Citi, New Enterprise, and Ex-Tesaro Board Win $5.1B Glaxo Merger Appeal Case

In a proposed class action lawsuit, Tesaro Inc. investors recently tried to challenge a $5.1 billion sale of the oncology-focused drug company to pharmaceutical behemoth GlaxoSmithKline Plc. The defendants, which included Tesaro Inc.’s ex-board, backers at New Enterprise Associates Inc., and financial advisers at Citigroup Inc., challenged the suit and won, however, as Delaware’s top court rejected the lawsuit.

The state’s justices upheld a decision dismissing the case for reasons stated by Vice Chancellor Morgan T. Zurn, who threw the case out of Delaware’s Chancery Court in August of 2021, according to Bloomberg Law. Zurn claims that former Tesaro shareholders were wrong in accusing its former directors of facilitating an underpriced deal. The investors claimed that Tesaro’s ex-board members, with Citi’s assistance, rushed the deal so that New Enterprise “could exit its longtime investment on terms justifying exorbitant fees it planned to charge on a new fund it was raising,” according to Bloomberg Law.

Become a Subscriber

Please purchase a subscription to continue reading this article.

Subscribe Now

The suit alleged that New Enterprise had strong connections to Tesaro’s leadership. However, none of the allegations illustrated a conflict of interest that justified the lawsuit, according to Zurn. The lawsuit was filed in 2020, a year after Tesaro merged with Glaxo. The suit accused Tesaro’s former leaders, in conjunction with members of Citi, of capitulating to conflicts of interest regarding the companies’ connections with New Enterprise and Glaxo. The main complaint in the suit is that the merger provided Glaxo with an opportunity to commercialize Zejula, a potential breakthrough ovarian cancer drug that Tesaro developed.

Tesaro’s former board members were represented by Abrams & Bayliss LLP and Ropes & Gray LLP. New Enterprise was represented by Chipman Brown Cicero & Cole LLP and Holland & Knight LLP. Citi was represented by Paul, Weiss, Rifkind, Wharton & Garrison LLP. The Tesaro investors were represented by Friedlander & Gorris PA; Cooch & Taylor PA; Robbins Geller Rudman & Dowd LLP; and Bronstein, Gewirtz & Grossman LLC.