Marstrand Partners, L.P. v. Israel Biotech Fund I, L.P.

── Marstrand Partners, L.P. v. Israel Biotech Fund I, L.P. ── Court: Court of Chancery of Delaware Date: May 27, 2026 Category: General IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE MARSTRAND PARTNERS, ) L.P., derivatively on behalf of ) AYALA PHARMACEUTICALS, ) INC., a Delaware corporation, ) ) Plaintiff, ) ) v. ) C.A. No. 2024-0421-KSJM ) ISRAEL BIOTECH FUND I, ) L.P., ISRAEL BIOTECH FUND ) II, L.P., ARKIN BIO ) VENTURES L.P., DAVID ) SIDRANSKY, M.D., PINI ) ORBACH, Phd., YUVAL ) CABILLY, Phd., ROBERT ) SPIEGEL, M.D., MURRAY ) GOLDBERG, RONI APPEL, ) KENNETH BERLIN, VERED ) BISKER-LEIB, and BRIDGET ) MARTEL, M.A., M.D., ) Defendants, ) ) and ) ) AYALA PHARMACEUTICALS, ) INC., a Delaware corporation, ) ) Nominal ) Defendant. ) ORDER GRANTING DEFENDANTS’ MOTIONS TO DISMISS1 1 The facts are drawn from the Verified Amended Complaint (the “Amended Complaint”) and documents it incorporates by reference. C.A. No. 2024-0421-KSJM, Docket (“Dkt.”) 39 (Am. Compl.). The director defendants in this action attached Israel Biotech’s marketing presentation and Ayala’s Form 10-Q filing for the third quarter of 2023 as exhibits to their opening brief. Dkt. 50 (“Director Defs.’ Opening Br.”), Exs. A, C. Each document is quoted or explicitly referenced in the Amended Complaint and thus incorporated by reference. Freedman v. Adams, 2012 WL 1345638, at *5 (Del. Ch. Mar. 30, 2012) (“When a plaintiff expressly refers to and  1. Ayala Pharmaceuticals, Inc. (the “Company”) is a Delaware corporation focused on developing cancer treatments. Israel-based venture capital funds Defendants Israel Biotech Fund I, L.P. and Israel Biotech Fund II, L.P. (together, “Israel Biotech”) invested in Ayala in 2017. In April 2018, Israel Biotech led a Series A financing round. In connection with the financing, Israel Biotech appointed non- party Roni Mamluk as CEO, Defendant and Israel Biotech co-founder David Sidransky as executive chairman, and Defendants Robert Spiegel and Murray Goldberg to Ayala’s board of directors (the “Board”). In May 2020, Ayala went public on the NASDAQ stock exchange. 2. By 2021, Ayala was struggling financially. The Company sustained net losses. Creditors doubted its ability to continue as a going concern. Sidransky was a board member of Advaxis, Inc., another struggling biotechnology company, and introduced the two management teams. Ayala began discussing a merger with Advaxis in July 2022. The parties announced a merger (the “Advaxis Merger”) pursuant to a merger agreement dated October 18, 2022.2 3. But Ayala was still in a precarious financial position. The month after the Advaxis Merger was announced, NASDAQ threatened delisting Ayala because the Company was not in compliance with stockholders’ equity and minimum bid price requirements. heavily relies upon documents in her complaint, these documents are considered to be incorporated by reference into the complaint; this is true even where the documents are not expressly incorporated into or attached to the complaint.”). 2 Am. Compl. ¶ 88. 2