Progenics Pharmaceuticals, Inc. (NASDAQ:PGNX) (“Progenics” or the
“Company”), an oncology company developing innovative targeted
medicines and artificial intelligence to find, fight and follow
cancer, is mailing a letter to shareholders in connection with its
upcoming 2019 Annual Meeting (“Annual Meeting”) scheduled for July
11, 2019. Shareholders of record as of the close of business on May
13, 2019 are eligible to vote at the Annual Meeting. The letter
addresses several of Velan Capital, L.P.’s (“Velan”) misleading
assertions.
The Progenics Board of Directors unanimously recommends that
shareholders vote “FOR” ALL of
Progenics’ highly qualified and engaged directors on the
WHITE proxy card today.
The full text of the letter follows:
June 19, 2019
Dear Fellow Shareholder:
In its attempt to derail our significant progress and ultimately
to gain control of your Board, Velan Capital L.P. (“Velan”) now is
resorting to issuing false claims and misrepresentations.
We are writing to set the record straight.
Our 2019 Annual Meeting of Shareholders is scheduled for July
11, 2019, and we want to ensure you have the correct facts when
making significant decisions about the future of your investment in
Progenics. We encourage you to protect the value of your investment
by voting “FOR” ALL of the Company’s director
candidates listed on the enclosed WHITE proxy
card, and to discard any of the materials sent to you by Velan.
Below are just a few examples of the misrepresentations
and inaccurate statements that Velan has made to support its
unsubstantiated case for shareholders to oppose election of your
Board.
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Myth:
Progenics botched the commercialization of AZEDRA and has made
questionable clinical program decisions.FACT: PROGENICS HAS
SUCCESSFULLY COMMERCIALIZED AZEDRA AND MADE CLEAR AND RATIONAL
CLINICAL PROGRAM DECISIONS. AZEDRABecause
AZEDRA treats an ultra-orphan indication with no other approved
therapy and is a radiopharmaceutical administered in a hospital
setting, its commercialization process was significantly more
complex than that of other therapies without radioactive
components. AZEDRA’s entire manufacturing, distribution and
administration process spans continents, requires close
coordination with numerous third parties (including a number of
federal, state and provincial regulatory agencies) and the
administration process must be completed within 14 days due to the
decay of its radioactive ingredient, Iodine-131. In addition,
following FDA approval, each treatment center has to complete
various nuclear medicine and administrative readiness steps,
including ensuring each site has the infrastructure, licensing and
training to handle a radiopharmaceutical, as well as ensuring payer
reimbursement and pharmacy & therapeutics and radiation safety
committee approvals.Your Board and management team have
successfully mastered this extremely complex commercialization
process. Indeed, we proudly recorded AZEDRA’s first commercial sale
in early June of this year.
1095Your Board has a strong track record of
strategic foresight and sound decision-making regarding the
Company’s clinical program, including with 1095.For example, in
2013, when the Company acquired AZEDRA, 1404 and 1095, your Board
and management recognized the potential value in these out-of-favor
assets and purchased them for the deeply discounted price of
approximately $10 million. We immediately focused our development
efforts on the two later stage drugs, AZEDRA and 1404, because they
showed the greatest potential for near-term commercial success, and
therefore, to enhance shareholder value. At that time, 1095 was a
preclinical drug candidate and was not supported by enough clinical
data to make a compelling business case for its immediate
development. After promising clinical data from similar drug
candidates became available in 2017, we sharpened our focus on
developing 1095. We believe that 1095 has several distinct
competitive advantages over its main competitor in the marketplace,
PSMA-617, including:
- Its focus on the pre-chemo market, which is at least two times
larger than the post-chemo market of approximately 8,000 patients
treated annually according to a June 2016 report from the Decision
Resources Group;
- Its use in combination with the existing standard of care,
enzalutamide, with the potential for a synergistic effect, which is
supported by pre-clinical data;1 and
- Its use of Iodine-131, which is a well-understood isotope with
decades of patient experience and a better understood side effect
profile than Lutetium.
