SEATTLE, Oct. 2, 2019 /PRNewswire/ --
Dear Catalyst Biosciences, Inc. Shareholders:
22NW, LP ("22NW" or "we") is one of the largest shareholders of
Catalyst Biosciences, Inc (the "Company") (NASDAQ: CBIO) with
ownership of approximately 6% of the Company's outstanding shares.
As mentioned in our previous letter, we recommended shareholders
apply pressure to the Company's Board of Directors and Executive
team and replace them with our representatives. In particular, we
believe long-time Board Director, Jeff
Himawan, should be replaced immediately.
Since joining Catalyst Biosciences' Board of Directors in 2008
as a privately-traded company, and his inclusion into the
publicly-traded company's Board in August
2015, we believe Jeff Himawan
failed to add tangible shareholder value. Jeff's tenure at the
Company includes: 1) shareholder losses of about -94% since the
reverse merger in August
20151; 2) a failure to enter any drugs into Phase
3 trials2; and 3) a failure to show evidence of
attracting new strategic partners to economically advance
late-stage trials.
In our view, Jeff's struggles at the Company are not an anomaly
but rather a continuation to a pattern of shareholder-value-erosion
and poor executive leadership. We encourage the Company's
shareholders to examine Jeff's track record with another publicly
traded biomedical company, MediciNova. Based on our research, Jeff
was added to MediciNova's Board of Directors in January 2006 and currently serves as its Chairman
of the Board. Since its IPO in December
2006, MediciNova shareholders lost about -29% on their
investment compared to the 412% and 136% of the SPDR S&P
Biotech and iShares Russell 2000 ETFs,
respectively:3
Like his time at Catalyst Biosciences, we believe Jeff failed as
a corporate leader in his inability to solicit a significant
third-party arrangement to guide MediciNova through Phase 3 trials
and into production. In the process, MediciNova's cumulative losses
totaled more than $200
million4 and its shareholders were significantly
diluted. Its "Named Executive Officers," on the other hand,
pocketed more than $50 million in the
same period:5
Named Executive
Officers
total yearly compensation
|
Yuchi Iwaka
(CEO)
|
Kazuko
Matsuda
(CMO)
|
Other
|
Total
|
2006
|
$
3,090,882
|
$
-
|
$
5,752,407
|
$
8,843,289
|
2007
|
596,867
|
-
|
1,386,557
|
1,983,424
|
2008
|
926,666
|
-
|
2,093,931
|
3,020,597
|
2009
|
838,033
|
-
|
1,907,352
|
2,745,385
|
2010
|
759,060
|
-
|
2,169,511
|
2,928,571
|
2011
|
917,580
|
606,809
|
2,116,677
|
3,641,066
|
2012
|
907,434
|
516,051
|
2,282,057
|
3,705,542
|
2013
|
1,615,366
|
915,011
|
909,645
|
3,440,022
|
2014
|
769,098
|
682,791
|
447,673
|
1,899,562
|
2015
|
1,305,086
|
729,870
|
1,215,239
|
3,250,195
|
2016
|
1,936,263
|
1,175,331
|
1,651,256
|
4,762,850
|
2017
|
2,557,279
|
1,645,654
|
2,137,575
|
6,340,508
|
2018
|
2,853,305
|
1,825,668
|
1,325,127
|
6,004,100
|
Total
|
$
19,072,919
|
$
8,097,185
|
$
25,395,007
|
$
52,565,111
|
Like Catalyst Biosciences, we believe MeidiciNova's executives
and Essex Woodlands owned an insignificant amount of the equity and
possessed great influence over MediciNova. Also like the Company,
the primary beneficiaries from years of what we perceived to be
strategic blunders and shareholder dilution were its executives,
whose pay was also decided by Jeff
Himawan through his role in the Compensation Committee. We
do not believe this represents the type of "extensive experience in
the biotechnology industry" from "considerable service on both
public and private boards of directors" shareholders of the
Catalyst Biosciences should find acceptable.
We also encourage shareholders to question Jeff Himawan's financial incentives to devote
time away from his extensive number of privately-traded portfolio
companies. Jeff's financial ties to the Company can be traced to
the private-equity sponsor, Essex Woodlands Management, where he
serves as a Managing Director.6 Since Jeff and Essex
Woodlands became owners of the publicly-traded Company in
August 2015, neither he nor the
sponsor purchased additional shares. According to the most recently
available 13-F data, Essex Woodlands owns less than 1% of the
Company's equity. We believe Jeff's and Essex Woodlands' immaterial
financial interest in the Company represents their ability and
willingness to drive shareholder value in the Company.
Through his membership on the Board of Directors and the
Company's Compensation Committee, we believe Jeff is content to
allow insiders to disproportionately benefit at the expense of
shareholders. During Jeff's tenure in the publicly-traded company,
Catalyst Biosciences accumulated more than $100 million in losses7, failed to
advance any drugs to or beyond Phase 3 clinical trials8,
and failed to form significant strategic partnerships.
Concurrently, its "Named Executive Officers" pocketed nearly
$15 million in four years under a
compensation plan approved by Jeff
Himawan:9
Named Executive
Officers
total yearly compensation
|
Nassim
Usman
(CEO)
|
Fletcher
Payne (CFO)
|
Howard Levy
(CMO)
|
Other
|
Total
|
2015
|
$
2,367,260
|
$
916,061
|
$
-
|
$
1,429,967
|
$
4,713,288
|
2016
|
569,634
|
383,659
|
414,104
|
695,833
|
2,063,230
|
2017
|
1,835,273
|
779,223
|
932,226
|
-
|
3,546,722
|
2018
|
2,442,313
|
969,476
|
1,198,847
|
-
|
4,610,636
|
Total
|
$
7,214,480
|
$
3,048,419
|
$
2,545,177
|
$
2,125,800
|
$
14,933,876
|
At time of writing, the Company is valued less than the cash
held on its balance sheet. We believe this suggests other
market-participants place very little faith in the Company's Board
and Executive team. We believe Jeff
Himawan's poor track record as an executive leader and lack
of ownership in the Company represents a significant hinderance to
unlocking the Company's intrinsic value. Through our 6% ownership,
we demand Board representation that will maximize shareholder
value–now is the time for shareholders to apply pressure to the
existing Board. Failing to place our representatives on the Board,
we believe Catalyst Biosciences should immediately initiate a
strategic sale process for the Company and/or aggressively pursue
established partners for the drugs in the Company's pipeline.
About 22NW, LP:
Founded in 2015, 22NW Fund is a Seattle-based value fund with $150 million of assets under management.
The firm specializes in small and microcap investments and has a
multi-year investment horizon.
1 Bloomberg, total return for the period August 20, 2015 through September 20, 2019.
2 Based on clinicaltrials.gov registrations.
3 Bloomberg, total return for the period December 7, 2006 through September 20, 2019.
4 Measured by the change in retained earnings for the
period beginning December 31, 2006
and ending June 30, 2019.
5 Based on the 'Summary Compensation Table' found in
MediciNova's annual proxy filings.
6
https://www.ewhealthcare.com/team/detail/jeff_himawan
7 Measured by the change in retained earnings for the
period beginning December 31, 2015
and ending June 30, 2019.
8 Per clinicaltrials.gov registrations.
9 Based on the 'Summary Compensation Table' found in
Catalyst Biosciences' annual proxy filings.
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SOURCE 22NW