Sian Capital, LLC (together with its affiliates, “Sian” or “we”), a
sizable stockholder with beneficial ownership of approximately 3%
of OPKO Health, Inc.'s (NASDAQ: OPK) (“OPKO” or the “Company”)
outstanding common stock, today issued the below letter to
stockholders. Recently, Sian issued a presentation outlining paths
to enhanced value creation at OPKO and posted other relevant
materials at www.siancapital.com/resources.
November 12, 2020
Fellow Stockholders,
Sian Capital, LLC (together with its affiliates,
“Sian” or “we”) has been overwhelmed by the positive investor
response to our October 2020 presentation that outlines several
viable paths to unlocking the tremendous value trapped within OPKO
Health, Inc.'s (“OPKO” or the “Company”) underperforming stock.
After receiving messages from more than 400 supportive stockholders
over the past two weeks, one thing has become crystal clear to us:
investors are fed up with leadership’s self-serving decisions and
believe now is the time to pursue the many high-potential
opportunities that exist across the industry.
We believe the public market does not fully
appreciate OPKO’s prized assets because it has lost confidence in
the Company’s management and Board of Directors (the “Board”). It
appears these leaders are either unable or unwilling to address the
array of governance, financial and strategic issues that continue
to depress the Company’s stock price. Moreover, it has recently
come to our attention that OPKO’s representatives are going so far
as to attempt to dissuade stockholders from supporting change at
the Company and making baseless claims regarding Sian and the
Company’s governance. For this reason, we want to expose OPKO’s
misinformation campaign and refute its recent effort to miscast
Sian and our value-enhancing ideas.
FACT: OPKO’s Investor
Relations Team is Waging
a Misinformation Campaign Against
Sian
Despite Sian frequently engaging with Chairman
and CEO Dr. Phillip Frost, Executive Vice President and director
Steven Rubin, OPKO’s investor relations team, as well as other
members of OPKO senior management to discuss paths to unlock value
for stockholders over the past six months, OPKO’s investor
relations team is now falsely claiming to stockholders that they
have “never heard of Sian” in an apparent attempt to discredit us
and our research. The reality is OPKO proactively reached out to
Sian within 24 hours of the release of our public presentation to
continue our dialogue. In spite of the Company’s misinformation
campaign, investors have been studying our materials, resulting in
positive feedback and support from analysts who follow OPKO
closely. Just today at the H.C. Wainwright 6th Annual Israel
Virtual Conference, an analyst asked multiple questions regarding
some of the very same strategic options we have urged OPKO to
examine. The analyst specifically asked if OPKO would consider
splitting its Pharma and Laboratory division since neither is
getting the value it deserves, to which the Company responded that
they are exploring this and “may in fact do that,” especially since
the Pharma division will be self-funding once hGH and Rayaldee
royalties begin shortly and is something they intend to look at
going forward. The analyst further asked about rumors they
independently heard of regarding acquiror interest, to which the
Company responded, “we engage in strategic decisions [consistently]
and at this time won’t comment.” Several savvy investors
highlighted these comments to us today noting they signal the
Company seems willing to take the steps Sian has outlined. We
believe investors can now clearly see the direct path to unlock the
value that long-suffering investors deserve.
FACT:
The Delaware Court of Chancery and OPKO’s
Board have Approved
the Institution of
Several Corporate
Governance Changes by
January 2021
Stockholders should know that within just two
weeks of Sian sending its 220 Demand Letter to OPKO, and just
one week after it was publicly disclosed on October 29th by press
release and Sian Capital’s website,1 the OPKO Board and the
Delaware Court of Chancery approved a settlement that requires OPKO
to implement certain important governance enhancements no later
than January 31, 2021. These include but are not limited to:
- The Mandatory Appointment
of a New Independent Director to the Board – OPKO is
required to add a new, independent director, specifically required
to have less than 5% stock ownership (to prevent further
concentration of ownership) and no previous employment or ties with
current management.
- The Nominating Committee of
the Board – This committee may be the
only Committee to recommend new Board members. The Chairman is also
disallowed from participating on the Nominating Committee,
preventing further hand-picked directors by the Chairman.
- Stockholder
Consultation
Required for
Director Selection – The
Nominating Committee is required to consider the input from
significant stockholders, which must be done explicitly in good
faith, including on issues of director independence, qualifications
and selection.
- Lead Independent
Director – Mandatory checks have been put in place
delivering greater power to the Lead Independent Director: (i) at
each Board meeting there shall be a separately convened session of
non-management Board directors, and (ii) the Lead Independent
Director has sole approval over the schedule of all Board meetings,
and is required to be consulted on the agenda of each Board
meeting, as well as all information sent to the Board.
- Independent Investment
Committee – A new Independent Investment Committee (“IIC”)
is required to consist of exclusively independent directors who
shall be given sole authority, in its discretion, to hire its own
independent advisors when making investment decisions on minority
investments. Members of the IIC are required to recuse themselves
if they or any family members have a material investment, or
affiliation, with a potential transaction partner.2
The full list
of corporate
governance
enhancements OPKO is required to
undertake can be found on Sian’s website here.