PyL / PSMA-AIWe also saw value where others did
not in PyL, which Johns Hopkins licensed to us at no upfront cost.
We believe the value of PyL will only be enhanced by our strategic
investment in PSMA-AI, which data suggests can analyze imaging
results with higher accuracy, reproducibility and speed and which
prominent oncologists and urologists viewed as opinion leaders in
their fields believe will become an integral diagnostic tool in
clinical practice. Our initial AI platform was obtained with a
modest investment of approximately $8 million and AI is already a
breakeven business for us. As we move PyL into commercialization,
our AI will be a key differentiator for PyL, driving PyL sales, and
we expect our AI algorithms to help extend exclusivity for PyL.Your
Board believes the current value of these assets greatly exceeds
the Company’s initial investments.Myth: The Progenics Board and
management team lack financial discipline. FACT:
PROGENICS MAKES PRUDENT FINANCIAL DECISIONS THAT HAVE RESULTED IN
LOWER SG&A EXPENSES THAN INDUSTRY PEERS.Your
management team, under the Board’s direction and oversight, works
diligently and continuously to maintain an efficient cost structure
while successfully executing our strategy. This has resulted in a
lower cumulative annual growth rate for operating expense than our
industry peers over the past three and five years.2 We have
successfully maintained this efficient cost structure even while
commercializing our first product (AZEDRA), which is normally a
time when selling, general and administrative expenses for
companies like ours increase significantly.Contrary to Velan’s
claims, our financial prudence also extends to our Board and
executive compensation. Over the past five years, our directors as
a group received a total of $6.2 million in compensation, below the
average of $6.4 million received by the nonexecutive directors of
our industry peers over the same timeframe.3 Likewise, our CEO’s
compensation falls well below industry peers as a percentage of
market capitalization over the past one, three and five years.Our
relocation to the World Trade Center also made good financial
sense. This move permitted us to lower our facility costs by
approximately 50 percent in 2016 due to favorable lease terms and
tax benefits as a biotech company relocating to the site of the
9/11 terrorist attack, as well as provided multiple strategic
benefits. We understand and are sensitive with regard to the
dilution associated with the issuance of our stock to make
milestone payments, particularly as we expect to achieve
meaningful, value-enhancing milestones in the future. We also know
that it is important that we be well-funded and maintain a strong
cash position to launch AZEDRA, make continued investments in our
pipeline assets and avoid the downward pressure that can be put on
the stock from a real or perceived “financing overhang”. As
you have seen, our corporate finance strategy is to explore all
possible financing opportunities, including non-dilutive
monetizations like we executed for RELISTOR. Our decision to
satisfy the AZEDRA launch milestone in stock versus cash is based
upon this rationale, to balance the dilution associated with
issuing stock with the desire to maintain a strong cash
position.Myth: The Progenics Board is unqualified and lacks “skin
in the game”.FACT: YOUR BOARD HAS THE NECESSARY EXPERIENCE
TO LEAD THE COMPANY TO SUCCESS AND ITS INTERESTS ARE FULLY ALIGNED
WITH SHAREHOLDERS.Your Board has the right mix of skills
and expertise to successfully develop and commercialize our
products and product candidates, and guide the Company to long-term
success. A majority of your Board includes current or former chief
executives and directors of other world-class public pharmaceutical
companies, with significant experience in commercial-stage oncology
products. For example, Michael Kishbauch established Novartis’
Oncology Field Force, helping to launch its first product, Aredia
(pamidronate), and paving the way for this commercial organization
to launch numerous notable oncology products.Our interests are
fully aligned with yours.We grant stock compensation to directors
in the form of stock options, which provide a direct beneficial
ownership in the Company’s performance. Options are a common form
of beneficial ownership for biotech companies and, among our
industry peers, approximately 80 percent of the beneficial
ownership held by non-executive directors (excluding founders) in
their respective companies is in the form of options similar to
those held by your Board of Directors.4Velan’s assertion that our
