Vancouver biotech Zymeworks rejects hostile $10.50 per share bid from Dubai hedge fund All Blue

Kenneth Galbraith, president and CEO of Zymeworks.Handout

Zymeworks Inc. ZYME-N has rejected an unsolicited takeover bid from a Dubai hedge fund, saying it “significantly” undervalues ​​the Vancouver biotech company and is not in the best interests of shareholders.

In late April, All Blue Falcons FZE, an arm of All Blue Capital, made a cash offer of $10.50 per share, valuing Zymeworks at $773 million. He made the offer after a tumultuous year for Zymeworks, once Canada’s most valuable early-stage drug developer.

Its stock had fallen 90% since the start of 2021, in part due to setbacks related to its two leading cancer and tumor drug candidates. Its fall was exacerbated by a slump in biotech stocks amid rising interest rates and mounting economic uncertainty.

Zymeworks replaced CEO and founder Ali Tehrani in January with industry veteran Kenneth Galbraith, who quickly cut its workforce by 25% and raised $107.5 million in an $8 dilutive offering. share, i.e. 14% less than its price. The shares continued to fall and traded below $5 apiece before All Blue’s offer surfaced.

In a statement on Friday, Mr. Galbraith, who is also chairman, said that “All Blue’s non-binding and unsolicited activist proposal has been opportunistically timed during a period of substantial market upheaval and before several significant near-term business events expected in 2022,” including the release of key trial data.

“We are confident that the execution of our key strategic priorities has the potential to deliver greater value to our shareholders than the current inadequate and non-binding proposal,” he said.

Zymeworks said it would not enter into discussions with All Blue because its proposal is “informal” and “lacks credibility” or details about its ability to fund or close a deal.

The offer price is also below the strike price of $14.97 per share on the 500,000 options granted to Mr. Galbraith when he joined, meaning they would be worthless if a deal were struck. under All Blue conditions.

All Blue owns 5.9% of Zymeworks and manages US$5 billion.

In the April 28 letter to the board outlining its offer, All Blue said Zymeworks had suffered “serious erosion of value due to a number of serious missteps by unfocused management with no strategy. clear to improve performance.

Zymeworks said its board has already received several letters from All Blue, expressing displeasure and calling on directors to “resign immediately without delay” or face “a very public fight.”

“The board and management are disappointed that All Blue has chosen to publicly attack the company as efforts to reinvigorate the business are well underway,” the company said.

In an interview, Canadian-born All Blue chief executive Matt Novak said his company has been in “constant” contact with the company since August. He dismissed his characterization of All Blue’s past correspondence, calling it “revisionist” and “fantasy”.

“We had tons of engagement,” Mr. Novak said. “Their positioning of this situation as an activist is just a smokescreen that this is an opportunity for shareholders to realize real value, and the board is denying shareholders shareholders of this opportunity.”

Mr Novak said All Blue had offered earlier this year to make a larger investment and on less dilutive terms than the Zymeworks stock offering did later. He disputed claims about the seriousness of All Blue’s offer, which he said “is not contingent on financing. … We have funding.

He said his company would prefer to reach a “constructive” negotiated agreement, but if that is not possible “we are ready, willing and able” to proceed with a formal hostile offer. He said if the board feels the offer is opportunistic, “come back to us and find a price that doesn’t undervalue the business. How can we do this if you don’t even want to hire us? »

The offering is unusual for All Blue, which tends to focus on real estate, private equity and capital market investments more geared towards digital companies such as Uber Technologies Inc. and Airbnb Inc. But with the sector’s recent sell-off, “private equity is hovering around biotech today because there’s value there,” Novak said.

“There are plenty of private equity firms like us that have patient capital” and are ready to exit the bear cycle. “Of course, All Blue is opportunistic,” Mr. Novak added. “We see substantial value in Zymeworks and its pipeline, and our goal is to crystallize before Mr. Galbraith has the opportunity to erode it further.”

Mr Novak admitted he was ‘not a biotech guy’ but said ‘that’s irrelevant’ because the company has hired high-level advisers who would sit on the board if All Blue’s bid was successful: Alan Barge, former chief of oncology at pharmaceutical giant Astra Zeneca and oncologist Siddhartha Mukherjee, associate professor of oncology and hematology at Columbia University Medical Center in New York and fellow Rhodes winner of the Pulitzer Prize.

Your time is precious. Receive the Top Business Headlines newsletter in your inbox morning or evening. register today.

Comments are closed.