Organovo Holdings Founder Issues Letter Regarding Alternative Paths to Illogical Merger With Tarveda Therapeutics to Stockhol...
March 23 2020 - 3:30PM
Keith Murphy, founder and former Chief Executive Officer of
Organovo Holdings, Inc. (NASDAQ: ONVO) (“Organovo” or the
“Company”), today issued a letter to stockholders in connection
with the Company’s prospective merger with Tarveda Therapeutics,
Inc. (“Tarveda”), a privately-held clinical stage biopharmaceutical
company.
The full text of the letter is below.
Fellow Stockholders,
As stockholders of Organovo Holdings, Inc.
(NASDAQ: ONVO) (“Organovo” or the “Company”), we have been forced
to endure unacceptable stagnation and value destruction at the
hands of the current Board of Directors (the “Board”). This is
evidenced by Organovo’s dismal share price performance since
mid-2017. Despite the Board’s record of poor business judgment and
haphazard decision-making, it is now asking stockholders to vote by
next week to approve an unjustified merger with Tarveda
Therapeutics, Inc. (“Tarveda”).
Given my unique experience starting Organovo and
operating in the biotechnology sector for decades, I hope that you
will consider my informed personal perspective on whether a
combination with Tarveda will lead to a turnaround and enhanced
value creation. The facts underscore that Tarveda is in a weak
financial position with unexciting technology and unattractive
prospects. It is also important for stockholders to recognize that
Organovo is already in its own precarious position due to recent
mismanagement. This is why I firmly believe that the
transaction being irrationally championed by the Board runs
completely counter to stockholders’ best
interests.
A key consideration for investors in the face of
the spread of the novel coronavirus, SARS-CoV-2, is that I believe
new market conditions make this merger even less attractive and
viable. Biotech companies needing to raise cash over the next
12-month period are poised to face significant headwinds in my
opinion. Tarveda is a company in need of additional capital beyond
Organovo’s current cash in order to fund clinical trials to a
successful point. In contrast, Organovo’s stock has been a
relatively safer harbor, trending with the NASDAQ overall.
Considering Organovo has natural downside protection due to being
valued near its book value, I believe that waiting—and not
consummating a reckless merger—may be the best course until the
current storm has passed.
I want to stress that my assessment is
unaffected by the Board’s decision to not pursue a merger with
Viscient Biosciences (“Viscient”). While I firmly believe that the
Board failed to create value for stockholders when it rebuffed what
could have been a very synergistic merger with Viscient, I am fully
aligned with you and recognize that there are many other viable
combination partners out there. However, Tarveda is by no
means an attractive deal partner.
I believe there are a number of factors to
consider, including:
- Tarveda was running out of money in late 2019, with no venture
capital funds or public market investors apparently eager to
invest;
- Tarveda has been on a downward trajectory following a prior
record of poor investments;
- Tarveda possesses unattractive technology that needs a bailout,
via a reverse merger, just to survive, and;
- Tarveda lost its longtime Chief Scientific Officer, who was
also President of R&D, in 2019, which is hardly the sign of a
strong technology.
So, what options exist that may be superior to
the Tarveda transaction?
- The Board Can Abandon the Merger to Re-Focus on Organic
Growth via Bioprinting – It should be clear to the Board
that investors believe in Organovo’s bioprinting opportunity. This
was communicated to them at the Annual Stockholders meeting in
September 2019, and more directly by many investors since
then. It is time for the Board to listen to stockholders. I
know many of the Company’s stockholders very well, and all of them
invested based on the promise of 3D bioprinting and want to
continue to see their investments used towards that end. In
the case of an abandoned or defeated Tarveda merger, the Board can
ensure Organovo actually utilizes the incredible bioprinting
technology that stockholders paid to develop. I find it completely
paradoxical that the Board, which lacks the knowledge of the sector
and the capacity for innovation, is willing to essentially flee the
bioprinting sector right as it begins to realize its promise in
other hands.
- The Board Should Reconstitute its Membership –
If the Board does not see the value of Organovo’s bioprinting
opportunity following an abandoned or defeated merger, I believe
the Board should step down. The stockholders want the company
to pursue bioprinting and have communicated this clearly to the
Board. A stockholder vote against the deal would be the
ultimate message to the Board. Rather than improperly substitute
its judgment for that of the stockholders, the Board of a
bioprinting company that cannot find a way to pursue bioprinting
should simply step down and find candidates with industry
experience to take over. I personally believe that this Board has
often appeared ill-equipped to lead the Company and meet its duty
of enhancing value. I believe that the record shows that the
current mix of inadequate directors lacks both sufficient expertise
and proper alignment of interests when it comes to Company
performance.
