Zymeworks rejects All Blue's $773M offer as an 'opportunistic' public attack

Zymeworks is nixing a $773 million offer from shareholder All Blue Capital to buy the company, saying the proposal “lacks credibility,” was “opportunistic” and ultimately, undervalues the company.

The move comes weeks after All Blue’s offer was originally disclosed in a letter to the board. Managing Partner Matthew Novak wrote that Zymeworks “has suffered from severe value erosion due to a number of serious missteps by an unfocused leadership with no clear strategy for improving performance.” 

Evidently, the letter struck a nerve with Zymeworks’ board, which hit back Friday saying, “The board and management are disappointed that All Blue chose to publicly attack the company while efforts to reinvigorate the company are well underway.”

According to Zymeworks, the tit for tat with All Blue began in January when the firm voiced displeasure on a number of fronts, including the company’s public offering later that month. That move released more than 11 million shares at $8 per share. After that, All Blue called on the board to immediately resign before it took up “a very public fight.” Fast-forward a few months and the brawl has spilled out into the open air as promised.

In an interview with Fierce Biotech, Novak said it was "disgraceful" that Zymeworks' board has not yet engaged with All Blue.

"Of course, we're being opportunist with our bid, we see substantial value in the company and its pipeline," he said. "And our goal is to crystalize that value before the existing management has an opportunity to erode it." 

All Blue’s offer would buy out Zymeworks' remaining stock at $10.50 per share, almost double its current value. But Zymeworks feels that’s short, saying the offer “substantially undervalues Zymeworks and is not in the best interest of the company and its shareholders.”

However, Novak contends the company evidently values itself even less give than $8 share price of its public offering. 

"So our offer is materially higher than even what they believe their company's worth since they sold a third at eight bucks," he said. 

As for Zymeworks' clinical progress, which is really the sole value maker, the company says it’s focused on progressing lead asset zanidatamab. The company is currently indicated for a number of cancers, including billiary tract cancers and gastroesophageal adenocarcinomas. Enrollment of the pivotal HERIZON-BTC-01 trial testing the bispecific antibody wrapped up in April and top-line data is expected in early 2023. A separate pivotal study for the med, HERIZON-GEA-01, is expected to wrap by the end of 2023. 

However, the company also notes it wants to continue growing its early programs and ideally, advance two new antibody-drug conjugates or multispecific products to the clinical stage by the end of 2024.

Novak says the focus, for now, should be solely on zanidatamab. Furthermore, Novak says "most" other Zymeworks shareholders are supportive of their takeover attempt. 

"We have spoken to most of the shareholders and the feedback that we're getting is exceptionally positive and they would all welcome our bid at the price that we put across publicly," he said.