Alpha Holdings counters China Grand’s offer to OncoSec

OncoSec’s largest stockholder opposes offer from China Grand

Mel J. Yeates
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SEONGNAM, South Korea and PENNINGTON, N.J.—Alpha Holdings, Inc. has delivered a binding term sheet to the board of directors of OncoSec Medical Incorporated, containing a detailed alternative proposal for their consideration. The proposal reportedly represents an additional $9.3 million of value compared with the $30 million transaction offer from China Grand Pharmaceutical and Healthcare Holdings Limited (CGP). Alpha is the largest stockholder of OncoSec, with an approximate 15.1% ownership stake.
Alpha believes that the terms of its proposed financing are more favorable to OncoSec and its stockholders than those offered by CGP. According to the binding term sheet, Alpha would commence a $9.3 million all-cash tender offer to purchase 35% of the outstanding OncoSec common stock at $2.50 per share, and purchase two tranches of newly issued common stock of OncoSec for an aggregate purchase price of $30 million.
“Alpha’s offer provides more monetary value overall, the potential for immediate cash for stockholders at a premium and none of the onerous terms of the China Grand Takeover that limit the potential upside for current stockholders,” Alpha Holdings stated. “Further, we believe that when more data on TAVO is available, it will open up even more attractive opportunities for long-term value creation that would be realizable for current stockholders if the restrictions of the China Grand Takeover deal were removed.” 
The terms of Alpha’s offer have no financing contingency, but would require, among other conditions set forth in the binding term sheet, the termination of two stock purchase agreements between OncoSec, CGP and Sirtex Medical US Holdings, Inc., a CGP affiliate. Alpha would also require the termination of the license and services agreements between OncoSec, China Grand and Sirtex; and the termination of all severance payments to current members of management as a result of Alpha’s proposed transaction.
Alpha is also demanding the resignation of Dan O’Connor, Avtar Dhillon and Punit Dhillon from all positions held at OncoSec. Upon closing of the tender offer, Alpha would have the right to appoint three additional directors to the OncoSec board.
“There is broad stockholder support for new leadership at OncoSec. Dan O’Connor, Avtar Dhillon and Punit Dhillon should never have put OncoSec in a position where it would have to consider a transaction like the China Grand Takeover,” continued Alpha. “We will work quickly to identify a new CEO who is better suited to lead OncoSec and bring TAVO to market.”
Alpha believes that the company’s interest in OncoSec would be more aligned with the interests of minority stockholders than China Grand. OncoSec would reportedly have a greater ability to run its business in its own interest, and would be free to seek a licensing deal with a “best efforts” clause and receive compensation for licensing those rights if the company chooses to do so. If OncoSec decides to take the Alpha agreement onboard the company could save $1.2 million by not having to pay the full fee for financial advisor Torreya Partners LLC, although those savings would be offset by any termination fees OncoSec might have to pay to CGP.
“As OncoSec’s largest stockholder, we do not believe anyone can represent the stockholder interest better than Alpha, and we stand ready to engage quickly with OncoSec’s Board and management team to quickly finalize a definitive agreement and execute this transaction,” added Alpha.
Alpha has devoted a website to more information about its alternative financing proposal, and its opposition to the CGP transaction.
But Alpha is only telling one side of the story. OncoSec entered into the strategic transaction with China Grand and Sirtex back in October 2019, and OncoSec has an entirely different opinion on the merger with China Grand, outlined on their own website devoted to the issue.
OncoSec says that Alpha “has been waging a campaign of misinformation in an effort to derail the CGP/Sirtex Transaction,” according to a January 6 letter to shareholders. The company also mentions that two independent proxy advisory firms, Institutional Shareholder Services Inc. and Glass, Lewis & Co., recommend that shareholders vote for the CGP/Sirtex transaction, and support what OncoSec has said about the transaction.
“Notwithstanding the seemingly favorable optics pegged to Alpha’s announcement, we consider the pointed lack of meaningful detail around the presented alternative raises considerable doubt around the viability of the alternative arrangement. [I]t appears Alpha has filed a proxy card which expressly allows investors to vote for or against the placement — or to abstain from the vote — but which Alpha may, in its sole discretion, elect to withhold as a means to preclude a quorum… There are thus necessarily scenarios in which Alpha could withhold a number of proxies which would yield both a quorum and a sufficient majority of votes in favor of the [CGP/Sirtex transaction],” explains Glass Lewis. “We consider this practice problematically stands to disenfranchise investors who otherwise believe their vote will be counted in relation to a critical strategic transaction.”
“We believe that Alpha is trying to game the system to engineer their preferred outcome. It is extremely unfair and patently absurd to ask shareholders to submit proxies that Alpha ‘might’ vote or might simply discard, at Alpha’s sole discretion. We believe this is highly irregular and demonstrates Alpha’s troubling disregard for the votes — and best interests — of other OncoSec shareholders,” OncoSec points out. “The bottom line is that Alpha has admitted that it may not vote the shares of shareholders who provide their proxies to Alpha. Unfortunately, this type of behavior is not surprising from an organization that we believe has repeatedly issued false and misleading statements about OncoSec and the proposed Transaction.”
“We have consistently stated that without the cash infusion from the CGP/Sirtex Transaction, our ability to continue running clinical trials and bring our life-saving therapies to market would be imperiled,” OncoSec adds. “OncoSec has also made clear that this deal is not ‘nice to have’ — it is a ‘must have.’ “We have conducted a wide search and comprehensive process to objectively assess all options available to us.” 
As the transaction currently stands, OncoSec will receive a $30 million investment from CGP and its affiliate Sirtex at $2.50 per share. Upon the closing of this transaction, CGP and Sirtex together will hold 53% of OncoSec common shares, and will be entitled to three of nine seats on the OncoSec board of directors. Should CGP seek to offer to acquire the remaining shares of OncoSec within the year following the transaction closing, the offer price for the outstanding shares of OncoSec must be the greater of $4.50 per share or 110% of the closing stock price of the common stock on the date prior to making the acquisition offer for the remaining shares.
“This infusion of capital would significantly strengthen OncoSec’s balance sheet and provide support to complete our ongoing pivotal clinical trial, KEYNOTE-695, in checkpoint-refractory metastatic melanoma in combination with Keytruda and our ongoing clinical trial, KEYNOTE-890, in chemo-refractory metastatic triple negative breast cancer,” noted Daniel O'Connor, OncoSec’s president and CEO, in a press release. “CGP is a global pharmaceutical company that has significant interests and holdings in the immuno-oncology space with the expertise and infrastructure to broadly introduce TAVO within these important Greater China markets where there remains a significant unmet need in a variety of cancers, while also providing support to our development activities elsewhere. We look forward to a long and fruitful partnership with them.”
OncoSec has scheduled a special meeting of shareholders on January 17 to vote on the proposed strategic transaction with CGP and Sirtex.

Mel J. Yeates

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