Progenics inked a merger to avoid negotiating a proxy war. One activist still wants to fight

Locked in a proxy tussle with activist investor Velan Capital, Progenics Pharmaceuticals danced a sidestep, inking a merger deal with another company rather than negotiate with its board challengers. But now, Velan says it's not giving up the fight—and the proposed merger has joined its list of grievances.

In a letter to shareholders Tuesday, Velan blasted Progenics’ agreement last week to merge with Lantheus Medical Imaging at a 21.5% premium on Progenics share price.

After what Velan called “a misguided attempt to seek out the nearest exit,” the firm called for five of its nominees to replace three members of Progenics’ board: CEO Mark Baker, David Scheinberg and Nicole Williams.

“Given this Board’s troubling track record, this latest maneuver, while deeply concerning, is not surprising and only solidifies our belief that wholesale Board and leadership change at Progenics is urgently required,” Velan said in its letter.

Velan initially proposed its five nominees in September after a Progenics annual shareholder meeting in July showed cracks in the drugmaker’s leadership team. Stockholders voted down two board members: Chairman Peter Crowley and Michael Kishbauch, then-chairman of the nominating and corporate governance committee.

Velan said the vote against two members of Progenics’ board signaled shareholders’ “dissatisfaction with the status quo” and potentially forecast even more changes to the drugmaker’s leadership team. The two men have said they will resign, provided the votes against them are certified.

Baker, CEO of Progenics since 2011, has been a focus of Velan's scrutiny due to his "extended period of poor performance and a lack of results" at the helm. Velan said in September it intended to immediately seek a replacement for Baker if it secured control of the board as well as launch a comprehensive review of Progenics' business. 

Velan also accused Progenics in June of diluting the company's stock in a plan to enrich company executives. Earlier that month, Progenics had issued 1.63 million shares of common stock rather than use cash reserves to dole out a milestone payment for its acquisition of Azedra, the drugmaker's sole approved drug.

Velan pointed out that neither Kishbauch nor Crowley owned Progenics stock at the time and said the decision "incentivizes the dilution of stockholders for the personal gain of executives and directors." Velan also listed among its grievances the underperformance of Progenics stock and the slow uptake of Azedra after its approval in 2018.

RELATED: AMAG bails on proxy fight standoff with settlement for 2 board seats

Velan’s crusade comes on the heels of another proxy fight at a small drugmaker that played out much differently for the activist investor involved.

Tuesday, AMAG Pharmaceuticals agreed to settle its proxy battle with Caligan Partners, temporarily placing two of the firm’s nominees on its board before a formal vote at the company’s 2020 shareholder meeting.

The settlement put a temporary muzzle on AMAG’s activist wing as the drugmaker preps for an FDA marketing review of controversial premature birth med Makena. The FDA said a confirmatory trial of the drug found little efficacy over placebo, leading to consumer group Public Citizen to call for its approval to be withdrawn.