Aeterna Zentaris Commences Legal Action Against David Dodd and Philip Theodore
August 03 2017 - 1:26PM
Business Wire
- Aeterna alleges among other things,
that former CEO Dodd and former General Counsel Theodore breached
fiduciary duties owed to Company.
- Company also alleges that defendants
developed secret plans to acquire the U.S. rights to MacrilenTM and
mount a proxy contest for control of the Board with assistance from
shareholder Graeme Roustan.
- Aeterna also alleges that Dodd and
Theodore conveyed and used Aeterna’s confidential information
without authorization.
Aeterna Zentaris Inc. (NASDAQ: AEZS) (TSX: AEZS) (the
“Company”), announced today that it has filed a claim against the
Company’s former CEO David Dodd and its former General Counsel
Philip Theodore (the “Defendants”) with the Ontario Superior Court
of Justice, Commercial List (the “Claim”) for actions that the
company says involve breaches of fiduciary duties and unauthorized
disclosure of confidential and highly proprietary information.
As detailed in the 15-page claim, the Board of Directors (the
“Board”) uncovered what it believes to be a conspiracy between Mr.
Dodd and Mr. Theodore, while still employed by Aeterna, to take
control of Aeterna and acquire the U.S. rights to the Company's
major asset, MacrilenTM. To accomplish these goals, they joined
forces with a self-styled shareholder activist, Graeme Roustan, who
made various demands for board representation. Mr. Dodd's and Mr.
Theodore’s egregious breaches of confidence and fiduciary duties to
the Company came to light as part of the investigation surrounding
the dismissal of Mr. Dodd for cause in July of this year.
Carolyn Egbert, Chair of the board of directors (the “Board”)
commented on the Claim:
“We are dismayed and appalled at the actions of Mr. Dodd and Mr.
Theodore and we are acting quickly and decisively to protect the
interests of our employees and shareholders. In our Claim, we ask
the Court to prevent Mr. Dodd and Mr. Theodore from using or
conveying the Company’s confidential information, including to
seize control of the Board through a proxy contest. We refuse to
allow Mr. Dodd or Mr. Theodore to disrupt the Company’s focused
effort in bringing Macrilen to market and maximizing value for all
of our stakeholders.
The Board would also like to recognize the considerable efforts
of our new CEO Michael Ward in acting quickly to stabilize the
management of the Company, and ensuring that we do not lose
momentum at a critical and exciting time in our Company’s
history.”
The Claim alleges, that among other
things:
- The Defendants breached fiduciary
duties owed to the Company.
- In or prior to June 2017 the Defendants
conspired to devise a secret plan known as "Project Rescue" that
outlined a path for Mr. Dodd and Mr. Theodore to acquire the U.S.
rights to MacrilenTM from Aeterna either through a Corporation
named RiversEdge BioVentures, LLC, which is wholly-owned by Mr.
Dodd, or another newly incorporated Corporation.
- In or about July 2017, while they were
still employed by Aeterna, the Defendants began to develop a second
secret plan, which they called "Project Rescue – Version 2". Under
the second plan, the Defendants engaged the assistance of an
activist shareholder named Graeme Roustan to mount a proxy contest
for control of the board of directors of the Company (the “Board”).
Mr. Roustan controls a currently undisclosed holding of Aeterna
shares.
- On July 7, 2017, Mr. Roustan sent a
letter to the Board advising, among other things, that he desired a
seat on the Board. The Board's Strategic Review Committee took
charge of communication with Mr. Roustan.
- The Defendants had full knowledge that
the Board was communicating with Mr. Roustan, and Mr. Dodd
expressed his objection to being excluded from those
communications. However, the Defendants never disclosed their
involvement with Mr. Roustan or their plans to take over the Board
and acquire the U.S. rights to MacrilenTM. Their plans were only
uncovered through an investigation following the termination of Mr.
Dodd as CEO. Among other things, the Board discovered a document
created by Mr. Theodore entitled "Outline of Proposed Agreement
with Graeme Roustan", which detailed some of the particulars of how
Messrs. Roustan, Theodore, and Dodd intended to mount the proxy
contest.
- On July 20, 2017, Aeterna terminated
Mr. Dodd's employment as CEO for cause, including for his repeated
refusal to implement express directives of the Board.
- Following the revelation of the plan to
mount a proxy contest after Mr. Dodd's termination, it was
uncovered through further investigation that, during and after Mr.
Theodore's employment, he disclosed and made unauthorized use of
highly proprietary and confidential information, including, among
other things, providing others with privileged information that Mr.
Theodore had received in his capacity as the Company's General
Counsel.
- Mr. Theodore's employment was
terminated on July 28, 2017.
- Following Mr. Dodd's and Mr. Theodore's
terminations, they failed to comply with the Company's requests for
the return of confidential information.
