Biotech firm CytoDyn calls activists' board nomination notice invalid -sources

Cytodyn

02/08/2021 11:00

By Svea Herbst-Bayliss
    BOSTON, Aug 2 (Reuters) - Biotechnology firm CytoDyn
 CYDY.PK , which is working on coronavirus treatments, is
pushing back against activists trying to seize control of its
board by declaring their director nominations invalid, a rarely
seen development in battles for board seats, two people familiar
with the matter said.
    The company, headquartered in Vancouver, Washington, told
the activist group that its notice letter, where it said it
planned to nominate five directors, failed to comply with its
bylaws. It also said the letter contained more than 50 errors
ranging from mistakes in the nominees' standard questionnaires
to failing to properly disclose the group's funding.
    In a letter to the activists dated July 30, which was seen
by Reuters, the company said the group does not have the right
to nominate any candidates for election as directors at the 2021
annual meeting because it failed to meet the bylaw requirements.
    On June 30, the activists, led by Paul Rosenbaum, wrote to
the company saying they planned to nominate five directors to
the company's six member board. The letter was received by the
company on July 1. 
    The company's nomination deadline was July 2 and its annual
meeting will be held on Oct. 28.
    A spokesman for the activists was not immediately available
for comment. A representative for the company declined to
comment.
    The group, which owns approximately 1% of the company's
shares, argued that management and the board have mishandled the
development of leronlimab, a monoclonal antibody investigational
drug.
    The group running the proxy contest is a sub-group of a
bigger group that made a regulatory filing in May with plans to
"discuss the company's underperformance" and its "lack of
confidence in management."
    The company, valued at $1.06 billion, said last week it
received a request for documents from the Securities and
Exchange Commission and Justice Department related to
leronlimab.
    The company said there were many errors in the activists'
notice letter. For example, Bruce Patterson, one of the group's
board nominees, in May proposed that CytoDyn buy IncellDx, Inc
where he serves as CEO, but the notice letter failed to disclose
the bid or how Patterson might have benefited personally had the
deal not been rejected by CytoDyn.
    CytoDyn's stock price has tumbled 68.47% since January and
closed trading at $1.69 on Friday. 
    Declaring a nomination notice to be invalid is rare in
battles for seats on corporate boards but happened in 2018 when
financial services company HomeStreet, Inc used the method
against Roaring Blue Lion Capital.
    

 (Reporting by Svea Herbst-Bayliss
Editing by Chris Reese)
 ((svea.herbst@thomsonreuters.com; +617 856 4331; Reuters
Messaging: svea.herbst.thomsonreuters.com@reuters.net))