Details the Incumbent Board’s History of
Presiding Over Dismal Governance Practices, Numerous Commercial and
Strategic Missteps, and Hundreds of Millions of Dollars in Value
Destruction
Highlights That Chairman Scott Tarriff has
Fostered an Anti-Shareholder Culture Defined by Dilutive Actions,
Poor Investor Engagement, and a Misaligned Management Team
Urges Shareholders to Vote on the
WHITE Consent Card to Reconstitute the
Board with WaterMill’s Three Highly-Qualified and Independent
Director Candidates
Warns Shareholders to Avoid Being Misled by
Mr. Tarriff and his Allies, Especially Given That Their Last
Self-Directed Board Refresh was Followed by a ~40% Share Price
Decline
WaterMill Asset Management Corp. (together with its affiliates,
“WaterMill” or “we”), which collectively with the other
participants in its consent solicitation beneficially owns
approximately 3.3% of the outstanding shares of Ziopharm Oncology,
Inc. (NASDAQ: ZIOP) (“Ziopharm” or the “Company”), today issued the
below letter to shareholders in support of the proposals included
in its definitive consent statement filed with the U.S. Securities
and Exchange Commission on October 30, 2020. Notably, WaterMill has
put forth proposals to reconstitute Ziopharm’s Board of Directors,
including a proposal to remove four incumbent directors and a
proposal to elect three highly-qualified and independent nominees:
Robert Postma, Jaime Vieser, and Holger Weis.
We are asking shareholders to consent to all of our proposals by
voting on the WHITE consent
card. We urge shareholders to sign,
date, and return their WHITE consent card today. Please return each
and every WHITE consent card
received. Do not return any green revocation card (even as a
protest vote).
Please note that important information pertaining to WaterMill’s
campaign, including the below letter, is available at
www.FixZiopharm.com.
***
November 5, 2020
Fellow Shareholders:
WaterMill Asset Management Corp. (together with its affiliates,
“WaterMill” or “we”) invested in Ziopharm Oncology, Inc.
(“Ziopharm” or the “Company”) because we believe in the innovation
and science behind the Company’s immuno-oncology platform. Like
many of you, we have spent years investing in the biotechnology
sector and understand that considerable patience is required on the
road to value creation. This is why we have never before engaged in
an “activist campaign” and strive to maintain cordial, productive
relationships with corporate leadership teams. Unfortunately, we
have been forced to deviate from our long-preferred posture due to
the extraordinarily anti-shareholder actions and value-destructive
reign of Ziopharm’s Board of Directors (the “Board”).
After assessing the various ways in which we could potentially
catalyze change at Ziopharm, we determined
that it was in the best interest of all shareholders for WaterMill
to launch a consent solicitation to reconstitute the Board in a
pragmatic and targeted manner. This is why we are
soliciting shareholder support to remove four incumbent directors –
Scott Braunstein, J. Kevin Buchi, Elan Z. Ezickson, and Scott
Tarriff – and elect three highly-qualified and independent
individuals – Robert Postma, Jaime Vieser, and Holger Weis – who we
believe possess the type of business acumen and strategic vision
that has been lacking in the boardroom for far too long.
In our view, a seven-member Board that includes four of the
incumbents and all three of our director candidates will have the
ideal mix of institutional knowledge, industry expertise,
commercial intensity, and meaningful ownership perspectives. We
believe a Board that is truly focused on running Ziopharm like a
high-potential business can finally establish value-enhancing
partnerships, line up appropriate financing sources, incentivize
the right management team, and reverse the Company’s five-year
tailspin. These are the types of outcomes that will benefit all of
Ziopharm’s stakeholders, ranging from shareholders and employees to
patients and caregivers.
THE CASE FOR
MEANINGFUL, SHAREHOLDER-DRIVEN CHANGE ATOP ZIOPHARM IS CRYSTAL
CLEAR
Since Chairman Scott Tarriff and Chief Executive Officer
Laurence Cooper joined Ziopharm in 2015, we contend that
shareholders have been systemically disregarded and deprioritized.
This is evidenced by the Company’s negative total shareholder
returns (“TSR”) and staggering underperformance over several time
horizons:
1-Year TSR*
3-Year TSR*
5-Year TSR*
Ziopharm
-39.31%
-52.43%
-76.28%
S&P 500
18.50%
44.63%
90.33%
Russell 3000
19.18%
43.19%
87.84%
SPDR S&P Biotech ETF
52.53%
39.17%
83.19%
*Source: Bloomberg (TSR figures reflect share price and
performance up until October 15, 2020, which is the day before
WaterMill filed its preliminary consent statement).
