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

Cytodyn

02/08/2021 19:35

(Updates with activist's statement; changes sourcing after
company publicly acknowledged letter.)
    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, the
company said, a rarely seen development in battles for board
seats.
    CytoDyn, headquartered in Vancouver, Washington, said the
activist group's notice letter failed to comply with its bylaws
and was riddled with errors ranging from mistakes in the
nominees' standard questionnaires to failing to properly
disclose the group's funding.
    The activist group is therefore not allowed to nominate
candidates for election as directors at the 2021 annual meeting
scheduled for Oct. 28.
    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 activist group on Monday vowed to press on with its
proxy contest to replace a board it claims enabled operational
failures and a sharp share price drop. The company's "attempt to
invalidate our director nominations is a desperate action to
further disenfranchise shareholders," a spokesman said.
    The group, which owns approximately 1% of the company's
shares, criticized management and the board for having 
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
dropped 6.8% on Monday to $1.58 in afternoon trading.
    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 and
Dan Grebler)
 ((svea.herbst@thomsonreuters.com; +617 856 4331; Reuters
Messaging: svea.herbst.thomsonreuters.com@reuters.net))