Regulus Investor Sues to Block Up to $1.7 Billion Novartis Sale

Regulus Therapeutics Inc.‘s up to $1.7 billion sale to Novartis AG was flawed, primarily benefiting board members and executives who have large amounts of illiquid shares instead of public stockholders, a lawsuit seeking to stop the acquisition said.

The deal’s recommendation statement wrongly omitted key information about the sales process, any conflicts of interest regarding corporate brass’s fiscal interest, and financial projections and underlying data sent to Regulus’ advisor Evercore Group LLC, said the complaint filed in the US District Court for the Southern District of California.

Without this data, investors can’t properly evaluate the company’s worth or the accuracy of its financial advisor’s analyses, the complaint filed Thursday said. Shareholders are entitled to this information to get “a complete and accurate picture of the sales process and its fairness” and make an informed decision on voting shares in favor of the merger, plaintiff Arsh Saini said. Regulus and its board violated certain securities laws by not including that information, he said.

Novartis will buy out Regulus at $7 per share in cash, or $800 million, the company said in an April 30 press release. Shareholders will also get a contingent value right that will pay out to $7 a share if and when Regulus’ lead product candidate to treat the most common inherited kidney disease, farabursen, gets regulatory approval, the company said. If that’s achieved, the deal would be about $1.7 billion, Regulus said.

The acquisition’s expected to finish in the second half of 2025. A Novartis tender offer commenced this week as part of the deal.

Insiders have large, illiquid portions of various types of company shares and options, some of which will be converted in the merger’s consideration unavailable to public investors, Saini said. And certain executives—its CEO, president, and chief financial officer—have “golden parachute” severance packages worth tens of millions of dollars should they be let go under certain circumstances, he said.

The recommendation statement, filed with the Securities and Exchange Commission on May 27, didn’t discuss any potential confidentiality agreements with Novartis or other interested third-parties and didn’t completely clarify communications during negotiations about post-merger employment plans, Saini said.

Brodsky Smith represents Saini. If the deal goes through, he wants the court to rescind it or give him rescissory damages. And Saini wants the court to make Regulus correct its recommendation statement, among other relief, for alleged Securities and Exchange Act of 1934 violations by the company and its board.

A spokesperson for Regulus didn’t immediately respond to an email seeking comment. Latham & Watkins LLP is serving as legal counsel to Regulus in the deal.

The case is Saini v. Regulus Therapeutics Inc., S.D. Cal., No. 3:25-cv-01362, complaint filed 5/29/25.