Arcturus Therapeutics

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Arcturus Therapeutics Files Lawsuit Against Joseph E. Payne and His Associates for Violations of Federal Securities Laws

April 20, 2018 at 8:00 AM EDT

Complaint Details Multiple Violations of Federal Securities Laws by Undisclosed Group Led by Payne

SAN DIEGO, April 20, 2018 (GLOBE NEWSWIRE) -- Arcturus Therapeutics Ltd. (NASDAQ:ARCT), a leading RNA medicines company, initiated a lawsuit in the United States District Court for the Southern District of California on April 19, 2018 against former President and Chief Executive Officer (CEO), Joseph E. Payne, and his associates, including Bradley Sorenson, Peter Farrell and Andrew Sassine (collectively, with other unknown shareholders, the “Payne Group”), for multiple violations of federal disclosure and reporting rules under Section 13(d) of the Exchange Act and Regulation 13D. The lawsuit seeks injunctive relief to compel the Payne Group to comply with Regulation 13D and prevent Payne and the other Defendants from future violations of Section 13(d). The filing also outlines how Payne has illegally and secretly colluded with multiple shareholders to support his vindictive campaign to replace the full Arcturus Board of Directors. The lawsuit seeks to prevent Payne and his associates from continuing to mislead the voting shareholders of Arcturus leading up to the next extraordinary general meeting of shareholders (“EGM”).

As detailed in the complaint, the Company alleges that Payne, following his termination for cause from Arcturus, has illegally organized a group of shareholders in support of his proxy campaign and repeatedly violated securities laws in a calculated attempt to mislead Arcturus and its investors, including:

  • Payne’s Formation of an Undisclosed Beneficial Ownership Group Acting to Change and/or Influence the Control of Arcturus: Payne is actively communicating, organizing, and colluding with the Payne Group in an effort to take control of the Arcturus Board. Members of the Payne Group are coordinating such that major decisions like share purchases are occurring in close proximity to announcements made by other group members. Group members are also working together to oppose Arcturus in an Israeli lawsuit and to vote their Arcturus Shares together.
  • Repeated Violations of Regulation 13D: Payne has failed to make required public filings and made illegally incomplete, inaccurate or misleading public filings by failing to disclose the existence of the Payne Group, the identities of the members of the Payne Group and the accompanying beneficial ownership of the Company’s securities held by such members, in direct violation of Section 13(d) of the Exchange Act and SEC Rules 13d-1, 13d-2, and 13d-5. Despite the fact that the Payne Group is clearly coordinating the voting of shares as a proxy solicitation group, neither Payne nor any other members of the Payne Group have disclosed this arrangement in a Schedule 13D, depriving Arcturus and its shareholders of fair context to evaluate the proxy contest being waged by this group.
  • The Payne Group’s Shadow Solicitation Campaign: The Payne Group has engaged in a concerted campaign of disruption and interference that has caused uncertainty with respect to Arcturus meeting its public company reporting obligations. Despite his continuing fiduciary duties as a Company Director, and his prior vote to support the proposal as a member of the Arcturus Board, Payne colluded with the Payne Group to vote against one of the most routine, yet essential resolutions for a public company: the ratification of the appointment of its independent auditors. The Payne Group’s destructive actions resulted in the failure of the ratification, leading to potentially severe consequences for the Company and its shareholders, including potential delisting from the NASDAQ Exchange, as well as possible sanctions by the Securities and Exchange Commission.

Arcturus said:

We have identified multiple instances of Payne’s attempts to deceive, manipulate and lie to our shareholders, partners and other stakeholders. We are taking this action to let it be known that there are other concerning facts that our shareholders should be aware of as they determine which Directors should serve on the Board following the upcoming EGM. Payne’s efforts to conceal the existence and membership of the Payne Group, and his multiple violations of federal securities laws are consistent with his established track record of misconduct and collusion.
The Payne Group’s actions are calculated non-disclosures that promise to keep Arcturus shareholders in the dark at this critical time in the Company’s history, causing direct and ongoing harm to the Company and its shareholders as the EGM approaches. We believe that if Payne and his associates are allowed to continue to evade disclosure requirements and operate in violation of Regulation 13D, Arcturus will not be able to have a free and fair director election.
Arcturus, led by our reinvigorated management team and actively engaged Executive Committee of the Board, remains well positioned to deliver long-term growth and value for our shareholders. We will continue to take the necessary actions to hold Payne accountable to shareholders both during his tenure and following his termination.

Vinson & Elkins L.L.P. is serving as legal counsel to Arcturus in connection with this matter.