- The Board Can Run an Improved Strategic Alternatives
Process – Having been Chairman for many years and having
recruited each of Organovo’s Special Committee members to the
Board, I feel that Organovo’s Board was not positioned to run an
effective and value-maximizing process to identify potential
suitable merger partners. The strengths of Organovo’s Board members
are simply not innovative thinking or the type of entrepreneurial
risk-taking required for a company like Organovo. The
impression one gets from reading Organovo’s filings is that the
Board ran the process with the primary goal of avoiding lawsuits
rather than maximizing stockholder value. Unlike other
companies with which Viscient has conversed about potential
mergers, Organovo didn’t have significant discussions between
management that knew the business best, deferring to a legalistic
Board process.Rather than combining with a company that is in
retreat, running low on capital and can only scrape together
several months of cash in connection to the merger, the Board could
admit its mistake and aim to find a combination partner that has
upward trending progress of any type or the ability to leverage the
Company’s world-class bioprinting technology. I know of at least
one exciting private company that would have been a good merger
partner, especially in light of its proven chief executive, whose
last company exited in the billions. That company has already
attracted tens of millions of dollars in new capital to back its
latest effort that it can add to the cash in Organovo.
If you review the Company’s communications
related to the merger closely, I suspect you will realize that the
Tarveda merger is built on hopes and speculation about products and
developments that I believe the circumstances prove have not been
able to interest investment funds and have already lost support
from VC funds. The Board expects us to trust its judgment over that
of experienced investors and also expects us not to read into
Tarveda’s tenuous current cash position or worry about the probable
sell-off to be expected from current stockholders given their
bioprinting interest and the resulting post-merger investor
mismatch.
For all these reasons, I am voting
“AGAINST” the proposed merger with Tarveda. I firmly
believe this Board has not earned the right to have stockholders
trust its judgment or its recommendation with respect to this
merger. The Board’s record of value destruction speaks for
itself.
I do plan to vote “FOR” the Company’s proposed
reverse stock split, as I believe this is a necessary tool to avoid
delisting from the NASDAQ stock exchange. In the context of a
reverse stock split and no merger, the company should continue to
trade for near its book value until an alternative plan is
developed.
Sincerely,
Keith MurphyFORWARD-LOOKING STATEMENTS
Any statements contained herein that do not
describe historical facts, including future operations, are neither
promises nor guarantees and may constitute “forward-looking
statements” as that term is defined in the U.S. Private Securities
Litigation Reform Act of 1995. Such forward-looking
statements may include words such as “may,” “might,” “will,”
“should,” “expects,” “plans,” “anticipates,” “believes,”
“estimates,” “predicts,” “potential” or “continue,” the negative of
these terms and other comparable terminology. Any such
forward-looking statements contained herein are based on current
assumptions, estimates and expectations, but are subject to a
number of known and unknown risks and significant business,
economic and competitive uncertainties that may cause actual
results to differ materially from expectations. Numerous
factors could cause actual future results to differ materially from
current expectations expressed or implied by such forward-looking
statements, including the risks and other risk factors detailed in
various publicly available documents filed by the Company from time
to time with the Securities and Exchange Commission (SEC), which
are available at www.sec.gov, including but not limited to, such
information appearing under the caption “Risk Factors” in the
Company’s Annual Report on Form 10-K filed with the SEC on June 3,
2019. Any forward-looking statements should be considered in
light of those risk factors. Mr. Murphy cautions readers not to
rely on any such forward-looking statements, which speak only as of
the date they are made. Mr. Murphy disclaims any intent or
obligation to publicly update or revise any such forward-looking
statements to reflect any change in Company expectations or future
events, conditions or circumstances on which any such
forward-looking statements may be based, or that may affect the
likelihood that actual results may differ from those set forth in
such forward-looking statements.
Contacts
For Media:
ProfileGreg Marose / Ashley
Areopagita347-343-2999gmarose@profileadvisors.com /
aareopagita@profileadvisors.com
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