Organovo Holdings Inc v Simeon Research LLC Et Al - Complaint Filed 04 21 14

EFiled: Apr 21 2014 05:43PTransaction ID 55330839Case No. 9563-

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

ORGANOVO HOLDINGS, INC., aDelaware Corporation,

Plaintiff,

SIMEON RESEARCH, LLC, aDelaware limited liability company, andDoes 1 through 25, inclusive,

Defendants.

CA. No.

VERIFIED COMPLAINT

Plaintiff Organovo Holdings, Inc. ("Plaintiff), by and through its counsel,

hereby brings this Verified Complaint against Defendant Simeon Research, LLC,and unnamed Does 1-25 (referred to herein, collectively, as "Defendant"), and in

support thereof alleges as follows:NATURE OF THE CASE

1. Defendant has undertaken a smear campaign against Plaintiff by

reporting and disseminating to the public a series of false, misleading andinaccurate reports and statements regarding Plaintiffs viability and the viability of

Plaintiffs products. Defendant's false, misleading and inaccurate reports were

made for the purpose of injuring Plaintiff and reducing the value of Plaintiff as a

WEST\247853625.2

Organovo Holdings, Inc. v. Simeon Research, LLC, et al., C.A. No. 9563-, compl. (Del. Ch. Apr. 21, 2014)

www.chancerydaily.com

company. Defendant may have also sought to injure Plaintiff for its own pecuniary

gain in the form of deriving profits from "short selling" Plaintiffs securities byDefendant or others that would result from any decrease in Plaintiffs stock trading

price.2. Defendant's conduct has caused substantial injury to Plaintiff in the

form of tarnished reputation, interference with Plaintiffs relationships with clients,

vendors, and current and prospective investors, among others, and it will result in

continued and irreparable harm to Plaintiff if it does not stop. Defendant's conduct

therefore gives rise to claims for libel, libel per se, and intentional interference

with prospective economic advantage.

3. As a result, Plaintiff seeks a final order: (i) permanently enjoining

Defendant from publishing or making any false and defamatory statements

regarding Plaintiff; (ii) compelling Defendants to immediately remove all false and

defamatory statements regarding Plaintiff from Defendant's website and any socialmedia accounts maintained by Defendant; and (iii) awarding damages to

compensate Plaintiff for Defendant's conduct. Plaintiff also seeks all such furtherrelief at law or in equity to which it may be entitled.

WEST\247853625.2



JURISDICTION AND VENUE

4. Plaintiff seeks, among other things, permanent injunctive relief.

Therefore, this Court has jurisdiction over all causes of action asserted in this

Complaint pursuant to 10 Del C. 341.5. Plaintiff was incorporated in the State of Delaware in accordance with

the Delaware General Corporation Law and remains an active corporation pursuant

to the laws of the State of Delaware. Defendant was also incorporated in the State

of Delaware in February 2014 and remains an active corporation. Accordingly, the

Court has jurisdiction over all parties and all claims in this action.

THE PARTIES

6. Plaintiff is a Delaware corporation with its principal place of business

located at 6275 Nancy Ridge Drive, San Diego, CA 92121. Plaintiffs common

stock trades on the New York Stock Exchange MKT ("NYSE") under the symbol

"ONVO." Plaintiff designs and creates functional human tissues, with the goal of

building living human tissues that function like native tissues.7. Defendant is a Delaware limited liability company, with a designated

agent for service of process, the Company Corporation, which is located in

Wilmington, Delaware. Its principal place of business is unknown to Plaintiff.Defendant is purportedly an independent stock research firm which disseminates

WESTA247853625.2



its research reports to the public at-large throughout Delaware and the United

States.

8. Plaintiff is ignorant of the true names and capacities, whether

individual, associate, partnership, corporate, or otherwise, of Defendants

designated herein as Does 1 through 25, inclusive, and therefore sues thoseDefendants by these fictitious names. Plaintiff is informed and believes, and on

that basis alleges, that Does 1 through 25, in some way unknown to Plaintiff, are

responsible for the acts alleged in this Complaint, are the affiliates, partners, co-

venturers, co-conspirators and/or aiders and abettors of Defendant, and have

incurred liability to Plaintiff therefor. Plaintiff will amend this Complaint to allege

the true names and capacities of Does 1 through 25 upon discovery thereof.

