MediciNova, Inc., a biopharmaceutical company publicly traded on the Nasdaq Global Market (NASDAQ: MNOV) and the Hercules Market of the Osaka Securities Exchange (OSAKA: 4875), today releases the notice of pendency and settlement of class action seen below:
 
SUPERIOR COURT FOR THE STATE OF CALIFORNIA
 

FOR THE COUNTY OF ALAMEDA
 
THE PENNSYLVANIA AVENUE FUNDS, individually and on behalf of all others similarly situated,
Case No. RG09470224
 
NOTICE OF PENDENCY AND SETTLEMENT OF CLASS ACTION
Plaintiff,
 
v. EXHIBIT A-1
 
 
AVIGEN, INC.; ZOLA HOROVITZ; JOHN K.A. PRENDERGAST; KENNETH CHAHINE; RICHARD WALLACE; JAN K. ÖHRSTRÖM; STEPHEN G. DILLY; MEDICINOVA, INC.
 
Defendants.
 

This notice (the “Notice”) provides you with important information in connection with the settlement (the “Settlement”) of a civil action concerning the acquisition of Avigen, Inc. (“Avigen”) by MediciNova, Inc. (“MediciNova”). Your legal rights may be affected by this Notice and the proceedings in this litigation, whether you act or do not act. You should read this Notice carefully.
  • This Notice is dated April 23, 2010 (the “Notice Date”).
  • This Notice is being published pursuant to an Order of the Superior Court of California, Alameda County, granting preliminary approval of the Stipulation of Settlement (the “Stipulation”), dated March 11, 2010, by and among the Settling Parties (defined below). This is not a solicitation from a lawyer.
  • The Settlement resolves a case filed in this Court as a proposed class action (the “Action”) that raised the issues of whether the directors of Avigen fulfilled their fiduciary duties to the stockholders of Avigen when Avigen entered into a merger agreement with MediciNova (the “Transaction”), including whether the Forms S-4 as amended filed with the Securities and Exchange Commission (the “SEC”) on September 17, 2009 and October 23, 2009, provided adequate disclosures to the stockholders of Avigen with regard to the Transaction.
  • The Settlement provides for the disclosure of additional information by Avigen and MediciNova. Plaintiff believes the disclosure of such information was necessary in order for Avigen shareholders to make an informed vote on the Transaction. Defendants do not believe that any additional disclosures were necessary.
  • Your legal rights and options are explained in this Notice.
  • The Court in charge of this case must decide whether to approve the Settlement.

BASIC INFORMATION

1. Why Did I Get This Notice?

You or someone in your family may have held shares of Avigen common stock at some time from August 20, 2009 through and including December 18, 2009, the Closing Date as defined in the Agreement and Plan of Merger between Avigen and MediciNova (the “Merger Agreement”).

The Court sent you this Notice because you have a right to know about a proposed settlement of a class action lawsuit before the Court decides whether to approve the settlement.

This Notice explains the lawsuit, the Settlement and your legal rights.

The Court in charge of the case is the Superior Court of California for Alameda County, and the case is known as The Pennsylvania Avenue Funds v. Avigen, Inc., et al., Case No. RG09470224 (the “Action”). Zola Horovitz, John K.A. Prendergast, Kenneth Chahine, Richard Wallace, Jan K. Öhrström, Stephen G. Dilly (collectively the “Individual Defendants”), Avigen, Inc. (“Avigen”) and MediciNova, Inc. (“MediciNova”) are collectively called “the Defendants.”

2. What Is This Lawsuit About?

This case was brought as a class action alleging that certain of the Defendants breached their fiduciary duties to the shareholders of Avigen common stock in connection with the acquisition of Avigen by MediciNova. Plaintiff sought to stop the Defendants from proceeding with the acquisition and alleged omission of information necessary for Avigen shareholders to make an informed vote on the Transaction and/or monetary relief. Defendants contend that the allegations have no merit. In the interests of settlement and avoiding the time, expense and inconvenience of litigation, among other considerations, Defendants agreed to provide certain additional disclosures to Avigen shareholders about the Transaction.

