A minority stakeholder in Californian PD-1 and CAR-T biotech Sorrento Therapeutics is urging the company’s board to boot out its CEO--and the directors had better shape up as well, or Wildcat says they should walk away with their chief.
Wildcat Capital Management--whose clients hold an ownership stake of 6.5% of the common stock of Sorrento ($SRNE)--today sent a letter to the biotech’s board urging it to “immediately terminate and replace Dr. Henry Ji as CEO,” and to stop recently announced financing transactions to “avoid further dilution to the existing shareholders.”
The letter also calls for the appointment of three Wildcat nominees to the board to lead a “special committee” authorized to initiate a sales process for the biotech.
The letter says there are several “serious issues” it has found which reveal that Dr. Ji, Sorrento's management team, and its board have “engaged in egregious and improper self-dealing and are squandering the company's assets.”
The letter said this includes, among other things:
- The company has repeatedly transferred assets to newly created subsidiaries and then granted stock options and warrants to acquire significant amounts of stock in those subsidiaries at nominal prices to Dr. Ji, other executives, and nonemployee directors.
- The company has wasted money and time on numerous imprudent transactions that have destroyed shareholder value.
- The company has repeatedly demonstrated an utter lack of fiscal and operational discipline.
- The company has entered into inappropriate financing transactions, including the pending highly dilutive sale of shares in which it effectively granted a free option to new investors to acquire 45% of the Company at a price that is near the 52-week low for the company's shares.
The firm is now calling upon the Sorrento board members to meet Wildcat's demands and take swift action to “protect and maximize shareholder value”--or to immediately resign and allow another slate of directors to effect such actions.
The biotech is one of many connected to billionaire Patrick Soon-Shiong, who in 2014 tapped the biotech for an immuno-oncology joint venture. In the months after, Sorrento partnered with Soon-Shiong's NantKwest ($NK) and NantCell, later joining NantBioScience to launch a $100 million joint venture that will develop small-molecule treatments for some of the so-called undruggable targets in LA Cell's crosshairs.
But not all of Sorrento's many dealings exist within the NantWorks family. Last year, the company bought into biosimilars through a deal with China's Mabtech, acquiring the rights to four undisclosed copies of best-selling treatments.
This week it tied up a private $10 million placement of common stock from Korea's Yuhan.
- check out Wildcat’s letter