____________________1https://siancapital.com/wp-content/uploads/2020/10/2020-10-21-Ltr-OPKO-Health-Inc.-re-Del-220-Demand_5577783.pdf2
In re Opko Health, C.A. No. 2018-0740-SG (2020).
OPKO has
Agreed
to Send Sian Requested
Documents – In addition to these enhancements, the Company
has agreed to send Sian a subset of the documents we requested in
our 220 Demand Letter, which we believe will affirm our fundamental
analysis. Predictably, OPKO has denied our request for certain
other documents, which we find suspicious because this information
would help verify various allegations we learned from in-depth
interviews conducted during our extensive due diligence. We will
continue to work to obtain these documents on behalf of all OPKO
stockholders.
FACT: Dr. Frost and the
Board Have a Fiduciary Duty to Act in the Best Interests of
Stockholders
Dr. Frost’s aggressive stock purchases this year
have caused Company insiders to exceed a 40% ownership position,
which is a key threshold we have been eyeing for quite some time.
The rise of insider control was a factor we were watching closely
and conscious of well before deciding to publicize our view of the
value opportunity at OPKO, as it not only verified our thesis that
the Company’s fundamentals are set to inflect in over the next
year, but also provided us with a path to help ensure improved
governance changes would be made. As a result of Dr. Frost and the
Board’s actions, we believe Dr. Frost is now considered a
“Controlling Stockholder” and the OPKO Board is “Conflicted,” as
both are specifically defined under Delaware law. As we describe in
our Corporate Governance White Paper, the simultaneous presence of
a “Controlling Stockholder” and “Conflicted Board” in the same
public company actually has specific ramifications under Delaware
law, precisely because of the enhanced potential for misuse of
power. In fact, in these situations, Delaware law actually imposes
stricter duties on the stockholder and the Board to protect
minority stockholders in these situations from abuses of power.
FACT:
Filings Show That OPKO
Leaders Could be
Personally Liable for Breaches of
Their Fiduciary
Duties, Leaving Them Highly
Vulnerable and Exposed
to Potential Litigation
Through our conversations with fellow
stockholders, we found that it was largely unknown that the
Company’s history of egregious violations has left its Board with
the possibility that no insurance company will cover them, and if
they do, it could be costly for inadequate and limited coverage,
thereby leaving
them potentially
personally liable for any breach
– a risk we cannot fathom any Board member would take. We also note
that the Company’s insurance premiums nearly doubled over 2019,
costing stockholders an astounding $25 million while they suffered
incredible financial loses. We believe upon reading our Corporate
Governance White Paper, investors will have a sharply different
view of stockholders’ ability to effect change than the one
espoused by the Company over the past several days.
FACT: There
is a Clear Path to Unlock
Value for OPKO
Stockholders
Many stockholders agree with our view that OPKO
is deeply undervalued, worth at least 3x its current stock price,
and that the multiple paths we have outlined for maximizing that
value are viable. Sian believes that our significant alignment with
stockholders and strong track record helping companies optimize
returns for investors will serve us in helping reverse the billions
of dollars in destruction of value at OPKO. Given that OPKO’s stock
continues to trade at a significant discount, we believe
the Board should initiate a formal strategic review process to
determine how the Company can realize the true potential of its
assets. Recent feedback has shown that a critical mass of
stockholders agree it is time for OPKO’s leaders to honor their
fiduciary duties and quickly move to deliver the value that
long-suffering investors deserve by announcing and initiating a
credible review process. Further, we believe multiple potential
suitors have come forward, unsolicited, to discuss partnerships,
acquisitions, royalty agreements and other value-enhancing
alternatives. We urge stockholders to ask OPKO themselves: has the
Company received interest in its assets? We believe the answer will
be telling.
We encourage investors to closely read the three
White Papers we have posted to our website. These contain further
details on the Company’s true fundamental value, which should be
read in conjunction with Sian’s previous investor presentation, an
examination on corporate governance under Delaware law, and
examples of how we can continue to enact change. These papers also
include short commentary on the election results and Pfizer’s tepid
vaccine announcement last week, which we believe have only made the
industry tailwinds more pronounced.
In the weeks ahead, we will continue to
communicate frequently and transparently with you regarding the
best path forward for OPKO. We encourage you to engage with us on a
one-to-one basis in the meantime by e-mailing
contact@siancapital.com.
Sincerely,
Anish Monga
Founder and Managing PartnerSian Capital LLC
About Sian Capital
Founded by veteran portfolio manager Anish
Monga, Sian Capital, LLC is a New York-based asset management firm
that employs a focused, event-driven investment approach. Sian’s
unique mix of cross-sector experience and activism expertise
enables it to identify and invest in what are often overlooked or
under-covered investment opportunities.
Contacts
ProfileGreg Marose / Charlotte Kiaiegmarose@profileadvisors.com
/ ckiaie@profileadvisors.com
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