Ampio Provides Litigation Update - Reports Settlement in Principle of Certain Pending Legal Actions
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Insights
From a legal perspective, the announcement of settlements in principle by Ampio Pharmaceuticals represents a significant step towards resolving ongoing litigation, which can have tangible implications for the company's financial stability and investor confidence. The coverage of the settlement and related defense costs by D&O (Directors and Officers) insurance is a relief to the company's balance sheet, as it mitigates the risk of depleting cash reserves, which is particularly crucial for a pre-revenue company. The absence of an admission of fault is a standard practice in such settlements, aimed at limiting potential future liabilities.
However, the ongoing SEC investigation remains a concern for stakeholders, as it could lead to further actions or financial penalties that are not covered by insurance. The uncertainty surrounding the timing of court approvals also introduces an element of risk, as prolonged legal proceedings can result in increased legal expenses and potential distraction from the company's core business activities. Stakeholders should monitor the progression of these legal matters closely, as they can influence the company's operational focus and resource allocation.
Settling the securities fraud class action and consolidated derivative actions can be perceived positively by the market, as it eliminates a significant source of legal uncertainty for Ampio Pharmaceuticals. The fact that settlements are expected to be covered by D&O insurance is financially beneficial, as it prevents immediate out-of-pocket expenses for the company. This is particularly relevant for a pre-revenue firm where capital preservation is critical for ongoing operations and research development.
Investors should note, however, that the impact of such settlements on the company's stock performance is multifaceted. While a settlement can lead to a short-term positive reaction in the stock market, the underlying issues that led to the litigation – if not adequately addressed – may continue to overshadow the company's long-term performance. Moreover, the ongoing SEC investigation may result in future financial implications that could affect investor sentiment and the company's cost of capital.
From a risk management standpoint, the settlement in principle is a proactive measure to contain and control the legal risks facing Ampio Pharmaceuticals. By potentially resolving these disputes, the company is looking to reduce the legal risk exposure that has been looming over its operations. The use of D&O insurance to cover these costs is a strategic risk transfer mechanism that protects the company's financial resources.
However, the presence of an ongoing SEC investigation is an unresolved risk factor that could have material consequences for the company. It is essential for risk managers and investors alike to consider the potential outcomes of this investigation, which could range from no action to significant financial penalties or operational restrictions. Such outcomes could materially affect the company's risk profile and should be factored into risk assessments and investment decisions.
Ampio currently expects the amount to be paid in both settlements, including related defense costs, will be covered by, and within the limits of, its D&O insurance policy. The settlements in principle do not constitute any admission of fault, wrongdoing or liability as to the Company or any other defendant. While the timing of completion of the settlement agreements and filing motions to seek court approvals are uncertain, the Company will be endeavoring to finalize and execute the settlement agreements and have motions for preliminary approval submitted to the relevant courts within the next 120 days. If finally approved by the relevant courts, the settlements will result in the dismissal with prejudice of all of the pending actions and the withdrawal of the two stockholder pre-litigation demands.
The Company has provided disclosure relating to these legal matters in its periodic reports on Forms 10-K and 10-Q throughout the pendency of these actions. The settlements in principle do not affect the ongoing investigation by the Securities and Exchange Commission, which also was previously reported by the Company in its periodic reports on Forms 10-K and 10-Q. Ampio intends to continue to cooperate fully with the SEC.
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Caution Regarding Forward-Looking Statements
All statements other than statements of historical facts contained in this letter, including statements regarding the adequacy of insurance coverage for the costs of defense and settlement, finalizing of the settlement agreements, and timing of the filing of motions for preliminary court approval (and later final court approval), are forward-looking statements. Words such as "may", "will", "should", "forecast", "could", "expect", "suggest", "believe", "estimate", "continue", "anticipate", "intend", "ongoing", "opportunity", "potential", "predicts", "seek", "plan," or similar words, or the negatives of such terms or other variations on such terms or comparable terminology, typically identify forward-looking statements. There can be no assurance that the settlements in principle of the pending actions and stockholder demands described in this press release will be finalized or approved by the respective courts, or that the settlements will be completed as currently proposed, or at any particular time.
Forward-looking statements are based on certain assumptions and expectations of future events and trends that are subject to risks and uncertainties including: (i) the settlements in principle of the pending actions and stockholder demands are subject to a number of conditions, including the execution and delivery of definitive settlement agreements reflecting the terms of the settlements in principle, obtaining preliminary court approval of the settlements, providing notice to stockholders of the proposed settlements, and obtaining final, non-appealable approvals by the respective courts; (ii) the timing of any final decision by any of the respective courts is subject to the discretion of such court and any potential appeal; (iii) if defense costs or the amounts associated with the settlements of the pending actions and stockholder demands exceed Ampio's current expectation, its insurance coverage may not be adequate to cover the amounts incurred by the Company including as a result of its indemnification obligations to its current and former officers and directors; and (iv) other risks described in "Risk Factors" and elsewhere in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 and subsequent periodic reports filed with the SEC.
We undertake no obligation to update or revise publicly any forward-looking statements to reflect events or circumstances after the date of such statements for any reason, except as otherwise required by law.
For more information, contact:
Ampio Pharmaceuticals, Inc.
Michael A. Martino
Chief Executive Officer
mmartino@ampiopharma.com
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SOURCE Ampio Pharmaceuticals, Inc.
FAQ
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