3. Why Is This a Class Action?

In a class action, one or more people called class representatives (in this case The Pennsylvania Avenue Funds) sue on behalf of people and entities who have similar claims. Here, these people and/or entities are collectively called a Class or Class Members. One court resolves the issues for all Class Members.

4. Why Is There a Settlement?

The Court did not decide in favor of Plaintiff or Defendants. Instead, both sides agreed to a Settlement, thereby avoiding the cost of a trial.

While Plaintiff originally sought injunctive and monetary relief, after filing its suit, Plaintiff, through its Counsel’s investigation, believed that obtaining additional monetary relief on behalf of Avigen shareholders would have been difficult because of the hurdles in showing that: (a) the consideration offered in the Merger was insufficient in light of the additional Contingent Payment Right (“CPR”) provided with the cash and/or Convertible Notes, and (b) Avigen’s approval of the Merger was unreasonable given the Company’s financial situation. Plaintiff, however, continued to believe that Defendants had not made proper disclosures in their original and amended Form S-4 in advance of the shareholder vote, particularly with regard to disclosing the details and considerations involved in the Board’s process in approving the Merger. After arm’s length negotiations, Plaintiff and Defendants agreed on the substantive terms of a Settlement that would provide additional disclosures to Avigen shareholders (as detailed below) before the close of the shareholder vote. These additional disclosures were provided to shareholders on November 18, 2009.

Before agreeing to finalize the Settlement, Plaintiff’s Counsel negotiated for the right to conduct discovery to confirm that the material terms of the Transaction were fair. Following completion of that discovery, which included a review of documents and interviewing Avigen’s former Chief Executive Officer under oath, Plaintiff’s Counsel determined that the additional disclosures that Defendants agreed to provide to shareholders were sufficient to allow Avigen shareholders to make an informed vote on the Transaction, and that the share price paid in connection with the Transaction was within the acceptable range of consideration for the shares of the Company.

In addition, Plaintiff and Defendants considered the following factors favoring Settlement:
  • the uncertainty of the legal issues underlying the allegations in the litigation;
  • the assurance that Avigen’s shareholders obtained benefits regardless of the outcome of further litigation;
  • the economy of costs/exposure reduction for the benefit of the Parties;
  • the costs of continued litigation; and
  • the prevailing consideration in all compromises and settlements that the parties weigh the advantages and benefits of settlement against the risks of loss.

5. How Do I Know if I am Part of the Settlement?

The Class includes all persons or entities who held Avigen stock, either of record or beneficially, at any time between August 20, 2009, through and including December 18, 2009, including all such persons’ or entities’ respective successors in-interest, predecessors, representatives, trustees, executors, administrators, heirs, assigns or transferees, immediate and remote and any person or entity acting for or on behalf of, or claiming under any of them, and each of them. Excluded from the Class are Defendants, Defendants’ Affiliates, members of the immediate family of any Individual Defendant, any entity in which a Defendant has or had a controlling interest, directors and officers of Avigen and their legal representatives, heirs, successors, or assigns of any such excluded Person or entity.

THE SETTLEMENT BENEFITS

6. What Does the Settlement Provide?

Plaintiff has alleged that the Defendants failed to disclose to shareholders certain material information relating to the Transaction. To settle the lawsuit, Defendants made available to Avigen’s shareholders additional information related to the Transaction, and amended the Preliminary Form S-4 Registration Statement in a relevant manner by adding significant additional information to pages 13, 74, 75, 83, 88, 92, 93 and 236 of the Definitive Form S-4 Registration Statement filed with the United States Securities and Exchange Commission.

