Good morning,
Welcome to today's edition of The Armchair Analyst, a 5-minute daily update on the ASX life-sciences sector.
Now, most notices are administrative in nature and don’t change a company's trajectory.
But not the 249D.
Last Friday, ASX-listed Arovella Therapeutics (ASX: ALA) was issued a 249D notice.
This essentially means that the shareholders of the company can force a meeting to vote on something.
That something?
The addition of three new members to the board of directors.
So, what does this mean…
For the company? For the shareholders?
Today, I put ALA’s 249D under the microscope.
But first…
The Pulse Check
NASDAQ-listed Travere secured FDA approval for a treatment for FSGS (a rare kidney disease). (Fierce Biotech)
This is very big news for ASX-listed Dimerix (ASX: DXB), a company that I’ve been trading recently.
(and this is news that I had been waiting for)
DXB’s treatment is also for FSGS and needs to be taken with a blood pressure medication. Travere’s product is a blood pressure medication.
Why this is important for the DXB is that Travere failed the trial in the first instance, but after reviewing the results again, the FDA allowed the use of the surrogate endpoint (proteinuria). Despite being post-hoc.
This gives me confidence that DXB could also use proteinuria for accelerated approvals (it already has permission to use it for the final endpoint).
A decision by DXB to go after accelerated approvals is looming; results from the Powering Analysis should be published shortly.
If DXB pursues accelerated approval and its drug is approved on that basis, DXB could have a product on the market this year.
4D Medical (ASX: 4DX) has been to the ASX-200 index. (4DX)
PainChek (ASX: PCK) signs a Master Services Agreement with Sabra Health Care to fund its pain assessment software in up to 20,000 beds in aged care facilities in North America. (PCK)
🪑 Nice deal, and good validation from a large ($5B capped) NASDAQ-listed healthcare company.
Entropy Neurodynamics (ASX: ENP) dosed its third patient in its TRP-8803 trial targeting Binge Eating Disorder. (ENP)
The CEO of Noxopharm (ASX: NOX) has resigned. (NOX)
Vectus Biosystems (ASX: VBS) sells a non-core renal fibrosis asset to Canadian biotech company XORTX. (VBS)
🪑 XORTX is also a microcap company on the CVE exchange. Strange deal.
Clarity Pharmaceuticals (ASX: CU6) signs a Commercial Manufacturing Agreement with Nucleus RadioPharma. (CU6)
Cash Injection
BlinkLab Limited (ASX: BB1) requests a trading halt for a capital raise. (BB1)
Lumos Diagnostics (ASX: LDX) receives US$5.0M milestone payment from Phase Scientific for FebriDx. (LDX)
Under the Microscope
So, a 249D notice has been served.
What does this mean?
The 249D power allows a top shareholder to call a vote to effect a change in the company.
Generally, they are considered hostile.
It is a mechanism used by shareholders with at least 5% of the votes to force the directors to call a meeting.
This one is a bit different to the other 249Ds I’ve seen.
There is no request to remove a director.
To get to this point, there would have been a discussion between the company and the shareholder, and there would be a reason the company does not want the request to happen.
A meeting to vote on the request will be held in 21 days; we will know more about the company’s and the shareholders' positions then.
Importantly, we will know why.
What was the request?
The shareholder, Summit Fund Management, which owns more than 5% of ALA shares, has requested the addition of three new directors.
Dave Williams
He is the most famous of the three names put up for a vote.
Dave was the Chairman of Polynovo and MVP.
He is also the Chairman of Kidder Williams, a boutique corporate advisory and investment bank.
Mark Diamond
Current non-executive chairman of Dimerix (ASX: DXB).
I know that Mark reads this newsletter (Hi Mark!), he has been around the industry for a while and has helped me with a few of the companies in my Biotech 165 Challenge.
Michael Thune
Last month, he resigned as the CEO of Neurizon (ASX: NUZ).
I don’t know Michael personally, but I have heard him present the NUZ story a couple of time (back when it was the old PharmAust)
What happens now?
The company will be playing defence.
ALA has already “considered the validity” of the notice and will likely make some phone calls to the top shareholder to gauge how they would vote.
If the notice is correctly served, then the board will need to call a meeting within 21 days.
As part of the meeting, both the company and the Summit will make their case to shareholders as to why these board members should be added.
Then the shareholders get to vote.
Owning a share isn’t just a financial instrument… It’s also a vote.
A vote that you can buy more of… on the market.
This gives all ALA shareholders an incredibly powerful stake in the company's future.
If the company wants to gather more votes its either hit the phones…
… or buy more of the stock.
The same goes for Summit.
Speculating on the tension
Now, neither party has given reasons why these individuals should or should not be added to the company's board of directors.
But I can always speculate.
ALA is about to enter its Phase 1 clinical trial for an off-the-shelf cancer cell therapy treatment.
(ALA was actually my first stock on the Biotech 165 Challenge, full company story here: https://thearmchairanalyst.com/p/day-1-the-biotech-165-challenge-begins)
The way that this trial is run, and importantly, the way that this trial is communicated to shareholders, is incredibly important.
There is a lot at stake (for the company) as well as for Summit as a top shareholder.
It’s my suspicion that this trial is at the core of the tension.
(I could be completely wrong; this is pure speculation.)
The best case for ALA's smaller shareholders is that the two factions reach a consensus on how to run the business going forward.
I decided to close out my ALA trade two weeks ago.
I’ll keep an eye on this one going forward with much interest.
See you all tomorrow,
The Armchair Analyst