FACTUAL BACKGROUND

9. The sole subsidiary and operating company of Plaintiff was founded

in 2007. Plaintiff is in the business of designing and creating functional human

tissues through use of its proprietary three-dimensional bio-printing technology.

Plaintiff's goal is to improve the lives of individuals by building living human

tissues that are proven to function like native tissues.

10. By creating three-dimensional tissues that accurately represent human

biology, the following goals are achieved: (1) the creation of functional, threedimensional tissues that can be implanted or delivered into the human body to

WEST\247853625.2



repair or replace damaged or diseased tissues; (2) assisting biopharmaceutical

companies and academic medical centers to design, build, and validate more

predictive in vitro tissues for disease modeling and toxicology; (3) providingresearchers the opportunity to test drugs on functional human tissues before ever

administering the drug to a living person; and (4) bridging the gulf between

preclinical testing and clinical trials.11. Starting in July 2013, Plaintiff entered the NYSE MKT under the

symbol "ONVO" and its shares began to be publicly traded at that time.12. Defendant's libelous campaign against Plaintiff started soon after that.

In February 2014, Simeon Research, LLC formed for the apparent purpose of

destroying Plaintiffs reputation and causing harm to Plaintiffs business. Indeed,Defendant undertook to appear to the public as a reputable equity research firm by

creating an entity with the term "Research" in the name, referring to itself asinvolved in "long/short analytical equity research," purporting to undertake

extensive inquiry into Organovo's operations, and issuing reports with a specific

price target. Legitimate equity research firms do not attempt to hide or conceal theauthors of their work, are typically affiliated with an investment bank or seek to

engage clients to receive ongoing research reports directly by subscription, and donot seek to hide the compensation they might receive as a result of issuing reports.

WEST\247853625.2



13. Defendant's own documents of incorporation filed with the Delaware

Secretary of State are devoid of any information relating to Defendant's businessaddress or acting principals. Rather, Defendant's incorporation documents

comprise a single document, and identify only Defendant's agent for service of

process, demonstrating the haste with which Defendant was formed as an entity forthe sole purpose of exacting harm upon Plaintiff.

14. Next, Defendant rushed to put together a website,

http://www.simeonresearch.com. The website lacks any contact information forDefendant's principals, and has no content other than links to two libelous reports

discussed herein, relating to Plaintiff.

15. Shortly thereafter, Defendant posted its first defamatory statements

that were intended to damage and injure Plaintiff. On or about March 20, 2014,

Defendant posted a report via its website entitled "Organovo: Dissecting the Fairy

Tale - Full Report." (hereinafter the "March Report.") Defendant then circulated

the March Report to investor websites. The March Report did not name an

individual author and did not provide any method for contacting Defendant for

comment. The March Report also made numerous statements about Plaintiff

which were false, misleading and/or inaccurate which include, but are not limited

to, the following:

WEST\247853625.2



a. "Organovo has a history of serial dilution and insider sales in the last

half-year exceed the amount of money the company invested inResearch & Development."

b. "[Organovo] has failed to achieve renewal from its 2 key

pharmaceutical partners and secured fluff PR pieces instead."c. "Even worse, Keith Murphy tells investors that Organovo can

leverage its platform to achieve partnership deals that bring in

$10,000,000-$30,000,000 per deal plus a 3%-7% royalty. That is 7times to 22 times greater than Organovo's largest deal to-date, a deal

that has not been renewed."

d. "The company publicizes any thread of good news while sweeping

detrimental events under the rug without mention."

e. "But no one bought the bioprinter. The reason, of course, is obvious.

No researcher will shell out $200,000 to buy Organovo's bioprinter

when they can make a comparable or better bioprinter on their own

for a fraction of the price. Organovo has placed 6of these bioprinters

with academic centers since 200979, or -1 bioprinter per year. And

they didn't receive a cent - they loaned the printers at no cost."