Board and executives lack “skin in the game” is simply false. Our
nonexecutive directors hold a beneficial ownership in the Company
equivalent to 1.4 percent of outstanding shares. This compares with
a median beneficial ownership of 0.6 percent of outstanding shares
among our industry peers. Our management team holds a beneficial
ownership in the Company equivalent to 3.0 percent of outstanding
shares, compared to a median beneficial ownership of 2.4 percent of
outstanding shares held by the management teams of our industry
peers.5 Our directors and management team thus have a major
financial (and professional) stake in Progenics’ long-term success,
just as our fellow shareholders do.Myth: The Progenics Board
invalidated Velan’s nominations on a
technicality. FACT: YOUR BOARD IS COMMITTED TO GOOD
CORPORATE GOVERNANCE AND HAS EARNED THE BEST QUALITY SCORE; VELAN’S
NOMINATIONS DID NOT COMPLY WITH THE COMPANY’S BYLAWS WHICH ARE
DESIGNED TO PROTECT THE INTERESTS OF ALL
SHAREHOLDERS.Velan has claimed that its disqualifying
failure to comply with our Company’s advance notice bylaw is a
“technicality.” In fact, following bylaws is not a “technicality” –
Boards are required to uphold them to protect the Company’s
interests and that of their shareholders. Velan has admitted it did
not meet the record holder requirement of our advance notice bylaw
that must be met in order to make timely and valid director
nominations even though it knew this requirement existed well
before the nomination deadline. Despite this, our Nominating &
Corporate Governance Committee proceeded to interview Velan’s
candidates to see whether they would be additive and complementary
to the Board at this important juncture in Progenics’ growth story.
We did this in an effort to reach a compromise with Velan.We are
committed to best-in-class corporate governance policies and take
great pride in holding ourselves accountable to you, our
shareholders, who can call for change at any time. In recent years,
we have made several bylaw amendments in response to your feedback,
including decreasing the threshold for shareholders to call a
special meeting and adopting proxy access. These changes have
resulted in Progenics receiving the highest Corporate Governance
QualityScore from Institutional Shareholder Services, a leading
proxy advisory firm, a score it has maintained since 2017.Myth:
Velan has been reasonable in potential settlement
negotiations.FACT: DESPITE REPEATED EFFORTS (INCLUDING AN
OFFER TO ALLOW VELAN TO DESIGNATE TWO DIRECTORS), VELAN HAS BEEN
UNWILLING TO NEGOTIATE IN GOOD FAITH TO REACH A MUTUALLY ACCEPTABLE
COMPROMISE.Velan complains that the Company did not
seriously evaluate its proffered slate of Board candidates. This is
again untrue. Each was carefully interviewed and evaluated over
many hours. The truth is that Velan’s candidates lack the unique
backgrounds in radiopharmaceutical commercialization and supply
chain management that your Company needs at this critical time in
its corporate life and phase of growth. Several of Velan’s
candidates are private equity investors with no direct operational
experience in our industry whatsoever. Meanwhile, the subset of
Velan candidates who had relevant experience also had track records
in the industry marred by questionable past business practices,
such as reported price-gouging and illegal kickbacks.Velan has not
disputed these reports of unlawful business practices, yet somehow
claims we dismissed its candidates in bad faith. How could any
board in good faith not place significant weight on these reports
in considering a potential director’s candidacy? Based on our
decades of experience in the industry, and taking into account
recent criticism of pharmaceutical companies by national
politicians, we strongly believe that any association with these
questionable practices would be concerning to physicians, patients
and payers. We also strongly believe they potentially could
be used against our Company in the court of public opinion, undoing
our positive work to establish fair pricing for AZEDRA and
ultimately harming our business. Velan’s candidates are also linked
and interconnected through a web of past experiences, calling into
serious question their independence, objectivity and alignment with
the long-term interests of the Company and of stockholders other
than Velan. This is why the Board made a reasoned and deliberate
determination to not add any of Velan’s candidates as
directors. We proposed, and continue to propose, constructive
compromises to avoid this disruptive and expensive proxy contest.
