Three Independent Directors Nominated to
Strengthen Board, Remove Conflicts and Return Control of the
Company to Shareholders
Commercial Potential of Voclosporin is
Tremendous, But Not Reflected in the Company’s Share Price Under
Current Leadership
Current Group of Hand-Picked and Conflicted
Directors Have Overseen Excessive Compensation, Increasing Costs
and Governance Failures
Shareholders Urged to Vote Their GREEN Proxy or
GREEN VIF to Strengthen Board with Three New, Highly Qualified
Independent Nominees
ILJIN SNT Co., Ltd. (“ILJIN”) today announced that it has
filed an information circular (the "Circular") and letter to
shareholders in connection with the upcoming Annual General Meeting
of Shareholders of Aurinia Pharmaceuticals Inc. (NASDAQ: AUPH, TSX:
AUP) (“Aurinia” or the “Corporation”) to be held on
Wednesday, June 26, 2019.
ILJIN, a founding shareholder of Aurinia which together with
certain affiliates holds an approximately 14% ownership interest in
Aurinia, is seeking support for three exceptional nominees for
election as directors at the annual meeting: Dr. Robert Foster, Mr.
Soon-Yub (Samuel) Kwon and Dr. Myeong-Hee Yu. These director
nominees represent an independent, non-conflicted and highly
experienced slate of directors who are committed to bringing both
good governance and their technical, business and scientific
expertise to the progression and ultimate commercialization of
Aurinia’s impressive pipeline of pharmaceutical solutions.
Young-Hwa Kim, Chief Executive Officer of ILJIN, said, “lLJIN is
a global life sciences-focused investment firm with a portfolio of
investments in companies focused on novel drugs, medical devices
and diagnostics for unmet medical needs. Aurinia is at a phase in
its development that we know well. We recognized very early on the
commercial potential of voclosporin, originally acquiring a
licensing agreement for the drug before allowing Aurinia to
reacquire the license in exchange for a significant equity
investment in Aurinia. To date, we have invested $58 million in
Aurinia and the future of voclosporin.”
Added Kim, “We, along with all Aurinia shareholders, have waited
patiently for current leadership to not only advance the
commercialization of voclosporin, but to do so in a way that shows
respect for its public shareholders, in terms of financial
discipline, proper corporate governance, and prudent capital
raising. Unfortunately, the current Board has repeatedly failed to
meet these responsibilities, and change is needed. This is a
critical time for the Corporation and the Board’s leadership will
determine if and how value is realized at Aurinia. So far, this
Board has focused primarily on itself, not the interests of
shareholders. We urge shareholders to join us in electing three
new, independent directors and return control of Aurinia’s future
to all of its shareholders, not Aurinia insiders.”
ILJIN’s Highly Qualified, Independent Nominees
- Dr. Robert Foster is largely
responsible for the discovery of voclosporin, the keynote drug upon
which Aurinia’s pipeline of pharmaceutical products is based, and
was the former CEO of both Isotechnika Pharma Inc., a predecessor
to Aurinia, and Aurinia itself. Dr. Foster is one of the most
respected pharmaceutical scientists in the world and brings a
proven ability in the discovery, development and commercialization
of pharmaceuticals.
- Mr. Soon-Yub (Samuel) Kwon has
extensive experience advising both domestic and international
healthcare-related companies over a broad range of transactional
and regulatory matters. He brings over 30 years of legal and
business acumen to his role as director.
- Dr. Myeong-Hee Yu has over 30
years of extensive international biotechnology experience, both as
a researcher and through numerous advisory and committee roles
within government and private industry. She has played a key role
in the development of Korea’s biotechnology industry, earning
numerous national and international awards and publishing over 120
articles in major scientific journals.
