QLT Inc. , a former darling of Canada's biotech sector that has fallen on hard times, is facing a last-minute proxy battle as a Danish investor tries to replace its board of directors.
QLT, which specializes in treatments for macular degeneration and other eye disorders, was notified Tuesday that NB Public Equity KS, a Copenhagen-based fund that invests in health care, will propose a dissident slate of directors at the annual meeting Thursday.
In a filing with U.S. securities regulators, the fund said its 15-per-cent stake in QLT was initially made purely for investment purposes, but it has "decided that change on the company's board of directors is important and necessary." It will propose six directors, while the company has nominated seven.
Analysts were puzzled by the last-minute move to replace the board. The stock, which soared as high as $115 in mid-2000, has been trading in the $7 range for the past year, but that's up sharply from its low of less than $2 in 2009.
Doug Miehm of RBC Dominion Securities said the shareholder discontent is "somewhat surprising" given that the current management and board "have done a capable job of adding value over the last few years, and the outlook appears favourable."
Vancouver-based QLT responded to NB's filing with a letter to shareholders saying that the Danish fund has not set out an alternative plan for the company, and that its move is "highly disruptive and could impede the progress" of clinical development programs. NB is trying to obtain control of the company "without notice, without a plan, and without paying you for control," the letter said.
In an interview, QLT president Bob Butchofsky said he was taken aback by the proposal. He said he had met NB principals less than two weeks ago at a conference, but they said nothing about the matter. "I really didn't have any indication that this was in the works until [Tuesday]"
He said QLT would not have enough time to address alternative proposals for the direction of the company before Thursday.
Mr. Butchofsky said a change in the board would likely be followed by a change in management, and that would disrupt crucial meetings scheduled with regulatory agencies. "Those meetings are extremely sensitive, and continuity and knowledge about the issues that we are discussing with the regulator authorities is absolutely critical."
In 2000, QLT received FDA approval for Visudyne, a treatment for wet macular degeneration. Within a few years, however, a drug developed by Genentech began eating into Visudyne's sales. The company sold off assets, including some of its products and its headquarters building, and founder Julia Levy departed.
QLT has two key new projects in the pipeline, in addition to Visudyne. It has a new product in development for retinal diseases, and has created an alternative method for depositing glaucoma medication into the eye.
NB is QLT's second-largest shareholder. Its largest, New York hedge fund Axial Capital Management, holds about 18 per cent of the shares and has told the company it will vote its shares at the meeting, rather than ahead of time by proxy. It's not clear if Axial will support the existing board slate or the dissidents, Mr. Butchofsky said.
One other large shareholder, Kingstown Capital Partners LLC, has filed a note with regulators saying it will vote its 5.5-per-cent share holding with NB.
Analyst Philippa Flint of Bloom Burton & Co. said in a report that QLT is on the "right development path" and its "strategy for product development is appropriate and is being executed in a timely manner."