Velan, however, has repeatedly rebuffed our efforts to reach a
mutually agreeable settlement. Our latest offer, for example, would
have allowed Velan to designate to the Board, two new, mutually
agreeable independent directors with radiopharmaceutical
commercialization and supply chain management experience so long as
they did not have any past associations with price-gouging or other
activities that would raise serious environmental, social and
governance (“ESG”) concerns. Our latest offer also included that
these new directors would each be eligible to serve on one
committee, either Nominating and Corporate Governance or
Compensation, and would also be re-nominated at the 2020 Annual
Meeting. In return for these reasonable settlement terms, we only
asked in return for customary standstill and voting commitments
through next year’s annual meeting. We believe that our latest
offer balances our legitimate concern over Velan’s candidates’ past
questionable business practices with its ability as a sizable
shareholder to give valuable input into the composition of the
Board. To date, Velan refuses to entertain any discussions of
settlement that would not result in its candidates with histories
of reported price-gouging joining the Board. Your Board
cannot countenance a settlement on Velan’s terms based on valid ESG
concerns. We strongly believe they are widely shared by our
shareholders, business partners, patients, politicians, physicians,
payers and other key constituencies in our ecosystem with whom we
have forged strong relationships over the course of many years. By
categorically refusing to listen to our concerns and to work with
us to find a path forward that allays them, we believe it is Velan
that has engaged on the topic of settlement in bad faith.
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We urge you to not be distracted by the steady drumbeat of false
claims and promoted misconceptions made by Velan in what we believe
to be an attempt to disrupt the positive, shareholder wealth
creating strategy your Board and management has developed and is
executing upon.
This is a critical moment in your Company’s history. We strongly
believe that we have the right Board with the right experience and
the right strategy to lead Progenics to success.
We hope we can count on your support and encourage you to vote
on the WHITE proxy card and “FOR”
all Progenics’ nominees at the upcoming 2019 Annual Meeting.
Sincerely,
The Progenics Board of Directors
About PROGENICS Progenics is an oncology
company focused on the development and commercialization of
innovative targeted medicines and artificial intelligence to find,
fight and follow cancer, including: therapeutic agents designed to
treat cancer (AZEDRA®, 1095, and PSMA TTC); prostate-specific
membrane antigen (“PSMA”) targeted imaging agents for prostate
cancer (PyL™ and 1404); and imaging analysis technology (aBSI and
PSMA AI). Progenics has two commercial products, AZEDRA, for the
treatment of patients with unresectable, locally advanced or
metastatic pheochromocytoma or paraganglioma (rare neuroendocrine
tumors of neural crest origin) who require systemic anticancer
therapy; and RELISTOR® (methylnaltrexone bromide) for the
treatment of opioid-induced constipation, which is partnered with
Bausch Health Companies Inc.
Forward Looking Statements
This letter contains projections and
other “forward-looking statements” regarding future events.