We believe it is critical for shareholders to see through
Ziopharm’s brazenly misrepresentative investor communications and
realize that value has eroded at an even faster pace following the
Company’s self-directed Board refreshment in 2018. In fact,
Ziopharm’s share price is down nearly 40% over the past twelve
months alone.1 Mr. Tarriff and Dr. Cooper apparently chose to
ignore this fact in their November 2nd letter that claims “Ziopharm
continues to drive value with fresh Board perspectives.”2 We
question how shareholders can have any faith in Ziopharm’s current
leadership when it is so willing to disseminate
consultant-manufactured spin and disregard shareholder
suffering.
Although the incumbent Board has signaled its intent to distort
and ignore reality, we feel shareholders deserve to be reacquainted
with data and facts that underscore the need for expedited
boardroom change:
- The incumbent Board has repeatedly shown that it is
unwilling to accept and address shareholder feedback.
- A majority of voting shareholders withheld support for three
directors – Mr. Braunstein, Mr. Ezickson, and Douglas Pagán – at
this year’s annual meeting. Rather than engage with shareholders to
finally commence a credible Board overhaul, Ziopharm allowed two of
the aforementioned directors to retain their positions and replaced
Mr. Pagán (Chief Financial Officer of Dicerna Pharmaceuticals,
Inc.) with Mr. Buchi (Chairman of Dicerna Pharmaceuticals, Inc.).
We question how it improves the Board’s damaged credibility and
serves shareholders’ interests to replace Mr. Pagán – who clearly
lost investors’ confidence – with one of his current bosses.
- Long-term shareholders have suffered through sustained losses
in recent years. In an apparent attempt to add insult to injury,
Ziopharm asked shareholders to increase the Company’s authorized
share count by 195 million shares at this year’s annual meeting.
This dilutive, poorly-conceived proposal was voted down.
- Instead of assuming accountability for the hundreds of millions
of dollars destroyed during their tenures, Mr. Tarriff and Dr.
Cooper boasted about purported accomplishments and hurled
unsubstantiated smears at WaterMill in its November 2nd letter. We
encourage shareholders to examine their insulting communication,
which we believe reads like it was ghost written by individuals
with no pulse on Ziopharm’s attentive and engaged investor
base.
- The incumbent Board lacks alignment with shareholders and
important ownership perspectives.
- According to Ziopharm’s consent revocation statement, the Board
paid out $1.84 million in total compensation to seven directors in
the year ended on December 31, 2019. It underscores just how out of
touch Ziopharm’s Board is that directors received an average
compensation of more than $260,000. In our view, this represents
egregious compensation for a small market capitalization company
that has been going in the wrong direction for years.
- WaterMill’s three-member slate, which collectively owns more
than 3.3% of the Company’s outstanding shares, has a significantly
larger ownership position than all eight of the incumbent directors
combined. We question how shareholders can trust the Board to
urgently correct years of underperformance when it is so misaligned
and maintains such meager shareholdings.
- The incumbent Board is plagued by what appears to be a
troubling web of performance issues and interlocking relationships
among directors.
- Among Ziopharm’s incumbent directors, we have uncovered
numerous instances of possible conflicts and overlap in Board
service at other companies, including:
- Mr. Ezickson serves on the Board of Marinus Pharmaceuticals,
Inc. (NASDAQ: MRNS), where fellow Ziopharm director Dr. Braunstein
also serves as Chief Executive Officer and President.
- Since 2007, Mr. Tarriff has served as a director and the Chief
Executive Officer at Eagle Pharmaceuticals, Inc. (“Eagle”) (NASDAQ:
EGRX). The brother of Mr. Tarriff’s fellow Ziopharm director, Scott
Braunstein, served on Eagle’s Board of Directors from July 2016 to
November 2019.
- Since February 2012, Mr. Tarriff has also been a director on
the Board of Synthetic Biologics, Inc. (NYSE: SYN), where
shareholders have seen Synthetic Biologic’s stock drop from over
$70 to less than $1. Ziopharm did not disclose this mark on Mr.
Tarriff’s record in its November 2nd letter to shareholders.
- As noted, Mr. Pagán’s replacement on the Board – Mr. Buchi – is
the Chairman of Dicerna Pharmaceuticals, Inc. (NASDAQ: DRNA), where
Mr. Pagán also serves as Chief Financial Officer.
- The incumbent Board has rewarded management with excessive
and unjustifiable compensation as shareholders have endured
unrelenting pain.
