Opko Health has been named as a defendant in a lawsuit alleging that the company conspired with one of its former executives to illegally interfere with the business activities of a rival ophthalmic technology firm in order to acquire ocular imaging systems firm Ophthalmic Technologies.
In a filing with the US Securities and Exchange Commission last week, Opko revealed that its former executive vice president of instrumentation, Steven Verdooner, had been sued in a California Superior Court by Ophthalmic Imaging Systems for, among other things, breach of fiduciary duty while he was president of OIS.
During that time, OIS was in negotiations with OTI over an undisclosed business arrangement. According to the lawsuit, those negotiations broke down after Verdooner left OIS to join Opko, which went on to acquire OTI last fall.
Opko disclosed in the filing that it was added in April as a defendant in the suit, which is seeking more than $7 million in damages. The company said in the SEC filing that it has not yet responded to the allegations, but said the legal action is “without merit” and that it will “vigorously defend the claims.”
In the most recent version of its complaint, OIS said that as late as April 2007 it had been negotiating a potential deal with OTI that was covered by a confidentiality agreement between the companies, and that those meetings regularly included Verdooner.
However, OIS claims that around four months earlier, Verdooner began meeting with Philip Frost, the principal investor in the Frost Group and in Opko’s predecessor company Exegenics. Exegenics was renamed Opko after it acquired RNAi drug developer Acuity Pharmaceuticals and ophthalmics firm Froptix in early 2007 (see RNAi News, 3/29/2007). The Frost Group is currently Opko’s biggest stakeholder.
“Frost was interested in employing Verdooner to work in a new business venture in the field of ophthalmic imaging,” OIS said its lawsuit. “Frost also informed Verdooner that he was aware of OIS’ negotiations with OTI … [and] that his companies were interested in some kind of relationship with or investment in OTI.”
OIS said that Verdooner, while he was its president, failed to inform other officials at the company about Frost’s intentions and instead “commenced a series of negotiations with Frost, Opko, and the Frost Group to take an executive position with Opko.”
During the course of those negotiations, which lasted from December 2006 until April 2007 when Verdooner was employed by Opko, OIS claims Verdooner “regularly sought and was provided [with] updates on the status of the Opko-OTI negotiations.
“Opko and the Frost Group knew that having Verdooner involved in the new Opko venture would make a deal with Opko more attractive to OTI because OTI would have valued Verdooner’s OIS background.”
“Despite receiving these updates, he repeatedly declined to share any information about these negotiations with OIS, although he … must have known that the existence of those negotiations would have been a vital material fact for OIS to know.”
The lawsuit further alleges that Verdooner later signed a confidentiality agreement with Opko not to disclose confidential information about OTI with other parties even though he was still president of OIS and even though OIS was engaged in its own negotiations with OTI.
Opko and the Frost Group, knowing Verdooner’s position with OIS and his obligation to inform his company about Opko’s negotiations with OTI, “persuaded and induced Verdooner not to disclose anything to OIS with the promise of future employment and by inducing him to sign the confidentiality agreement,” the suit states.
Shortly after resigning from OIS on April 20, 2007, Verdooner informed the company that “he was working for Opko, that he intended to compete with OIS, and that he intended to call OIS personnel to solicit them to work for him,” OIS said.
Specifically, Verdooner invited 11 of the 15 members of OIS’ sales and marketing team to work with him at Opko, and at least five of these staffers now work for companies affiliated with the Frost Group, OIS said.
Additionally, after Verdooner’s resignation, “OTI … called OIS to inform it that [their] negotiations were terminated,” the suit adds. “OIS has discovered that Verdooner’s new employer, Opko/the Frost Group, acquired a significant equity interest in OTI contemporaneously with Verdooner’s departure from OIS.”
“Opko and the Frost Group knew that having Verdooner involved in the new Opko venture would make a deal with Opko more attractive to OTI because OTI would have valued Verdooner’s OIS background,” OIS stated in the suit.
Opko announced last November that it had completed its acquisition of OTI (see RNAi News, 11/29/2007).
According to last week’s SEC filing, in May 2007 OIS sued Verdooner, who Opko terminated in January but who was indemnified by the company as a former officer.
Last month, OIS expanded its lawsuit to include charges against Opko and the Frost Group for alleged intentional interference with contractual relations; intentional interference with prospective economic advantage; aiding and abetting breach of fiduciary duty; and conspiracy to cause breach of fiduciary duty.
The suit also charges Opko and the Frost Group with aiding and abetting interference with contractual relations and conspiracy to interfere with contractual relations.
The lawsuit seeks damages, including OIS’ loss of business and profits, “in an amount to be proved at trial but believed to exceed $7,000,000." It also seeks a court order barring Verdooner, the Frost Group, Opko, and related parties from soliciting any of OIS’ customers; from offering employment to the company’s staffers; and from using or disclosing any of OIS’s proprietary business information.
Officials from Opko declined to comment for this article.
The litigation with OIS is the second legal row Opko has had to deal with in its short history.
As first reported by RNAi News, the company late last year was sued by non-profit economic-development organization Ben Franklin Technology Partners of Southeastern Pennsylvania for allegedly breaching a contractual obligation requiring it to pay the non-profit more than $800,000 worth of stock warrants if one of its business components was to move out of the state before an agreed-upon date (see RNAi News, 11/29/2007).
Opko allegedly inherited the obligation from Acuity, which had been awarded research and development funding by BFTP-SEP in exchange for stock and warrants.
Opko and BFTP-SEP ultimately settled their dispute out of court (see RNAi News, 2/7/2008).