Statements contained in this communication that refer to Progenics’
estimated or anticipated future results or other non-historical
facts are forward-looking statements that reflect Progenics’
current perspective of existing trends and information as of the
date of this communication and include statements regarding
Progenics’ strategic and operational plans and delivering value for
shareholders. Forward looking statements generally will be
accompanied by words such as “anticipate,” “believe,” “plan,”
“could,” “should,” “estimate,” “expect,” “forecast,” “outlook,”
“guidance,” “intend,” “may,” “might,” “will,” “possible,”
“potential,” “predict,” “project,” or other similar words, phrases
or expressions. Such statements are predictions only, and are
subject to risks and uncertainties that could cause actual events
or results to differ materially. These risks and uncertainties
include, among others, the costs and management distraction
attendant to a proxy contest; market acceptance for approved
products; the risk that the commercial launch of AZEDRA may not
meet revenue and income expectations; the cost, timing and
unpredictability of results of clinical trials and other
development activities and collaborations; the unpredictability of
the duration and results of regulatory review of New Drug
Applications (NDA) and Investigational NDAs; the inherent
uncertainty of outcomes in the intellectual property disputes such
as the dispute with the University of Heidelberg regarding
PSMA-617; our ability to successfully develop and commercialize
products that incorporate licensed intellectual property; the
effectiveness of the efforts of our partners to market and sell
products on which we collaborate and the royalty revenue generated
thereby; generic and other competition; the possible impairment of,
inability to obtain and costs of obtaining intellectual property
rights; possible product safety or efficacy concerns, general
business, financial, regulatory and accounting matters, litigation
and other risks. More information concerning Progenics and such
risks and uncertainties is available on its website, and in its
press releases and reports it files with the Securities and
Exchange Commission (the “SEC”), including those risk factors
included in its Annual Report on Form 10-K for the year ended
December 31, 2018, as updated in its subsequent Quarterly Reports
on Form 10-Q. Progenics is providing the information in this letter
as of its date and, except as expressly required by law, Progenics
disclaims any intent or obligation to update or revise any
forward-looking statements, whether as a result of new information,
future events or circumstances or otherwise.
Additional information concerning Progenics and its business may
be available in press releases or other public announcements and
public filings made after this letter. For more information, please
visit www.progenics.com. Information on or accessed through our
website or social media sites is not included in the company’s SEC
filings.
Important Additional Information and Where to Find
It Progenics has filed a definitive proxy statement and
accompanying WHITE proxy card with the
SEC in connection with the solicitation of proxies for its 2019
Annual Meeting of Shareholders. Progenics’
shareholders are strongly encouraged to read the definitive proxy
statement (including any amendments or supplements thereto) and the
accompanying WHITE proxy card because they contain important
information. Shareholders may obtain copies of Progenics’
2019 proxy statement, any amendments or supplements to the proxy
statement, and other documents filed by Progenics with the SEC in
connection with its 2019 Annual Meeting of Shareholders when they
become available and for no charge at the SEC’s website at
www.sec.gov. Copies will also be available for no charge in the
Investors section of Progenics’ website at www.progenics.com.
Certain Information Regarding Participants
Progenics, its directors, executive officers and certain employees
may be deemed participants in the solicitation of proxies from
shareholders in connection with Progenics’ 2019 Annual Meeting of
Shareholders. Information regarding these participants, including
their respective direct or indirect interests by security holdings
or otherwise, is set forth in the definitive proxy statement for
Progenics’ 2019 Annual Meeting of Shareholders, which can be
obtained free of charge from the sources indicated above.
Investor Contact Melissa Downs Investor
Relations (646) 975-2533 mdowns@progenics.com
Additional Investor Contact Bob Marese / David
Whissel MacKenzie Partners, Inc. (212) 929-5500
Media Contact Michael Freitag / James Golden /
Clayton Erwin Joele Frank, Wilkinson Brimmer Katcher
(212) 355-4449________________________
1 Reference: Radio potentiation of Enzalutamide over Human
Prostate Cancer Cells as Assessed by Real-Time Cell Monitoring. Dr.
David Escors, Dr. Grazyna Kochan, Dr. Fernando Arias. Published May
17, 2018.2 Industry peer group includes all domestically listed
biopharma oncology companies as of 6/17/2019 that had a market
capitalization within a $100 million range of Progenics’ 6/17/2019
market capitalization of $370 million.3 Peer group as defined in
note 2. Compensation excludes any industry peers that have not been
reporting Director compensation for the past 5 years or are foreign
reporters not required to file a DEF14A.4 Peer group as defined in
note 2. Note option ownership as a percentage of shares owned is
calculated based on each company’s non-executive and non-founding
directors.5 Beneficial ownership defined as common stock plus
options / indirect securities. Peer group as defined in note 2.
Management team includes Mark Baker, Patrick Fabbio, Vivien Wong,
Asha Das, Bryce Tenbarge, and Benedict Osorio.
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