WEST\247853625.2



f. "Compare this to Organovo, which has placed only 6 printers to date

since 2009, a little over 1 printer a year. And, Organovo loaned these

printers."

g. "Of course, Organovo knows all of this, because it worked with

nScrypt to develop its own bioprinter."h. "Leapfrogging Organovo, researchers at Scotland's Herriot-Watt

University have made a revolutionary breakthrough in tandem with

privately-held Rodin Cellab by bioprinting human embryonic stemcells with high levels of viability (>95% with identical physiology

post-printing) using a modified MakerBot printer. The work, unlikethe claims of Organovo, has been published in the journal

Biofabrication - it has been called "the greatest breakthrough in 3D

bioprinting to date."i. Defendant claims that Plaintiff initially based its commercialization

strategy on selling its bioprinters.

j. Defendant claims that Plaintiff misled investors or did not meet its

promises to investors in regards to advancing projects from 2010 toclinical trials, stating, among other things, that, "either Organovo's

management made dubious claims to raise money from investors, orits employees and technology failed to achieve the targets."

8WEST\247853625.2



k. "Back in 2012, every private investor in Organovo sold their shares

into the market, liquidating 32.1M shares (99.7% of their holdings) at

a blended price of $3.02/share."

16. None of those statements in the March Report are true. Each of the

above-referenced statements, among others, is patently false, misleading and/or

inaccurate.

17. On or about April 8, 2014, Defendant posted a second report via its

website, http://www.simeonresearch.com, entitled "Bargaining with the Devil:How Organovo Used Fraudulent Brokers and Promoters to Sell its Shares and

Story" (hereinafter the "April Report.") The April Report was disseminated tothird party investors. The April Report did not name an individual author and did

not provide any method for contacting Defendant for comment. The April Report

also made numerous statements about Plaintiff which were false, misleading and/or

inaccurate which include, but are not limited to, the following:

a. "Organovo has spent triple its entire R&D budget since inception on

raising money from small-time investors and stock promotiondemonstrates that Organovo is more penny-stock promotion than

legitimate company."b. "Organovo has spent nearly three times as much money ($36.5

million) compensating its brokers and discounting shares in a follow-

WEST\247853625.2



on as it has on Research & Development ($13.5 million) since the

company's inception."c. "ProActive provided Organovo a number of stock promotion services

in exchange for Organovo's business - many had none of the legally-

required disclosures."d. "ProActive Capital and DreamTeamGroup have absolutely no

disclosures on any of their operated websites that they were

compensated by Organovo."e. "Organovo paid these brokers more than $1 in cash, stock, and

warrants for every $1 raised from investors."

18. None of those statements in the April Report are true. Each of the

above-referenced statements, among others, is patently false, misleading and/or

inaccurate.

19. Defendant also published numerous statements in the March and April

Reports that constituted half-truths at best; statements which contained sometruthful information in addition to misleading information, which were designed to

cast aspersions upon Plaintiff while appearing to be truthful and accurate

statements. They were neither.

10WEST\247853625.2



20. Defendant also intentionally provided misleading information, by

taking information relating to Plaintiffs products and financial well-being out of

context in order to cause damage and injury to Plaintiff. In addition, Defendant

alludes to wrongdoing by third parties and insinuates wrongdoing by Plaintiff by

association. Like its defamatory reports, Defendant's insinuations are false.

21. Once the March Report and the April Report were published, those

reports were referenced by numerous financial bloggers and websites. Followingthe publishing of those reports, Plaintiffs stock price dropped precipitously, and it

continues to drop. Moreover, Plaintiff believes it has lost potential investors and

has suffered injury to its reputation based upon Defendant's publications.

22. In addition to the website, a Twitter account with the address

"@SimeonResearch" is currently active on Twitter - an account that has publishedat least 65 individual comments or "tweets." The content of the 65 tweets on that

Twitter account are directed solely at Plaintiff, and those tweets appear to be an

attempt to negatively impact Plaintiffs stock price. For example, in an April 8,2014 tweet, @SimeonResearch states, "Simeon Research reiterates $1.35 price

target for Organovo shares ..." In another tweet from April 8, 2014,

@SimeonResearch states, "ONVO is down 4% today and 12% since our first

report in March. We believe downside exists to $1.35/share."

11WEST\247853625.2



23. Defendant's acts in publishing the reports and potentially the Twitter

communications are intended solely to drive down the price of Plaintiff's common

stock, so that Defendant or others acting.in concert with Defendant may effectuate

profitable short sales of that stock.24. To this end, Defendant sought to have the reports it published

distributed as widely as possible by providing them freely to investor news

services on the internet.