- Ziopharm’s consent revocation statement notes that all of the
Company’s eligible named executive officers received base
compensation raises from 2018 to 2019. Dr. Cooper was rewarded with
a 14.6% raise in his base compensation. All of this occurred
despite the fact that the Company’s share price declined by more
than 50% over the course of the year ended December 31, 2018.
- In January 2019, the Board awarded restricted shares and
options with a total equity value of more than $3 million to Dr.
Cooper and three other executives. Once again, this was provided
after the Company’s share price declined by more than 50% in
2018.
- For performance in the year 2019, the Board determined that
each member of the executive team met 100% of his individual
objectives and paid out more than $1.5 million in bonuses. Dr.
Cooper was showered with a more than $1 million bonus despite the
fact that Ziopharm’s share price has dramatically declined over his
tenure. We believe this excessively generous and misaligned
compensation system reflects the low-bar objectives set by the
Board and is symptomatic of the disease of poor boardroom
stewardship.
- The incumbent Board has championed dilutive actions and
tolerated dismal business execution.
- Since 2017, the Board has overseen multiple public offerings
and private placements that have diluted existing shareholders by
more than 50%. These share issuances were at prices significantly
below the market and led to only $255 million raised.
- Ziopharm has failed to accelerate the monetization of its
attractive immuno-oncology assets, going on for years without a
partnership that further validates the Company’s therapies and its
commercial prospects. We feel the evidence of this failure is
embedded within the Company’s beaten down shares – and the Board’s
attempts to point to qualitative accomplishments does not change
reality.
- The Board and management have rewarded themselves with lofty
compensation but have not invested in the type of transformative
business development and commercialization talent that Ziopharm
needs to completely or partially monetize assets.
- The incumbent Board, under Mr. Tarriff’s leadership, has
amassed an industry-worst governance profile.
- One of the leading independent proxy advisory firms,
Institutional Shareholder Services, Inc. (“ISS”), shares our view
that the Board fosters anti-shareholder practices, as evidenced by
its issuance of a score “9” (on a scale of 1-10, with “10”
representing the highest governance risk) in its QualityScore
Governance Profile Report. It is very unfortunate that this ISS
assessment did not serve as a wakeup call to Mr. Tarriff, Dr.
Cooper, and other incumbent directors that we believe are focused
on their self-interests.
- ISS recommended shareholders vote “WITHHOLD” with respect to
the election of Mr. Braunstein to the Board at the 2020 Annual
Meeting due to his service on more than three public company boards
while also serving as Chief Executive Officer of a separate public
company, noting that “[a] CEO cannot reasonably be expected to
balance the responsibilities of serving on more than three public
boards while also fulfilling full-time executive duties.”
- In 2019, Mr. Ezickson attended less than 75% of Board and
committee meetings. How can directors address investor concerns and
effectively evaluate management with 75% participation? Effective
boards of directors have strong, robust engagement from all
members.
CHANGE ATOP ZIOPHARM
IS NEEDED NOW – SHAREHOLDERS CANNOT AFFORD TO CONTINUE ROLLING THE
DICE ON MR. TARRIFF AND THE INCUMBENTS
Ziopharm’s shares are currently trading near a ten-year low
because leadership has failed to provide a credible path to
unlocking value. To the contrary, it seems to us that Mr. Tarriff
and Dr. Cooper only have a roadmap for enriching insiders at the
expense of shareholders. We fear that another year under the
incumbent Board’s leadership may lead Ziopharm toward a de-listing
and joining the long list of biotechnology firms that have
squandered their potential on route to becoming a penny stock. This
is why we have taken the extraordinary action of running a consent
solicitation and are seeking to facilitate targeted boardroom
changes as quickly as possible.
Now that WaterMill has exposed Ziopharm’s contempt for
shareholders and prioritization of insiders, we expect the Company
and its growing army of high-priced external consultants – who are
paid for with our capital – to continue attacking our slate and
disseminating misrepresentations. We urge shareholders to see
through the incumbent Board’s empty spin and reject any attempts to
pass off cosmetic changes as substantive improvements. In our view,
any reactionary moves announced by Ziopharm in the weeks to come
will represent nothing more than self-preservation tactics and
entrenchment maneuvers.
There is no need for shareholders to continue to roll the dice
on Mr. Tarriff and the other three underperforming incumbent
directors we are targeting. It is clear to us – and hopefully now
other shareholders – that these individuals appear content to run
Ziopharm like a rudderless non-profit organization. By removing
these individuals and installing our slate of proven business and
financial experts, we believe shareholders will finally have a
Board that is capable of running the Company like a publicly-traded
entity that is supposed to produce value for its shareholders.
