Progenics Investors Seek Changes at the Top as Activist Gains Traction

(Bloomberg) -- Progenics Pharmaceuticals Inc.’s disappointing performance has driven some investors to side with activist shareholder Velan Capital LP as they push for significant changes.

A slow launch for its sole wholly owned drug Azedra has prompted Velan, the company’s second-largest holder, and others to threaten to shake up the drugmaker’s board. One of Progenics’s top 10 stakeholders told Bloomberg that they have more confidence in Velan’s team than the drugmaker’s current management.

The investor, who asked not to be named due to a company policy, would still support the company if the board replaced Chief Executive Officer Mark Baker. The holder cited Azedra’s “botched” commercial launch as a reason for discontent. Shares of the biotech company have erased most of their 2019 gains after being up almost 50% in late June.

Investors see Progenics as significantly undervalued for the assets that it holds. Besides Azedra, a therapy for rare endocrine tumors, the drugmaker gets royalties for opioid-induced constipation drug Relistor, which is partnered with Bausch Health Companies Inc. It also has a few other clinical trials ongoing.

A second investor, who has owned Progenics shares for years, is willing to give the company and its CEO another year to improve execution, while waiting for the activist to put forward board nominations and more formal plans. The holder said the Progenics board has been in touch recently to ask for investor feedback, which is “good progress.”

“We take the views of our shareholders seriously,” New York-based Progenics said in a statement. “The board is working with urgency to make the changes necessary to improve the company’s performance.”

The biotech’s shares have declined 45% over the past 12 months and were trading Friday at about $4 apiece. That’s nearly two-thirds lower than what they traded for in early 2017.

All the analysts tracked by Bloomberg share the holders’ view that the stock has more upside from current levels. They expect the stock will more than double in the next 12 months.

The shares plunged last week after the company reported that it had only treated two patients with Azedra, nearly a year after the cancer medicine won approval from the FDA. The drugmaker received 32 additional requests for treatment, although management said on a recent earnings call that it’s hard to forecast how quickly those will turn into actual sales.

Previously, Progenics said it took time to get the different specialized centers ready to administer the medicine and work through the logistics of getting patients ready to be dosed.

In the second quarter, the drugmaker spent $5.5 million in legal and advisory fees to fight Velan for the re-election of its board members, unsuccessfully. Last month, shareholders voted against re-appointing board members Michael Kishbauch and former chairman Peter Crowley. Both men stepped down and will leave the company soon. A majority of holders voted for the re-election of CEO Baker as director.

Cash Concerns

With about $85 million in cash and equivalents at the end of the second quarter, Progenics may need to raise money soon, Velan said in a recent statement. BTIG analyst Tim Chiang, a long-term bull on the stock, recently wrote that Progenics is “well-funded” to support the launch of Azedra and fund key pipeline programs.

Progenics said it’s “regularly” exploring all its financing options.

Without an appropriate settlement with the biotech company, Velan said it could look to remove other members of the board. The Alpharetta, Georgia-based firm could wait till next year’s annual meeting, or try to seek a vote earlier via consent solicitation from major shareholders, according to a person close to the firm.

To contact the reporter on this story: Tatiana Darie in New York at tdarie1@bloomberg.net

To contact the editors responsible for this story: Catherine Larkin at clarkin4@bloomberg.net, Morwenna Coniam

©2019 Bloomberg L.P.