25. Defendant will likely continue to publish false and defamatory

statements on its website.

26. As a result of Defendant's conduct, Plaintiff has been irreparably

harmed. Defendant's false and misleading statements have caused some readers

and potential investors to view Plaintiffs business as non-viable, dishonest, and

non-reputable.27. Moreover, Plaintiff has suffered and will continue to suffer irreparable

harm absent an order requiring Defendant to cease making false and misleading

statements about Plaintiff, and requiring that all such statements be removed from

Defendant's website.

12WEST\247853625.2



COUNT I-LIBEL(Against All Defendants)

28. Plaintiff re-alleges and fully incorporates by reference paragraphs 1

through 27 as though fully set forth herein.29. Defendant made false and defamatory statements as alleged herein

about Plaintiff.

30. Defendant made these negative defamatory statements with the intent

and import that the statements were assertions of fact and not merely opinion, and

with knowledge of their falsity and/or with reckless disregard for the truth or

falsity thereof.31. Defendant published these statements, in writing, to unprivileged third

parties including, but not limited to, readers and purchasers of online and printfinancial publications.

32. Defendant's statements cased its readers, including investors and the

community, to view Plaintiffs business as non-viable, dishonest, non-reputable,

and engaging improper conduct, and thus have diminished the esteem, respect,

goodwill or confidence in which Plaintiff was held. Moreover, upon informationand belief, Defendant's statements have deterred third parties, including potential

investors, from doing business with or investing in Plaintiffs business.

13WEST\247853625.2



33. Defendant knew such statements disparaged the quality of Plaintiff s

business and its stock, and intended these statements to cause Plaintiff pecuniary

loss and harm to reputation.

34. Defendant made its defamatory and libelous statements with malice,

malicious intent, and with intent to cause the foregoing harm to Plaintiff.

Accordingly, Plaintiff is entitled to and should be awarded damages againstDefendant.

35. It was foreseeable that the defamatory statements would be repeated

by second parties. Defendant, as the originator, is therefore liable for each

repetition of the defamatory matter by second parties.36. Defendant's libelous statements caused harm to Plaintiff, and will

continue to cause harm to Plaintiff, including without limitation: harm to Plaintiffs

reputation and good will; loss of product sales and the profits therefrom;interference with and damage to Plaintiffs relationships with its bankers, lenders,

institutional investors, and the media; loss of market share and business

opportunity for its products; loss of investment capital; loss of operating capital;and impairment of Plaintiff s ability to continue to grow.

14WEST\247853625.2



COUNT H - LIBEL PER SE(Against All Defendants)


through 36 as though fully set forth herein.38. Defendant made false and defamatory statements as alleged herein

about Plaintiff.

39. Defendant made these defamatory statements with the intent and

import that the statements were assertions of fact and not merely opinion, and with

knowledge of their falsity and/or with reckless disregard for the truth or falsitythereof.

40. Defendant published these statements, in writing, to unprivileged third

parties including, but not limited to, readers and purchasers of online and printfinancial publications.

41. Defendant's false statements malign Plaintiff in its business, trade and

profession.42. Defendant's false statements also impute improper and unlawful

conduct to Plaintiff.

43. Defendant's statements cased its readers, including investors and the

community, to view Plaintiffs business as non-viable, dishonest, non-reputable,and engaging improper conduct, and thus have diminished the esteem, respect,

goodwill or confidence in which Plaintiff was held. Moreover, upon information15

WEST\247853625.2



and belief, Defendant's statements have deterred third parties, including potential

investors, from doing business with or investing in Plaintiffs business.

44. Defendant knew such statements disparaged the quality of Plaintiff s

business and its stock, and intended these statements to cause Plaintiff pecuniary

loss and harm to reputation.

45. Defendant made its defamatory and libelous statements with malice,

malicious intent, and with intent to cause the foregoing harm to Plaintiff.

Accordingly, Plaintiff is entitled to and should be awarded damages againstDefendant.

