Investor Deep Track launches proxy fight at Dynavax, nominates 4 directors

Dynavax Technologies

19/02/2025 13:00

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      Deep Track becomes corporate agitator after months of
pushing
for change privately
    

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      Deep Track expects new directors to prioritize vaccine
over M&A 
    

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      Deep Track owns 13.5% of Dynavax to rank among company's
biggest
investors  
    

  
    By Svea Herbst-Bayliss
       NEW YORK, Feb 19(Reuters) - Life sciences investment
firm Deep Track Capital is launching a board fight at Dynavax
Technologies  DVAX.O , pressing for new directors to prioritize
the development of the company's hepatitis B vaccine instead of
pursuing new acquisitions.
    Deep Track nominated four candidates to Dynavax's board to
add industry and financial expertise plus a shareholder's
perspective to the 11-member board, the investment firm told
fellow shareholders in a letter seen by Reuters. 
    As Dynavax's second largest investor with a 13.5% stake,
Deep Track describes itself as a loyal shareholder who believes
in the company's potential and tried to address its concerns
privately before opting for a potentially noisy proxy fight.
    Deep Track founder David Kroin criticized Dynavax for
failing to concentrate on building up its vaccine Heplisav and
chasing after "a misguided 'empire-building' exercise."  
    "We remain deeply concerned that Dynavax will not only
squander its substantial and growing cash balance on an
ill-advised acquisition but also jeopardize future profitability
and rob shareholders of the immense opportunities to be realized
by focusing on Heplisav," the letter said.
    Dynavax did not immediately respond to a request for
comment. 
    "To help catalyze critical improvements at Dynavax, we are
seeking to elect four highly qualified director candidates at
the Annual Meeting," the letter said, noting one of the nominees
is Deep Track Managing Director Brett Erkman.
    Ever more companies are preparing for expensive and noisy
board room fights this year. Established corporate activists and
first time agitators like Deep Track are demanding more ways to
push up the stock price, including operational fixes and even
putting the company up for sale.
    Deep Track, which invests $4 billion in assets, wants
Dynavax to focus exclusively on growing Heplisav, a vaccine
designed to prevent the hepatitis B infection that can lead to
chronic liver disease and death, into an asset that a large
pharma company would want to own.
    The investment firm estimates Heplisav will generate over $1
billion in cash through 2029, and that coupled with the $714
million in cash the company had on hand at the end of last year,
"this translates into nearly $2 billion of cash that can be
returned to shareholders by the end of 2030."
    Deep Track has also pushed Dynavax's board and management
team to buy back more shares. 
    Dynavax late last year announced a $200 million share
repurchase program. Deep Track has proposed doubling the share
repurchase to $400 million.
    This month the company said it added two new directors to
replace a long serving director who will retire and another who
will step down to serve as CEO at another company.
    After the annual meeting, which has not been scheduled, the
board will have nine directors, the company said.
    The company also said it will ask shareholders to approve
new bylaws so that all directors stand for election every year,
a governance issue that shareholders generally favor. This year
only four directors will be voted on, another sore point for
investment firm Deep Track.
    

 (Reporting by Svea Herbst-Bayliss; Editing by Sonali Paul)
 ((svea.herbst@thomsonreuters.com; +617 233 2138; Reuters
Messaging: svea.herbst.thomsonreuters.com@reuters.net))