The disclosures included additional information about the following:

(a) Merger proposals Avigen received from parties other than MediciNova, including the value of the consideration offered in these proposals, disclosing the terms of various offers Avigen received as of March is 7, 2009;

(b) Potential conflicts of interests or financial incentives of any members of Avigen’s Board of Directors in connection with the Proposed Transaction, disclosing the specific payments Avigen’s Directors and executive officers would receive under the Management Transition Plan;

(c) The data inputs used by Ladenburg Thalman & Co. Inc. (“Ladenburg”) in its analyses in connection with preparing its Fairness Opinion for the Proposed Transaction, disclosing the 14 specific partnering transactions Ladenburg analyzed;

(d) The values and methodology RBC Capital Markets Corporation (“RBC”) used to estimate the values of certain assets relating to its liquidation analysis of Avigen, disclosing the values of: (i) Avigen’s AV411 intellectual property as $3.0 million (based upon the non-binding term sheet for the cash purchase of AV411 that had been submitted by Suitor A on June 22, 2009), (ii) the Genzyme milestone as $6.0 million, and (iii) the amount withheld from initial distribution to Avigen stockholders for additional liabilities and expenses as approximately $4.0 million;

(e) The reasons the Avigen board of directors terminated discussions relating to a proposed merger on March 25, 2009 after determining that such proposal was “not feasible” in light of Biotechnology Value Fund’s (“BVF”) position on the potential transactions, disclosing the reasoning that BVF owned 30% of Avigen’s stock and that BVF would only support a transaction with a structure that allowed Avigen’s stockholders to receive primarily cash for their stock;

(f) The factors and inputs RBC used in its Black-Scholes valuation analysis of the Convertible Notes offered in the Proposed Transaction, disclosing MediciNova’s stock price of $7.12 per share (the closing price of MediciNova common stock on August 17, 2009), exercise price of $6.80, term of 1.5 years, risk-free rate of 1.06 percent, and standard deviation estimate of 0.69; and

(g) The liquidity and transferability of the Convertible Notes offered in the Proposed Transaction, disclosing that the Convertible Notes would be generally transferable without restriction under the securities laws but that there was currently no trading market for the Convertible Notes, which could have an effect on the Notes’ liquidity and trading prices.

7. What Does It Mean to Be Part of the Class?

If you are in the Class, that means you cannot sue or be part of any other lawsuit against the Defendants or their affiliates about the legal issues in this case. Defendants and their affiliates means each of the Defendants and/or their respective families’ past and present affiliates, parent entities, associates, subsidiaries or general partners, limited partnership partners and partnerships, and each and all of their respective past, present or future officers, directors, stockholders, agents, representatives, employees, attorneys, legal counsel, financial or investment advisors, persons who provided opinions relating to the Transaction, appraisers, and any other advisors, consultants, accountants, investment and commercial bankers, commercial bank lenders, trustees, engineers, agents, insurers, co-insurers and reinsurers, heirs, executors, trustees, general or limited partners or partnerships, limited liability companies, members and managers; and each of their respective heirs, executors, personal or legal representatives, estates, administrators, predecessors, successors and assigns (the “Released Persons”).

If you are in the Class that also means that all of the Court’s orders will apply to you and legally bind you. In addition, if the Court approves the settlement, you will lose all claims, rights and causes of action, whether legal or equitable or any other type, known or unknown, you or any Class Member ever had, now have, or hereafter can, shall, or may have, arising from the acts, omissions or failures to act occurring prior to the Settlement, whether directly, derivatively, representatively or in any other capacity against any of the Defendants or their affiliates, by reason of, or arising out of, or relating to, or in connection with: (i) the claims or allegations asserted by Plaintiff in the Action, and any other facts, matters, transactions, actions or conduct, actual, alleged or that could have been alleged in this case; (ii) the Transaction or the Merger Agreement; (iii) any other agreements, contracts, actions or approvals relating to the foregoing; (iv) the fiduciary obligations of any of the Defendants or Released Persons in connection with the Transaction or the Merger Agreement; (v) the negotiations in connection with the Transaction or the Merger Agreement; or (vi) any disclosures made by or disclosure obligations of any of the Released Persons, to any party, including but not limited to the Securities and Exchange Commission (the “SEC”) in connection with the Transaction or the Merger Agreement (“Released Claims”). The Defendants believe that no such claims exist but, if you are in the Class, you will not be able to pursue any such claims, if and to the extent they exist. The Settlement does not affect or release any statutory appraisal rights that may pertain to any Avigen shareholder under applicable law.

