Friday, February 20, 2009

Targanta settles shareholder suit, moves merger forward

By Marc Songini

The soon-to-be-acquired Targanta Therapeutics Corp. has taken a step to resolve an ongoing lawsuit with shareholders that potentially was blocking the proposed merger.

Last month, the Cambridge based biotech Targanta (Nasdaq: TARG), which targets so-called superbug infections, agreed to be purchased by New Jersey’s The Medicines Co. (TMC) for about $133.35 million. Targanta’s management agreed to the tender offer, which was slated to expire on Feb. 24, and urged shareholders to accept it.

However, subsequently, according to  U.S. Securities and Exchange Commission documents, a number of the shareholders challenged the transaction, and accused CEO and president Mark Leuchtenberger and other directors of having “breached fiduciary duties to the stockholders.” In particular, the suit claimed, the directors had failed to adequately disclose “certain material information” in the merger recommendation statement. The shareholders brought suit in the Superior Court of the Commonwealth of Massachusetts.

After lawyers conferred, on Feb. 19 both sides agreed to settle the suit by creating a memorandum of understanding. Under its terms, Targanta will make supplemental disclosures to its solicitation-recommendation statement on its Schedule 14D-9 filed with the SEC. These additional disclosures include making public the criteria considered to select the potential strategic partners that had been contacted by financial advisor Leerink Swann LLC on Targanta’s behalf. Additionally, the company will provide additional information about a Dec. 17 board meeting when Leerink Swann advised the board on the need for exclusivity to negotiate with TMC, based on previous experiences with that company.

In a press release this past week, Targanta pointed out that the memorandum contains “no admission of wrongdoing.” Rather, it provides a way to avoid “the potential cost and burden of continued litigation.”

Last December, Targanta’s financial problems led it to cut 86 employees, some 75 percent of its staff.



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