Aeterna has sought among other
things:
- An injunction to prevent the Defendants
from continuing to use Aeterna’s confidential and proprietary
information without authorization.
- An injunction to prevent the Defendants
from mounting a tainted proxy contest that will be premised upon
the breaches of fiduciary and statutory duties and breaches of
confidence alleged in the Claim.
About MacrilenTM (macimorelin)
Macimorelin, a ghrelin agonist, is an orally-active small
molecule that stimulates the secretion of growth hormone.
Macimorelin has been granted orphan drug designation by the FDA for
diagnosis of AGHD. The Company owns the worldwide rights to this
patented compound and has significant patent protection left. The
Company’s U.S. composition of matter patent expires in 2022 and its
U.S. utility patent runs through 2027. The Company proposes,
subject to FDA approval, to market macimorelin under the tradename
Macrilen™.
About AGHD
AGHD affects approximately 75,000 adults across the U.S., Canada
and Europe. Growth hormone not only plays an important role in
growth from childhood to adulthood, but also helps promote a
hormonally-balanced health status. AGHD mostly results from damage
to the pituitary gland. It is usually characterized by a reduction
in bone mineral density, lean body mass, exercise capacity, and
overall quality of life as well as an increase of cardiovascular
risks.
About Aeterna Zentaris Inc.
Aeterna Zentaris is a specialty biopharmaceutical company
engaged in developing and commercializing novel pharmaceutical
therapies. We are engaged in drug development activities and in the
promotion of products for others. We recently completed Phase 3
studies of two internally developed compounds. The focus of our
business development efforts is the acquisition of licenses to
products that are relevant to our therapeutic areas of focus. We
also intend to license out certain commercial rights of internally
developed products to licensees in non-U.S. territories where such
out-licensing would enable us to ensure development, registration
and launch of our product candidates. Our goal is to become a
growth-oriented specialty biopharmaceutical company by pursuing
successful development and commercialization of our product
portfolio, achieving successful commercial presence and growth,
while consistently delivering value to our shareholders, employees
and the medical providers and patients who will benefit from our
products. For more information, visit www.aezsinc.com.
Forward-Looking Statements
This press release contains forward-looking statements made
pursuant to the safe harbor provision of the U.S. Securities
Litigation Reform Act of 1995, which reflect our current
expectations regarding future events. Forward-looking statements
may include, but are not limited to statements preceded by,
followed by, or that include the words “expects,” “believes,”
“intends,” “anticipates,” and similar terms that relate to future
events, performance, or our results. Forward-looking statements
involve known risks and uncertainties, many of which are discussed
under the caption “Key Information – Risk Factors” in our most
recent Annual Report on Form 20-F filed with the relevant Canadian
securities regulatory authorities in lieu of an annual information
form and with the U.S. Securities and Exchange Commission (“SEC”).
Such statements include, but are not limited to, statements about
the progress of our research, development and clinical trials and
the timing of, and prospects for, regulatory approval and
commercialization of our product candidates, the timing of expected
results of our studies, anticipated results of these studies,
statements about the status of our efforts to establish a
commercial operation and to obtain the right to promote or sell
products that we did not develop and estimates regarding our
capital requirements and our needs for, and our ability to obtain,
additional financing. Known and unknown risks and uncertainties
could cause our actual results to differ materially from those in
forward-looking statements. Such risks and uncertainties include,
among others, the availability of funds and resources to pursue our
research and development projects and clinical trials, the
successful and timely completion of clinical studies, the risk that
safety and efficacy data from any of our Phase 3 trials may not
coincide with the data analyses from previously reported Phase 1
and/or Phase 2 clinical trials, the rejection or non-acceptance of
any new drug application by one or more regulatory authorities and,
more generally, uncertainties related to the regulatory process
(including whether or not the regulatory authorities will
definitively accept the Company’s conclusions regarding Macrilen™
and approve its registration following the Company’s re-submission
of an NDA for the product as described elsewhere in this press
release), the ability of the Company to efficiently commercialize
one or more of its products or product candidates, the degree of
market acceptance once our products are approved for
commercialization, our ability to take advantage of business
opportunities in the pharmaceutical industry, our ability to
protect our intellectual property, and the potential of liability
arising from shareholder lawsuits and general changes in economic
conditions. Investors should consult the Company’s quarterly and
annual filings with the Canadian securities commissions and the SEC
for additional information on risks and uncertainties. Given these
uncertainties and risk factors, readers are cautioned not to place
undue reliance on these forward-looking statements. We disclaim any
obligation to update any such factors or to publicly announce any
revisions to any of the forward-looking statements contained herein
to reflect future results, events or developments, unless required
to do so by a governmental authority or applicable law.
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