(Reuters) - Ziopharm Oncology Inc urged its shareholders on Monday to reject an attempt from one of the cancer drug developer’s investors to oust half of its board of directors, according to a letter seen by Reuters.
Ziopharm was responding to a call by WaterMill Asset Management Corp to remove four of the company’s eight board members. The investment firm has put forward three of its own board director nominees.
WaterMill argued that Ziopharm’s management was destroying shareholder value and that new board members were necessary to turn around the company. Ziopharm shares have declined about 54.8% this year, while the Nasdaq Biotechnology Index has risen about 8.9%.
Ziopharm said that WaterMill’s actions were self-serving and that its nominees were not qualified due to a lack of public company board experience.
“Given the board’s past receptiveness to shareholder feedback in the board refreshment process, it is disappointing that WaterMill, an approximately 3.3% shareholder, is now attempting to gain a disproportionate amount of influence on the board,” Ziopharm Chief Executive Officer Laurence Cooper and Chairman Scott Tarriff wrote in the letter.
WaterMill responded on Monday that the case for removing board members was “crystal clear” after Ziopharm’s shares declined more than 75% over a five year period.
“It is now evident to us – and hopefully all other shareholders – that Ziopharm’s current leadership has no credible plans to enhance corporate governance, halt dilutive actions, improve disclosures, align management’s compensation to tangible results, and accelerate the monetization of the company’s attractive immuno-oncology assets,” WaterMill founder Robert Postma said.
Ziopharm is developing immuno-oncology drugs, a class of therapies that use a patient’s own immune system to fight cancer. The company has licensed some of its technology from The University of Texas MD Anderson Cancer Center, one of the world’s leading cancer hospitals.
The company’s CEO was a professor at MD Anderson before joining the company.
Shareholder activism is relatively rare in the biotechnology industry because hedge funds are typically worried that if they build stakes in companies such as Ziopharm that are not turning a profit their original investment will be at risk.
Reporting by Rebecca Spalding in New York; Editing by Rashmi Aich and Sonya Hepinstall
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