THE LAWYERS REPRESENTING YOU

8. Do I Have a Lawyer in This Case?

The law firm of FINKELSTEIN THOMPSON LLP represents you and other Class Members. The lawyers at this firm are called Plaintiff’s Counsel. You will not be charged for these lawyers. If you want to be represented by your own lawyer, you may hire one at your own expense.

9. How Will the Lawyers Be Paid?

Defendants have agreed to pay and not to oppose Plaintiffs Counsel’s application for attorneys’ fees and expenses, not to exceed $140,000, and an award to the named Plaintiff for its time and expenses in prosecuting the litigation, totaling no more than $2,500. The amounts awarded will be subject to Court approval. The attorneys’ fees and expenses will be the only payment to Plaintiff’s Counsel for their efforts in achieving this Settlement and for their risk in undertaking this representation on a wholly contingent basis.

EXCLUDING YOURSELF FROM THE SETTLEMENT

If you do not want to be included in this settlement and you want to keep any right you may have to sue or continue to sue the Defendants and the other Released Persons on your own about the Released Claims, then you must take steps to exclude yourself— or as it is sometimes referred to, you must “opt out” of the settlement Class.

10. How do I exclude myself from the proposed settlement?

To exclude yourself from the settlement Class, you must send a letter by mail stating that you “request exclusion from the Class in The Pennsylvania Avenue Funds v. Avigen, Inc., et al., Case No. RG09470224.” Be sure to include your name, address, telephone number, your signature, and the number of shares of Avigen common stock that you held at any time from August 20, 2009 through and including December 18, 2009. Mail the letter to the Court, with a copy to the following three different places such that it is received no later than June 7, 2010 by each of the following:
 

Court
 
Clerk of Court

Superior Court of California, County of Alameda

Administration Building

1221 Oak Street

Oakland, California 94612
 

Counsel for Plaintiff
 
Rosemary M. Rivas

FINKELSTEIN THOMPSON LLP

100 Bush St., Suite 1450

San Francisco, CA 94104
 

Counsel for Defendants Avigen, Inc., Zola Horovitz, John K.A. Prendergast, Kenneth Chahine, Richard Wallace, Jan K. Öhrström, Stephen G. Dilly
 
William S. Freeman

COOLEY GODWARD KRONISH LLP

Five Palo Alto Square

3000 El Camino Real

Palo Alto, CA 94306
 

Counsel for Defendant MediciNova, Inc.
 
Matthew L. Larrabee

DECHERT LLP

One Maritime Plaza, Suite 2300

San Francisco, CA 94111-3513
 

You cannot exclude yourself by telephone, by fax or by e-mail. If you ask to be excluded, you will not be included in the Settlement, and you cannot object to the Settlement. You will not be legally bound by anything that happens in this lawsuit, and you may be able to sue Defendants and the other Released Persons about the Released Claims in the future.

11. If I do not exclude myself, can I sue Defendants and the other Released Persons later for the Released Claims?

No. Unless you exclude yourself, you give up any rights to sue Defendants and the other Released Persons, or to enforce any existing judgments against any of the Released Persons, for any and all Released Claims. If you have a pending lawsuit against Defendants or the other Released Persons, speak to your lawyer in that case immediately, to determine if you have to exclude yourself from this Class to continue your own lawsuit. Remember, the exclusion deadline is June 7, 2010.

OBJECTING TO THE SETTLEMENT

You can tell the Court that you do not agree with the Settlement or some part of it if you consider it necessary.

12. What is the difference between objecting and excluding?

Objecting is simply telling the Court that you do not like something about the proposed settlement. You can object only if you stay in the Class. Excluding yourself is telling the Court that you do not want to be part of the Class. If you exclude yourself, you have no basis to object because the case no longer affects you.

