Patrick Soon-Shiong and one of his umbrella corporations, NantCell, announced a deal to buy Altor Biosciences yesterday. But minority shareholders are poised to stage a revolt and block the deal.
Two former directors—Adam Waldman, founder of the Endeavor Group, a D.C. consultancy, and C. Boyden Gray, former White House counsel—this month sued Patrick Soon-Shiong and NantCell and now plan to seek a court order to scuttle the deal, Waldman said in an interview.
Soon-Shiong, a billionaire biotech mogul, owns 51.4% of Altor and became chair of the company in April last year. He started accumulating his stake in 2015.
Under the merger agreement, NantCell would buy Altor—and its cancer pipeline—at what Waldman and Gray claim is a “low-ball” amount. The Altor assets would beef up NantCell for an IPO, they say. On its own, NantCell's leading asset is the once-failed Amgen pancreatic cancer candidate ganitumab, which it obtained in 2015.
The sale contradicts Altor's previous statements, the lawsuit states. Earlier this year, Altor told shareholders it planned to gun for its own IPO before 2018.
“After years of informing plaintiffs that Altor would be preparing for an IPO, Altor made defendant Soon-Shiong’s true intentions apparent in April 2017—to acquire Altor in its entirety and squeeze out its minority stockholders," the lawsuit alleges.
Altor works on cytokine-based immunotherapeutics for cancer and infectious diseases, and last month, it won a fast-track designation from the FDA for its midstage interleukin-15 (IL-15) agonist complex, ALT-803 as a treatment for non-muscle invasive bladder cancer.
NantCell agreed to buy Altor for $2 a share, with an extra $4 per share in contingent value rights attached to certain milestones. The complaint asserts that the company is worth more, given ALT-803's new fast-track status, which usually boosts a company’s worth in itself, and the fact that it is poised to move into phase 3 testing with a cancer candidate.
The deal values Altor at $290 million, Waldman says, calling that figure "outrageous," given the prices on recent biotech buyouts. The lawsuit alleges that Soon-Shiong, to win the board votes necessary to approve the deal, offered directors jobs, "equity positions and options packages totaling tens of millions of shares in the new entity.”
“Altor’s insiders ... led by majority shareholder Soon-Shiong, have conspired to set for themselves a fire-sale price for the company," the complaint says, "...in which they will reap all the benefits at the expense of Plaintiffs and Altor’s other minority stockholders in violation of their fiduciary duties.”
The plaintiffs also take issue with the cash-and-stock sale, saying there's no evidence NantCell shares are worth the amount the deal would require. The documents provided to shareholders include "no valuation analysis whatsoever to support the fairness of the merger consideration, or even how price was calculated or determined,” the lawsuit says.
Altor negotiated the deal, and even won Federal Trade Commission approval, before telling shareholders, the complaint says. According to the merger documents, filed as an exhibit to the legal complaint, the NantCell buyout was officially proffered in May. A term sheet for the merger came as early as February this year.
“Plaintiffs learned [of the deal] from Altor CFO Rick Greene, who disclosed Soon-Shiong’s plans to plaintiffs only after they confronted him with a one-page FTC / Hart-Scott-Rodino filing they discovered approving Soon-Shiong’s proposed acquisition of Altor,” the lawsuit claims.
Waldman says he and Gray will file for a temporary restraining order "and block this deal in Delaware Chancery Court.” Waldman is a minority shareholder, as well as a former member of its board and owns 1 million shares of Altor common stock, while Gray, also a minority shareholder and a former founding member of its board, owns 2 million.
Representatives of NantCell, NantHealth, NantWorks and NantKwest did not respond to requests for comment on the deal or the lawsuit's allegations.
Soon-Shiong has been under increasing pressure this year about some of his business conduct, with a series of reports from medical news site STAT and Politico alleging that he had been giving out millions of dollars for philanthropic causes, but then saw this money come back to his company.
Waldman and Gray's complaint: