potentially lucrative products, have been popular targets for SPAC sponsors. Unfortunately, one such private equity sponsor may have its hands full after its managing partner was publicly named in a securities class action.

Immunovant Sciences was a private clinical-stage biopharmaceutical company that develops treatments for autoimmune diseases. One of its promising drugs – IMVT-1401 – was in Phase II clinical trials for the treatment of Graves’ ophthalmopathy and warm autoimmune hemolytic anemia. Dr. Roderick Wong, Managing Partner/Chief Investment Officer of RTW Investments and CEO of blank-check company Health Sciences Acquisitions Corporation (“HSAC”), must have liked what he saw, as Immunovant Sciences entered into a merger agreement with HSAC on September 29, 2019, after which the new company “changed” its name to Immunovant, Inc.

The merger was announced to the public three days later, in which Dr. Wong stated he “believe[d] IMVT-1401 is a uniquely compelling asset within the FcRn drug class” which he expected would become “a cornerstone therapy for treating many auto-antibody driven disease.” Throughout the rest of 2019 and 2020, Immunovant, Inc. positively mentioned IMVT-1401 in public statements and SEC filings.

However, Immunovant Inc. changed its tune on February 2, 2021 when it announced a “ voluntary pause of dosing in its ongoing clinical trials for IMVT-1401” as the company became aware of a “physiological signal consisting of elevated total cholesterol and LDL levels in IMVT-1401-treated patients in ASCEND GO-2, a Phase 2b trial in Thyroid Eye Disease (TED).”

On February 19, 2021, a sole plaintiff filed a purported federal securities class action against Immunovant, Dr. Wong, and its current CEO and CFO in the United States District Court for the Eastern District of New York. In her complaint, the plaintiff alleged the company and Dr. Wong’s statements were materially misleading as, among other things, HSAC failed to perform adequate due diligence on Immunovant Sciences prior to the merger.

Immunovant, Inc. has not yet filed its response, and the Court has not made any statements about class certification.

© 2023 Proskauer Rose LLP. National Law Review, Volume XI, Number 60

About this Author

Corey I. Rogoff Securities Litigation Lawyer Proskauer Law Firm

Corey Rogoff is a litigation associate in Washington, D.C. with a focus on securities litigation. Corey earned his J.D. from Columbia Law School, where he was a Harlan Fiske Stone Scholar and served on the Columbia Journal of Tax Law. While a summer associate at Proskauer, Corey seconded at Major League Baseball’s Washington Nationals franchise. Corey earned a B.A. in Political Science from Johns Hopkins University.