13. How Do I Tell the Court that I Object to the Settlement?

If you are a Class Member, you can object to the Settlement if you do not like any part of it. You can give reasons why you think the Court should not approve it. The Court will consider your views. To object, you must send a letter saying that you object to the Settlement in The Pennsylvania Avenue Funds v. Avigen, Inc., et al., Case No. RG09470224. Be sure to include your name, address, telephone number, your signature, the number of shares of Avigen common stock that you held at any time from August 20, 2009 through and including December 18, 2009, and the reasons you object to the Settlement. Mail the objection to the Court, with a copy to the following three different places such that it is received no later than) June 17, 2010 by each of the following:
 

Court
 
Clerk of Court

Superior Court of California, County of Alameda

Administration Building

1221 Oak Street

Oakland, California 94612
 

Counsel for Plaintiff
 
Rosemary M. Rivas.

FINKELSTEIN THOMPSON LLP

100 Bush St., Suite 1450

San Francisco, CA 94104
 

Counsel for Defendants Avigen, Inc., Zola Horovitz, John K.A. Prendergast, Kenneth Chahine, Richard Wallace, Jan K. 6hrstrOrn, Stephen G. Dilly
 
William S. Freeman

COOLEY GODWARD KRONISH LLP

Five Palo Alto Square

3000 El Camino Real

Palo Alto, CA 94306
 

Counsel for Defendant MediciNova, Inc.
 
Matthew L. Larrabee

DECHERT LLP

One Maritime Plaza, Suite 2300

San Francisco, CA 94111-3513
 

THE COURT’S FAIRNESS HEARING

The Court will hold a hearing to decide whether to approve the Settlement. You may attend and you may ask to speak, but you do not have to.

14. When and Where WM the Court Decide Whether to Approve the Settlement?

A Final Fairness Hearing will be held before Judge Steven A. Brick on June 24, 2010, in Department 17 of the Alameda County Superior Court, located at 1221 Oak Street, Oakland, California 94612. At this hearing, the Court will consider whether the Settlement is fair, reasonable, and adequate. If there are objections, the Court will consider them. The Court will listen to people who have asked to speak at the hearing. The Court may decide these issues at the hearing or take them under consideration. We do not know how long the Court’s decision will take.

15. Do I Have to Come to the Hearing?

No. Plaintiff’s’ Counsel will answer questions the Court may have. But you are welcome to come at your own expense. If you send an objection, you don’t have to come to Court to talk about it. As long as you submitted your written objection on time, the Court will consider it. You may also pay your own lawyer to attend, but it is not necessary.

16. May I Speak at the Hearing?

You may ask the Court for permission to speak at the fairness hearing. To do so, you must send a letter saying that it is your intention to appear in The Pennsylvania Avenue Funds v. Avigen, Inc., et al., Case No. RG09470224. Be sure to include your name, address, telephone number, and your signature. Your letter stating your intent to appear must be received no later than June 17, 2010 by the Clerk of the Court, Plaintiff s’ Counsel, and Defendants’ counsel, at the four addresses listed in question 10.

GETTING MORE INFORMATION

17. Are There More Details About the Settlement?

This Notice summarizes the proposed Settlement. More details are in the Stipulation of Settlement entered into as of March 11, 2010. You can download a copy of the complaint, Stipulation of Settlement, Motion for Preliminary Approval of Settlement, and other documents related to the Settlement by visiting Finkelstein Thompson LLP’s website at http://www.finkelsteinthompson.com/; or by visiting the Public Access Website of the Superior Court of California, County of Alameda, at http://apps.alameda.courts.ca.gov/domainweb/html/index.html.