Shareholders are urged to read the circular and vote ONLY the
GREEN proxy or GREEN VIF on or before 5:00 p.m. (Mountain time) on
June 21, 2019, so that it can be deposited in advance of the proxy
cut-off. Shareholders who have already voted and wish to change
their vote in support of the three independent nominees can do so
by simply executing the Green proxy. As a later dated Green proxy
will cancel an earlier vote. Shareholders requiring any assistance
in executing their GREEN proxy or voting instruction form, can call
Gryphon Advisors Inc. at: 1-833-266-0365 or 1-416-661-6592 or email
inquiries@gryphonadvisors.ca.
For ease of voting, shareholders are encouraged to visit
www.AHealthierAurinia.com to learn more. A copy of the information
circular is available on Aurinia’s SEDAR profile at
www.sedar.com.
The full text of ILJIN’s letter to fellow Aurinia shareholders
follows:
June 2, 2019
Dear Fellow Shareholders,
ILJIN SNT Co., Ltd. (“ILJIN” or the “Concerned
Shareholder”) and its affiliated companies (collectively, the
“ILJIN Group”) are significant shareholders of Aurinia
Pharmaceuticals Inc. (“Aurinia” or the
“Corporation”), with an approximate 14% ownership interest.
We are long-time enthusiastic believers in the commercial potential
of voclosporin, having first become involved with the drug through
a development, distribution and licensing arrangement with
Isotechnika Pharma Inc. (“Isotechnika”), a predecessor
company to Aurinia, in 2010. As part of the transactions by which
Isotechnika and Aurinia merged in 2013 (and continued under the
name “Aurinia Pharmaceuticals Inc.”), the ILJIN Group became a
significant shareholder in Aurinia when Aurinia reacquired full
rights to voclosporin from the ILJIN Group.
Since Aurinia’s merger with Isotechnika, the ILJIN Group has
unfailingly supported the Corporation, placing its trust and its
significant economic investment in the hands of Aurinia’s board of
directors and management to advance the drug through clinical
trials and to commercial applications for lupus nephritis
(“LN”), dry eye syndrome (“DES”) and focal segmental
glomerulosclerosis (“FSGS”). While other shareholders have
reduced their exposure to Aurinia significantly or exited entirely
over the past several years, ILJIN has in fact participated in
incremental offerings by Aurinia to help it achieve its objectives
and voclosporin’s unrealized potential. In 2018 and year-to-date
2019 alone, the ILJIN Group acquired an additional 827,641 common
shares of Aurinia from treasury for an aggregate of approximately
$2.3 million.
However, since announcing positive long-term outcomes for
patients suffering from LN, followed by a significant public
offering of stock in March 2017, Aurinia has failed to communicate
or execute a coherent strategy to maintain its momentum and to
realize the tremendous potential of voclosporin. Shareholders,
ILJIN included, are losing confidence in a board of directors and
management team whose interests are increasingly at odds with
shareholders, as reflected in rising executive compensation,
minimal stock ownership and an egregious lack of independence.
There can be no other explanation for the fact that Aurinia’s share
price has failed to move materially over the past two years.
No shareholder has been more committed to Aurinia’s success
and shown more patience with Aurinia’s board of directors and
management than ILJIN.
But enough is enough.
It is abundantly clear that Aurinia shareholders require a
board of directors that aligns with shareholders and that can guide
the company toward successful commercialization of voclosporin.
For this reason, ILJIN has taken the step of nominating three
(3) highly qualified and independent directors, who will act in the
interest of all shareholders to realize voclosporin’s full
potential.
Now. Finally. Aurinia’s Future is in Your
Hands.
In our months of dialogue with the Aurinia board and management
about the Corporation’s challenges, our message has remained
constant. We believe that Aurinia requires, and its shareholders
deserve, a board of directors that:
- Embodies corporate governance best
practices, rather than flouting them.
- Aligns board and executive compensation
and expenses with shareholders’ interests, rather than rewarding
non-performance.
- Demonstrates true independence from one
another and management (current and former), rather than looking
out for each other first.
- Supports and accelerates the
Corporation’s strategy execution, rather than sitting idly by as
the Corporation potentially squanders its tremendous
opportunity.