If investors have any questions, please contact the Company’s proxy solicitor:


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Stockholders Call Toll Free: (800) 662-5200

About Arcturus Therapeutics Ltd.
Founded in 2013 and based in San Diego, Arcturus Therapeutics Ltd. (NASDAQ:ARCT) is an RNA medicines company with enabling technologies - UNA Oligomer chemistry and LUNAR™ lipid-mediated delivery. Arcturus’ diverse pipeline of RNA therapeutics includes programs pursuing rare diseases, Hepatitis B, non-alcoholic steatohepatitis (NASH), cystic fibrosis, and vaccines. Arcturus' versatile RNA therapeutics platforms can be applied toward multiple types of RNA medicines including small interfering RNA, messenger RNA, replicon RNA, antisense RNA, microRNA and gene editing therapeutics. Arcturus owns LUNAR lipid-mediated delivery and Unlocked Nucleomonomer Agent (UNA) technology including UNA Oligomers, which are covered by its extensive patent portfolio (120 patents and patent applications, issued in the U.S., Europe, Japan, China and other countries). Arcturus' proprietary UNA technology can be used to target individual genes in the human genome, as well as viral genes, and other species for therapeutic purposes. Arcturus’ commitment to the development of novel RNA therapeutics has led to partnerships with Janssen Pharmaceuticals, Inc., part of the Janssen Pharmaceutical Companies of Johnson & Johnson, Ultragenyx Pharmaceutical, Inc., Takeda Pharmaceutical Company Limited, Synthetic Genomics Inc., CureVac AG and Cystic Fibrosis Foundation Therapeutics Inc. For more information, visit, the content of which is not incorporated herein by reference.

Additional Information and Where to Find It
In connection with the meeting, Arcturus will make available to its shareholders of record a proxy statement describing the time and place for, and other logistical information related to, the meeting and the proposal to be voted upon at the meeting, along with a WHITE proxy card enabling them to submit their votes on that proposal. Arcturus will also be furnishing copies of the proxy statement and WHITE proxy card to the United States Securities and Exchange Commission, or the SEC, in a Report of Foreign Private Issuer on Form 6-K, which may be obtained for free from the SEC’s website at and will be available on Arcturus’ website at SHAREHOLDERS OF THE COMPANY ARE STRONGLY ENCOURAGED TO READ SUCH PROXY STATEMENT, ACCOMPANYING WHITE PROXY CARD AND ALL OTHER DOCUMENTS FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE AS THEY WILL CONTAIN IMPORTANT INFORMATION.

The full text of the proposed resolution for the meeting, together with the form of the WHITE proxy card, may also be viewed beginning on Wednesday, April 11, 2018, at the registered office of Arcturus, c/o MeitarLiquornik Geva Leshem Tal, 16 Abba Hillel Road, Ramat Gan, Israel 5250608, 12th Floor, from Sunday to Thursday (excluding holidays), 10:00 a.m. to 5:00 p.m. (Israel time). Arcturus’ telephone number at its registered office is +972-3-610-3157.

Forward-Looking Statements
This press release may contain “forward-looking statements” that involve substantial risks and uncertainties for purposes of the safe harbor provided by the Private Securities Litigation Reform Act of 1995. Any statements, other than statements of historical fact, included in this press release regarding strategy, future operations, collaborations, future financial position, prospects, plans and objectives of management are forward-looking statements. Examples of such statements may include, but are not limited to, statements relating to the expectations regarding voting by Arcturus’ shareholders. Arcturus may not actually achieve the plans, carry out the intentions or meet the expectations or projections disclosed in any forward-looking statements and you should not place undue reliance on those forward-looking statements. Any such statements are based on management’s current expectations and involve risks and uncertainties. Actual results and performance could differ materially from those projected in any forward-looking statements.

The forward-looking statements contained or implied in this press release are subject to other risks and uncertainties, including those discussed under the heading “Risk Factors” in Arcturus’ (formerly Alcobra Ltd.’s) Annual Report on Form 20-F for the fiscal year ended December 31, 2016, filed with the SEC on April 28, 2017 and in subsequent filings with, or submissions to, the SEC. Except as otherwise required by law, Arcturus disclaims any intention or obligation to update or revise any forward-looking statements, which speak only as of the date they were made, whether as a result of new information, future events or circumstances or otherwise.

Media Contacts
Arcturus Therapeutics
(858) 900-2660

Andrew Brimmer / Trevor Gibbons / Joseph Sala
Joele Frank, Wilkinson Brimmer Katcher
(212) 355-4449

Investor Contacts
Michael Wood
LifeSci Advisors LLC
(646) 597-6979

Mike Verrechia
Morrow Sodali, LLC
(212) 300-2476

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Source: Arcturus Therapeutics, Inc.