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Velan, Progenics about Lantheus transaction

Velan Capital has issued a statement in which said Progenics has again resorted to false information and misleading Innuendo in seemingly desperate attempt to avoid accountability and deprive stockholders of chance to realize company’s full value.

Edited by pharmaceuticaldaily

Velan said it purchased Progenics stock because of conviction in itsi opportunities for long-term value creation and said it had no prior knowledge of the Lantheus transaction.

Progenics said in their statement that the Velan Group knew about – and expressed vehement opposition to – the proposed acquisition of Progenics by Lantheus (the “Transaction”) well in advance of the public announcement of the Transaction, and made significant trades in Progenics’ stock while aware of the potential Transaction.

ALPHARETTA, Ga.–(BUSINESS WIRE)–Velan Capital, L.P. (together with the other members of its group, “Velan” or “we”), one of the largest stockholders of Progenics Pharmaceuticals, Inc. (“Progenics” or the “Company”) (NASDAQ:PGNX), comprised of successful specialty pharmaceutical operators and financial services experts, today responded to the Company’s presentation and press release, including misleading statements surrounding the Lantheus Medical Imaging, Inc. (“Lantheus”) merger agreement and interactions with the Progenics Board of Directors (the “Board”).

Velan issued the following statement:

We are deeply disappointed that Progenics has resorted to such desperate tactics in an attempt to mislead stockholders around Velan’s intentions and our Nominees’ plan to deliver long-term value at the Company. We never hid our intention to launch a Consent Solicitation and have always been forthright in our communications to the Company, Progenics stockholders and proxy advisory firms. Our purchases of stock in the run-up to launching our Consent Solicitation were based on our conviction about Progenics’ opportunities and potential. In the course of our conversations with the Company, we made it clear to Board members and others that we thought selling the Company before realizing its full potential was a mistake. However, Velan had no prior knowledge of a near-term transaction involving the Company, including who the ultimate purchaser would be or its timing, terms or structure.

Recent public communications from Progenics and Lantheus have contained a number of false and misleading claims about Velan that deserve correction. Consider the following points:

Progenics states the Lantheus “transaction addresses all of [stockholders’] concerns” and that the Board vote would have been unanimous had the two now-resigned directors abstained from voting.

  • This is blatantly misleading as (i) stockholders demanded new directors through their votes at the 2019 Annual Meeting and indicated significant dissatisfaction with the CEO – NOT support for a transaction at a massive discount whereby the Board is effectively throwing in the towel, (ii) the Board chose to vote on this transaction without new voices in the boardroom (when it had three months to fill two pending vacancies and apparently decided that any independent view on the Lantheus transaction was not welcome despite the stockholder vote), and (iii) the Company has made no operational progress and disclosed no plan to improve Progenics if the Lantheus transaction is not consummated.
  • In contrast to Velan, the Progenics directors knew of all pertinent facts regarding the deal and the Consent Solicitation, and should have allowed stockholders to first vote on which directors they believe are best suited to make such an important decision about the future of the Company.
  • We question why the Board refused the views of two new directors (that they could have selected) to opine on the Lantheus transaction. Clearly the transaction doesn’t seem as compelling as the Board would like stockholders to believe.

Progenics also implies that voting for Velan’s Nominees means the Lantheus transaction is not acceptable and will be voted down.

  • Our Nominees have stated their intent to fully evaluate the transaction once inside the boardroom – providing the independent review that the Board should have conducted on its own during the last three months.
  • Despite the Company’s misleading commentary, our Nominees are respected and experienced professionals with public company board experience and clearly understand their fiduciary duties as directors.
  • The Board is attempting to make this vote a referendum on the Lantheus transaction – this vote is about which director candidates have the qualifications and independence necessary to determine the best path forward for the Company and to instill the much needed accountability in the boardroom.
  • A change in a majority of the Board is now necessary – this Board has proven time and time again that it cannot be trusted and stockholders deserve to have highly-qualified nominees assess the merits of the transaction independently.

Progenics agrees that “run-rate costs savings, together with future cost avoidance…could generate hundreds of millions of dollars in value”

  • This statement all but explicitly agrees with Velan that the current transaction attributes no value to the Company’s radiopharmaceutical product portfolio.

Progenics claims that “Velan is forcing shareholders into making a pivotal decision [before] all material [merger] information is available”.

  • The Company conveniently fails to acknowledge that Velan delivered its written consent and filed its preliminary consent statement prior to the transaction announcement. The Company entered into a transaction (with a sizeable breakup fee) in the midst of a Consent Solicitation and with two directors that stockholders voted out in July. Who is depriving the stockholders of a right to choose?
  • Despite the Company’s erroneous commentary, Velan commenced its Consent Solicitation to reconstitute the Board given the Board’s abysmal track record and persistent and continued failure to deliver for cancer patients (indeed, Velan publicly sought to hold the Board accountable well before the Consent Solicitation) – NOT because of any purported transaction.

We also question the process run by the Board as it performed a “market check” in June 2019 for “potential cash buyers”.

  • How did the Board determine that Lantheus was the only stock acquiror that was worthy of contacting? We have heard from numerous investment banks and it seems quite clear that a comprehensive process to determine the interest of all potential buyers was not completed; if it were, the Company would have stated the number of parties it contacted in its presentation.
  • This also would have increased the competition tension in the process instead of countering Lantheus’ 35% pro forma ownership offer with a measly 36.5% offer – the Board sold the Company at the initial bid price without a competitive process and without any fruitful negotiations.

The Company also touts its negotiated 0.2502 exchange ratio.

  • Since Lantheus’ IPO in 2015, the implied exchange ratio has been worse than this negotiated rate for only 16% of trading days.
  • But it gets worse, if you only look at the time from the Lantheus’ IPO to AZEDRA’s FDA approval in July 2018 (after which point the Company botched its launch), only 14 of 781 trading days had an implied exchange ratio worse than this negotiated ratio – this means that 98% of the time, stockholders would have been better off than they are at this (poorly) negotiated exchange ratio.
  • The Board is attempting to sell the Company at a price lower than all recent capital raises and far below the valuation that we believe could be created with competent leadership.

Progenics states the “potential need for dilutive, near-term capital raise” and the $18 million termination fee as reasons to not vote for new directors.

  • These are issues caused by this Board’s mismanagement, not issues this Board can use to hold stockholders hostage.
  • Velan has seen through this thinly veiled threat and already had discussions with lenders that are willing to lend up to $200 million in non-dilutive capital to Progenics.

Finally, we would like to respond to comments made today by Lantheus.

  • We have no issue with Lantheus being the ultimate partner of Progenics. Rather, our concerns are with the manner in which the Board approved the transaction and the minimal sale process run by the Board to get the best deal possible for stockholders.
  • Furthermore, Lantheus is not responding to our assertion that it is acquiring Progenics’ product portfolio for FREE – that’s more telling than the items it has addressed.
  • Lantheus also appears to ignore its own supply chain issues and stagnant pipeline, which has not received an approval during CEO Mary Anne Heino’s time at Lantheus. When we spoke to CEO Heino last week, she refused to disclose what steps Lantheus would take to improve AZEDRA’s launch and implied the company did not have the existing infrastructure to manufacture and distribute PyL.
  • How can Progenics stockholders vote in an informed manner when the CEO of the acquiring business told us, “you are not my stockholder” and stated that Lantheus did not owe us a strategic plan for Progenics’ products prior to the vote to approve the transaction? The reality is that if this transaction is consummated we will indeed be Lantheus stockholders. Our Nominees have disclosed their plan, now it’s Lantheus’ turn.

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