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Biotech firm CytoDyn calls activists' board nomination notice invalid -sources

·2 min read

By Svea Herbst-Bayliss

BOSTON, Aug 2 (Reuters) - Biotechnology firm CytoDyn , which is working on coronavirus treatments, is pushing back against activists trying to seize control of its board by declaring their director nominations invalid, a rarely seen development in battles for board seats, two people familiar with the matter said.

The company, headquartered in Vancouver, Washington, told the activist group that its notice letter, where it said it planned to nominate five directors, failed to comply with its bylaws. It also said the letter contained more than 50 errors ranging from mistakes in the nominees' standard questionnaires to failing to properly disclose the group's funding.

In a letter to the activists dated July 30, which was seen by Reuters, the company said the group does not have the right to nominate any candidates for election as directors at the 2021 annual meeting because it failed to meet the bylaw requirements.

On June 30, the activists, led by Paul Rosenbaum, wrote to the company saying they planned to nominate five directors to the company's six member board. The letter was received by the company on July 1.

The company's nomination deadline was July 2 and its annual meeting will be held on Oct. 28.

A spokesman for the activists was not immediately available for comment. A representative for the company declined to comment.

The group, which owns approximately 1% of the company's shares, argued that management and the board have mishandled the development of leronlimab, a monoclonal antibody investigational drug.

The group running the proxy contest is a sub-group of a bigger group that made a regulatory filing in May with plans to "discuss the company's underperformance" and its "lack of confidence in management."

The company, valued at $1.06 billion, said last week it received a request for documents from the Securities and Exchange Commission and Justice Department related to leronlimab.

The company said there were many errors in the activists' notice letter. For example, Bruce Patterson, one of the group's board nominees, in May proposed that CytoDyn buy IncellDx, Inc where he serves as CEO, but the notice letter failed to disclose the bid or how Patterson might have benefited personally had the deal not been rejected by CytoDyn.

CytoDyn's stock price has tumbled 68.47% since January and closed trading at $1.69 on Friday.

Declaring a nomination notice to be invalid is rare in battles for seats on corporate boards but happened in 2018 when financial services company HomeStreet, Inc used the method against Roaring Blue Lion Capital.

(Reporting by Svea Herbst-Bayliss Editing by Chris Reese)

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