OUR THREE-MEMBER SLATE
OF DIRECTOR CANDIDATES IS ALIGNED, EXPERIENCED AND FULLY FOCUSED ON
UNLOCKING VALUE
Although Ziopharm boasts it has “directors with diverse skills
and experiences relevant to our industry and operations,” recent
evidence suggests its Board is most skilled and experienced in
presiding over rapid and significant value destruction. We also
find it odd that Mr. Tarriff and Dr. Cooper are trying to score
points with shareholders by saying they are “executing on the
Company’s long-term strategy,” particularly in light of the fact
that this so-called “strategy” has been a recipe for years of
losses. Fortunately, our slate will not allow Ziopharm to continue
bleeding cash, overpaying underperforming leadership, and wagering
all of its remaining equity value on three partnerships that are
yet to yield even a hint of value for shareholders.
We believe a properly reconstituted Board that includes our
three director candidates will be able to oversee the
implementation of a superior corporate strategy – one that leads to
enhanced governance, improved financing decisions that serve
shareholders’ best interests, and value-enhancing business
development opportunities. Our slate’s business and financial
acumen, commercial vision, and ownership perspectives are the ideal
complement to the four Board members that we are not seeking to
remove. Our slate includes:
Director
Candidate
Relevant
Experience
Notable
Qualifications and Skills
Robert Postma
- Principal and founder of WaterMill Asset Management Corp.
- Four decades of experience investing across equity and fixed
income markets
- Frequently analyzes, invests in, and engages with healthcare
and biotechnology companies
- Sizable and long-term shareholder of Ziopharm
- Extensive knowledge of Ziopharm’s assets, governance, and
financials
- Strong capital allocation acumen
- Valuable relationships with prospective industry and financial
partners
Jaime Vieser
- Manager of Brushwood LLC, a private investment firm
- Previously Co-Founder and Chief Investment Officer of Castle
Hill Asset Management LLC, a multi-billion dollar asset
manager
- Former banker at Deutsche Bank AG and Bankers Trust
Company
- Sizable and long-term shareholder of Ziopharm
- Deep understanding of Ziopharm’s assets, governance, and
financials
- Strong and useful relationships with banks and prospective
sources of capital
- MBA
Holger Weis
- Two decades of various c-level business and strategy roles at
life science companies
- Currently Chief Financial Officer of PhenoTarget Biosciences,
Inc.
- Co-author of several scientific papers and presentations
- Former Ernst & Young executive
- Deep knowledge of the biotech industry and operational,
financial, and strategic planning practices
- Valuable expertise in financial management, planning, audits,
and accounting
- Extensive knowledge of Ziopharm’s assets, governance, and
financials
- Certified Public Accountant
In the weeks to come, we will release additional information
pertaining to our slate and its strategic vision. We are committed
to communicating with shareholders in a frequent and transparent
manner in order to demonstrate how our slate will act and think
upon entering the boardroom.
Please visit www.FixZiopharm.com and sign up for e-mail alerts
in order to receive our updates.
Thank you for your support.
Robert Postma Principal and Founder WaterMill Asset Management
Corp.
***
We urge Ziopharm shareholders to consent to
all five proposals on the WHITE
consent card today and return it in your postage-paid envelope
provided. December 11, 2020 is our goal for the submission
of written consents. Effectively, this means
that you have until December 11, 2020 to consent to the
proposals.
Should you have any questions or need
assistance with voting, please contact Saratoga Proxy Consulting
LLC at (888) 368-0379 or (212) 257-1311 or by email at
info@saratogaproxy.com.
PROTECT YOUR INVESTMENT. SIGN, DATE AND
RETURN YOUR FILLED OUT WHITE CONSENT CARD TODAY.
____________________________ 1 Ziopharm’s share price was $4.35
as of market close on October 15, 2019 and the Company’s share
price was $2.64 as of market close on October 15, 2020 (the day
prior to WaterMill filing a preliminary consent statement). 2 Press
release entitled “Ziopharm Files Definitive Consent Revocation
Statement and Sends Letter to Shareholders” issued on November 2,
2020.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201105005658/en/
For Investors:
Saratoga Proxy Consulting LLC John Ferguson / Joe Mills,
212-257-1311 jferguson@saratogaproxy.com /
jmills@saratogaproxy.com
For Media:
Profile Greg Marose / Charlotte Kiaie, 347-343-2999
gmarose@profileadvisors.com / ckiaie@profileadvisors.com
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