46. It was foreseeable that the defamatory statements would be repeated

by second parties. Defendant, as the originator, is therefore liable for each

repetition of the defamatory matter by second parties.47. Defendant's libelous statements caused harm to Plaintiff, including

without limitation: harm to Plaintiffs reputation and good will; loss of product

sales and the profits therefrom; interference with and damage to Plaintiffs

relationships with its bankers, lenders, institutional investors, and the media; lossof market share and business opportunity for its products; loss of investment

capital; loss of operating capital; and impairment of Plaintiff s ability to continueto grow.

16WEST\247853625.2



COUNT m - INTERFERENCE WITHPROSPECTIVE ECONOMIC ADVANTAGE

(Against All Defendants)48. Plaintiff re-alleges and fully incorporates by reference paragraphs 1

through 47, as though fully set forth herein.49. Plaintiff has or had valuable prospective economic relationships and

business opportunities with its bankers, customers, lenders, investors and

prospective investors, from which Plaintiff derived economic gain, and from whichPlaintiff had a reasonable expectancy of deriving future economic gain.

50. Defendant was and is aware of these relationships. Defendant,

through the acts alleged herein, has and continues to, wrongfully, knowingly and

intentionally act to interfere with and destroy or harm Plaintiffs existing and/or

prospective business relationships.51. Defendant's wrongful acts alleged herein have actually interfered with

and disrupted Plaintiffs relationships and/or prospective relationships, and these

acts designed to interfere with and disrupt these relationships have been a

substantial factor in causing Plaintiffs harm through the loss of prospective

economic advantage.

52. Plaintiff is entitled to, and should be, awarded damages caused by

Defendant's actions, including without limitation, monetary loss from: harm to

Plaintiffs reputation and good will; loss of product sales and the profits therefrom;

17WEST\247853625.2



interference with and damage to Plaintiffs relationships with its bankers lenders,

institutional investors, and the media; loss of market share and business

opportunity for its products; and impairment of Plaintiffs ability to continue to

grow.53. Defendant acted with malice, malicious intent, and with intent to

cause the foregoing harm to Plaintiff,

COUNT IV - PERMANENT INJUNCTION(Against All Defendants)


through 53, as though fully set forth herein.55. Defendant's statements are false and defamatory.

56. As a result of Defendant's libelous statements, Plaintiff has suffered

and will continue to suffer irreparable harm including, but not limited to, harm to

its reputation.

57. Absent a permanent injunction barring Defendant from making any

further false and defamatory statements, Plaintiff will suffer irreparable harm.

58. The harm caused by Defendant's destructive and knowingly false

statements regarding Plaintiff outweighs any harm to Defendant if the injunction is

granted.59. Plaintiff lacks an adequate remedy at law.

18WEST\247853625.2



60. Accordingly, the Court should enter a permanent injunction (i)

enjoining Defendant from making or publishing any further false and defamatorystatements regarding Plaintiff, and (ii) compelling Defendant to remove any and all

defamatory and violative statements from its website and Twitter account.

PRAYER FOR RELIEF

WHEREFORE, respectfully requests that the Court enter an Order:

A. granting judgment in favor of Plaintiff and against Defendant;

B. awarding Plaintiff general and special damages in an amount tobe determined;

C. awarding Plaintiff the reasonable attorneys' fees, costs, andexpenses it incurred in this action;

D. permanently enjoining Defendant from making any false anddefamatory statements against Plaintiff;

E. compelling Defendant to remove any and all libelousstatements from its website; and

D. granting such other and further relief as this Court shall deemproper and just.

19WEST\247853625.2



Dated: April 21,2014

DLA PIPER LLP (US)

Of Counsel:Nicolas MorganGrant P. AlexanderDLA PIPER LLP (US)2000 Avenue of the StarsSuite 400 North TowerLos Angeles, CA 90067-4704Phone:(310)595-3000Fax:(310)[email protected]@dlapiper.com

/s/ John L. ReedJohn L. Reed (I.D. No. 3023)Laura D. Hatcher (I.D. No. 5098)1201 North Market Street, Suite 2100Wilmington, DE 19801(302) 468-5700(302) 394-2341 (Fax)[email protected]@dlapiper.com

Attorneys for Plaintiff OrganovoHoldings, Inc.

WEST\247853625.220



Organovo Holdings Inc v Simeon Research LLC Et Al - Complaint Filed 04 21 14

Documents

Transcript of Organovo Holdings Inc v Simeon Research LLC Et Al - Complaint Filed 04 21 14