Medtech startup is using a digital health company UpHealth, claiming it lied about plans to acquire the startup as part of a broader SPAC deal.
A medication adherence startup is using digital health company UpHealth, saying it lied about a planned acquisition.
San Francisco-based PillDrill said it struck a term sheet in April of last year to be acquired for $6 million of UpHealth’s stock. But after a year of delays, the deal ultimately never happened, according to the lawsuit.
As a result, San Francisco-based startup PillDrill said it had to lay off all of its employees and is in “dire economic straits.” The startup is suing UpHealth for breach of oral contract and fraud, according to a complaint filed last week in the Circuit Court of Cook County, Illinois.
PillDrill makes a consumer-facing device that uses an RFID scanner for people to track if they’ve taken their medication. According to the complaint, it was supposed to be one of eight companies that UpHealth would acquire before going public through a special-purpose acquisition company (SPAC) created by investment firm Gig Capital.
“Defendants’ conduct has effectively destroyed PillDrill,” the complaint stated. “PillDrill locked itself up with (UpHealth) when it could have otherwise pursued other merger and acquisition partners or other sources of funding that would have allowed it to continue its existence and growth trajectory.”
In August, UpHealth reportedly told PillDrill’s leadership that it would acquire the company after going public instead. In the meantime, PillDrill looked to raise bridge funding, and sought to sign a new term sheet where PillDrill would instead get 1.7% of UpHealth’s outstanding shares. The companies reportedly agreed to the new terms in an October video conference, but UpHealth’s leadership had not yet signed it.
In March of this year, UpHealth’s leadership told PillDrill that they expected the SPAC merger to close in April, and that the company would be able to acquire PillDrill within a week of its stock trading on the New York Stock Exchange, according to the complaint.
But a month later, UpHealth Co-Chairman Chirinjeev Kathuria allegedly told PillDrill CEO Peter Havas that he could not have agreed to acquire PillDrill for 1.7% of the company’s stock, and that he did not plan to acquire it.
The startup is seeking at least $18 million in damages.
Grellas Shah LLP Partner David Siegel, who is representing PillDrill, described the case in a statement as a “cautionary tale for startups about the world of SPACs.”
UpHealth did not respond to requests for comment.
In a press release last month, the company shared it had filed paperwork for the planned SPAC merger with the Securities and Exchange Commission, and had completed five acquisitions that it had agreed upon with GigCapital2.
By ELISE REUTER Source: https://medcitynews.com/2021/06/in-lawsuit-medication-adherence-startup-claims-it-was-strung-along-as-part-of-planned-spac-acquisition/