18. How Do I Get More Information?

Further information regarding the Action and this Settlement may be obtained by contacting FINKELSTEIN THOMPSON LLP at the contact information below:
 
Address: 100 Bush St., Suite 1450, San Francisco, CA 94104
 
Telephone: (877) 800-1450
 

Email: contact@finkelsteinthompson.com
 

DO NOT TELEPHONE THE COURT REGARDING THIS NOTICE
DATED: April 6, 2010                           BY ORDER OF THE SUPERIOR COURT OF CALIFORNIA, ALAMEDA COUNTY

About MediciNova

MediciNova, Inc. is a publicly-traded biopharmaceutical company founded upon acquiring and developing novel, small-molecule therapeutics for the treatment of serious diseases with a commercial focus on the U.S. market. Through strategic alliances primarily with Japanese pharmaceutical companies, MediciNova holds rights to a diversified portfolio of clinical and preclinical product candidates, each of which MediciNova believes has a well-characterized and differentiated therapeutic profile, attractive commercial potential and patent assets having claims of commercially adequate scope. MediciNova’s pipeline includes six clinical-stage compounds for the treatment of acute exacerbations of asthma, chronic obstructive pulmonary disease exacerbations, multiple sclerosis and other neurologic conditions, asthma, interstitial cystitis, solid tumor cancers, Generalized Anxiety Disorder, preterm labor and urinary incontinence and two preclinical-stage compounds for the treatment of thrombotic disorders. MediciNova’s current strategy is to focus on its two prioritized product candidates, MN-221 for the treatment of acute exacerbations of asthma and chronic obstructive pulmonary disease exacerbations and MN-166/AV-411 for the treatment of multiple sclerosis or chronic pain or drug addiction. Each drug candidate is currently in clinical trial under U.S. INDs and MediciNova is considering strategic collaborations to support further development of the MN-221 and MN-166/AV-411 programs. Additionally, MediciNova will seek to monetize its other product candidates. For more information on MediciNova, Inc., please visit www.medicinova.com.

Statements in this press release that are not historical in nature constitute forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, without limitation, statements regarding MediciNova's clinical trials supporting safety and efficacy of product candidates and the potential novelty of such product candidates as treatments for disease, plans and objectives for present and future clinical trials and product development, strategies, future performance, expectations, assumptions, financial condition, liquidity and capital resources. These forward-looking statements may be preceded by, followed by or otherwise include the words "believes," "expects," "anticipates," "intends," "estimates," "projects," "can," "could," "may," "will," "would," or similar expressions. These forward-looking statements involve a number of risks and uncertainties that may cause actual results or events to differ materially from those expressed or implied by such forward-looking statements. Factors that may cause actual results or events to differ materially from those expressed or implied by these forward-looking statements, include, but are not limited to, the risks and uncertainties inherent in clinical trials and product development and commercialization, such as the uncertainty in results of clinical trials for product candidates, the uncertainty of whether the results of clinical trials will be predictive of results in later stages of product development, the risk of delays or failure to obtain or maintain regulatory approval, the risk of failure of the third parties upon whom MediciNova relies to conduct its clinical trials and manufacture its product candidates to perform as expected, the risk of increased cost and delays due to delays in the commencement, enrollment, completion or analysis of clinical trials or significant issues regarding the adequacy of clinical trial designs or the execution of clinical trials and the timing, cost and design of future clinical trials and research activities, the timing of expected filings with the FDA, MediciNova's failure to execute strategic plans or strategies successfully, MediciNova's collaborations with third parties, MediciNova's ability to realize the anticipated strategic and financial benefits from its acquisition of Avigen, Inc., to integrate the two ibudilast development programs and to pursue discussions with potential partners to secure a strategic collaboration to advance the clinical development of the combined development program, the availability of funds to complete product development plans and MediciNova's ability to raise sufficient capital when needed, intellectual property or contract rights, and the other risks and uncertainties described in MediciNova's filings with the Securities and Exchange Commission, including its annual report on Form 10-K for the year ended December 31, 2009 and its subsequent periodic reports on Forms 10-Q and 8-K. Undue reliance should not be placed on these forward-looking statements, which speak only as of the date hereof. MediciNova disclaims any intent or obligation to revise or update these forward-looking statements.

Copyright Business Wire 2010

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