Biotechnology company CytoDyn has rejected the candidacies of five director nominees put forward by a group of investors, saying the dissidents’ notice did not comply with its bylaws and contained “over 50 significant deficiencies.” The company’s stock was down more than 10% in morning trading Monday.
In July, a shareholder alliance led by Paul Rosenbaum and controlling 5.6% of CytoDyn’s shares, launched a proxy contest for five board seats. The dissidents cited CytoDyn’s inability to obtain regulatory approval for its main asset, Leronlimab, for the move and said a new board would do a better job.
But the activists may not get a chance to face a shareholder vote at CytoDyn’s October 28 annual meeting as the company has rendered their nomination notice invalid.
CytoDyn said on Monday that Rosenbaum and his allies failed to disclose important information about the group and their interests in revamping the company’s board.
The dissident group called the move a “desperate action to further disenfranchise shareholders and entrench a board and management team that have overseen repeated operational failures and a dramatic share price decline over recent months,” according to a statement to the media.
CytoDyn claimed that the questionnaire responses filed by the dissidents contain “numerous false statements relating to past or current affiliations with certain entities, preventing the board and shareholders from evaluating potential conflicts of interest,” according to preliminary findings from the company.
The biotechnology company also said that one of the dissidents, Bruce Patterson, last year proposed the purchase of IncellDx, a company he is in control of, for $350 million. CytoDyn, which rejected the combination at the time, suggested the activists may try to push through the deal once again if successful in overhauling the board.
CytoDyn added that the nomination letter did not “accurately” disclose all members of the group and its funding. The company noted that the alliance includes two former directors, Richard Pestell and Anthony Caracciolo, who are engaged in lawsuits with CytoDyn.
“This litany of false statements and omissions – of which the above is merely a subset – is highly concerning and raises serious questions about the Rosenbaum/Patterson Group’s motives, funding and conflicts of interest,” said CytoDyn.
“As a result, the Rosenbaum/Patterson Group’s director nominations will be disregarded, and no proxies or votes in favor of their nominees will be recognized or tabulated at the 2021 annual meeting,” the company added.