Upon their successful election, we expect that our nominees,
through the Governance & Nomination Committee and the
Compensation Committee, as applicable, will help implement
governance and compensation best practices at Aurinia to unlock
shareholder value and rebuild shareholder confidence. Our Concerned
Shareholder nominees can be expected to take the following steps,
among others:
1. Implement a robust share ownership
guideline for directors and executives to inhibit excessive risk
taking and to promote share ownership and alignment. 2. Implement
performance-based equity compensation for named executive officers;
a minimum of 50% of the equity pay mix will consist of performance
share units tied to rigorous performance metrics. 3. Establish a
robust shareholder engagement program that ensures that shareholder
voices are heard and that shareholders will have regular dialogue
with the board. 4. Adopt a clawback policy to restrict excessive
risk-taking and prevent windfall for executives. 5. Review the
audit fees and relationship with the auditors to ensure the
non-audit fees are maintained at an appropriate level. 6. Establish
an effective board refreshment policy to ensure that the new
nominees are truly independent. 7. Revisit Aurinia’s gender
diversity policy to ensure it is structured in accordance with best
corporate governance practices and with a proposed target of at
least two female directors on the board by the 2020 annual meeting.
8. Review the severance agreements of existing named executive
officers to ensure that all change of control provisions align with
best governance practices.
Our Concerned Shareholder Nominees can also be expected to
undertake actions in concert with the remaining board members to
unlock shareholder value, including:
1. Thoroughly reviewing corporate SG&A for
opportunities for efficiency gains. 2. Thoroughly reviewing R&D
expenses, including Aurinia’s relationships with third parties
(including contract research organizations) and its own internal
processes for opportunities for efficiency gains and alternatives
to institutional complacency. 3. Revisiting the drivers of overall
compensation growth and working with suitable external advisors to
develop a compensation program that encourages and motivates
employees while facilitating the achievement of corporate
objectives and compensation expense control. 4. Developing a
long-term strategy as a standalone pharmaceutical company,
including fully pursuing Aurinia’s current and future alternative
applications of voclosporin and to move market perception away from
a binary bet on the success of voclosporin in treating LN.
ILJIN HAS NOMINATED THREE (3) INDEPENDENT DIRECTORS TO
STRENGTHEN THE BOARD, REMOVE CONFLICTS AND GIVE AURINIA
SHAREHOLDERS CONTROL OF THEIR COMPANY
We have noted Aurinia’s recent letter to shareholders
disingenuously implying that ILJIN is intending to take “effective
control” of Aurinia without paying Aurinia’s shareholders a
premium. Nothing could be further from the truth.
We had originally proposed four (4) nominees under Aurinia’s
advance notice bylaw to preserve our ability to be responsive to
Aurinia’s circular once released, as we did not know at the time at
what size the board would be fixed and the advance notice bylaw is
inflexible on the ability to later add nominees. Now that Aurinia
has definitively proposed to fix the number of directors at eight
(8), we are proposing a minority slate of three (3) directors for
appointment, which is consistent with our message. Further, one of
our nominees is proposed to be appointed in lieu of our current
representative on the board of directors, Dr. Hyuek Joon Lee.
ILJIN does not want to, nor can it with a three (3) director
minority slate, take control. Rather, ILJIN wants to give all
shareholders more control. Unlike the complicated web of
relationships which bind the current board members together in a
ball of allegiances and loyalties that conflict with their duties
to shareholders, ILJIN’s nominees have no prior relationships with
each other of any nature and have been selected because they have
the requisite expertise and can be expected to act independently of
each other and of ILJIN.
We ask that you review the attached Proxy Circular and urge
you to support us and vote for change in the board of directors of
Aurinia by only using and voting the GREEN universal proxy or
voting instruction form enclosed with the Proxy Circular.
Discard and do not use the YELLOW
proxy or voting instruction form that was included with the
management information circular distributed by Aurinia.
For more information or if you require assistance with voting
your accompanying GREEN universal proxy or voting instruction form,
please contact our proxy solicitation agent, Gryphon Advisors Inc.,
using the contact information set out below and on the front and
back pages of the Proxy Circular.
We believe the Proposed Nominees have the required discipline
and skill set to take Aurinia to the next phase of its existence
and are confident that you will come to the same conclusion. We
welcome all Shareholders to join us and vote for change. We look
forward to your support.
Aurinia’s future is in your hands.
Sincerely,
/s/
(signed) “Young-Hwa Kim”
Chief Executive Officer
ILJIN SNT Co., Ltd.
Advisors and Counsel
Stikeman Elliott LLP is acting as Canadian legal counsel to
ILJIN. Gryphon Advisors Inc. has been engaged as proxy solicitation
agent and Gagnier Communications has been engaged by ILJIN as
communications advisor.
Legal Notices and Disclaimers
The data, information and opinions contained or referenced
herein (collectively, the “Information”) is for general
informational purposes only for the Shareholders in order to
provide the views of the Concerned Shareholder regarding certain
changes that it is requesting to the composition of the Aurinia
board of directors and other matters which it believes to be of
concern to Shareholders described herein. The Information is not
tailored to specific investment objectives, the financial
situation, suitability or particular need of any specific person(s)
who may receive the Information and should not be taken as advice
in considering the merits of any investment decision. The views
expressed in the Information represent the views and opinions of
the Concerned Shareholder, whose opinions may change at any time
and which are based on analysis of disclosure and filings with
respect to and/or made by Aurinia and other issuers that we
consider to be comparable to Aurinia, and from other third party
reports (see “Disclaimer Respecting Publicly Sourced Information”
in the Circular, a copy of which is available on SEDAR at
www.sedar.com or on www.aHealthierAurinia.com). The Concerned
Shareholder disclaims any obligation to publicly update the
Information, except as required by applicable law.
The Information contains forward-looking statements or
forward-looking information within the meaning of applicable
securities laws (collectively, "forward-looking
statements"), including in respect of the Concerned Shareholder
and the impact of the Concerned Shareholder Nominees on the
Corporation. All statements and Information, other than statements
of historical fact, contained or referenced herein are
forward-looking statements and forward-looking information,
including, without limitation, statements regarding activities,
events or developments that the Concerned Shareholder expects or
anticipates may occur in the future. Such forward-looking
statements and information can be identified by the use of
forward-looking words such as “will”, “expect”, “intend”, “plan”,
“estimate”, “anticipate”, “believe” or “continue” or similar words
and expressions or the negative thereof. There can be no assurance
that the plans, intentions or expectations upon which such
forward-looking statements and information are based will occur or,
even if they do occur, will result in the performance, events or
results expected.
The Concerned Shareholder cautions readers not to place undue
reliance on forward-looking statements and information contained or
referenced herein, which are not a guarantee of performance, events
or results and are subject to a number of risks, uncertainties and
other factors that could cause actual performance, events or
results to differ materially from those expressed or implied by
such forward-looking statements or information, including but not
limited to those set forth in the Circular under the heading
“Forward-Looking Statements and Information” and those risks and
uncertainties detailed in the continuous disclosure and other
filings of Aurinia and certain members of Aurinia’s peer groups
with applicable securities regulatory authorities, copies of which
are available on SEDAR at www.sedar.com or on the Electronic Data
Gathering, Analysis, and Retrieval at www.sec.gov. Shareholders are
urged to carefully consider those factors.
The forward-looking statements and information contained or
referenced herein are expressly qualified in their entirety by this
cautionary statement. The forward-looking statements and
information contained or referenced herein are made as of the date
of the Circular and the Concerned Shareholder undertakes no
obligation to publicly update such forward-looking statements or
information to reflect new information, subsequent events or
otherwise, except as required by applicable laws.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190603005751/en/
Investors:Gryphon Advisors Inc.North American Toll-Free Number:
1-833-261-9730Outside North America, Banks, Brokers and Collect
Calls: 1-416-661-6592Email:
inquiries@gryphonadvisors.caMedia:Gagnier CommunicationsDan Gagnier
/ Jeffrey Mathews1-646-569-5897
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