The war of words between Erytech and an activist investor trying to stall the long-planned merger with Pherecydes has reignited this week, with both sides firing off stinging press releases.
Monday saw Erytech respond to what it described as Akkadian Partners’ “disinformation,” arguing that the investor’s challenge to the merger was “based on incomplete information and misleading arguments.”
The proposed deal, which was announced in February, seemed like a win-win for both companies, ensuring Erytech’s expertise didn’t go to waste while giving fellow French biotech Pherecydes access to more cash and a U.S. presence. A shareholder vote on the merger is scheduled for Erytech’s AGM on June 23.
The merger would see Pherecydes absorbed into publicly listed Erytech, with Pherecydes shareholders receiving 15 new Erytech shares for every four of their current shares.
But Akkadian Partners, which Erytech estimates owns around 5% of the biotech’s stock, has thrown the plans into doubt by initiating legal proceedings to secure a postponement of the vote. As far back as May, the investor was setting out a long list of objections, including its view that the market value of Pherecydes used as the basis of the deal was “unjustified.”
In a June 12 release, Erytech warned its shareholders that derailing the merger would risk destroying the value of both companies.
“To the best of our knowledge, Akkadian’s predation of Erytech’s corporate structure and cash will not support ideas of sufficient quality and robustness to create value for the company and its shareholders, on the contrary,” the company wrote. “Anybody who really, sincerely wants to save Erytech should be allowed to vote at the General Assembly on June 23 and support Erytech’s merger project.”
Akkadian hit back this morning, branding the biotech “scandalous” for suggesting that the company might have to liquidate if the merger falls through.
“This is yet another example of the disdain shown towards the shareholders of Erytech by demanding that they approve the merger or face disappearance following the liquidation of their company,” the investor group wrote.
The emotive language didn’t stop there, with Akkadian not holding back in its attempts to dissuade its fellow shareholders from greenlighting the merger.
“Akkadian wishes to point out that the merger with Pherecydes would be the equivalent of serving a death warrant on Erytech, which has ample financial resources to continue trading and to grow without a merger,” they added.
If the deal fails, the investor group called for their own board to replace the biotech’s current directors “and so end this scorched earth policy which entails condemning Erytech to disappear through an unbalanced merger or to disappear by liquidating its resources.”
Despite Akkadian’s vocal misgivings, it’s easy to see why Erytech’s board is keen to keep the Pherecydes deal on track. The biotech appeared to have run out of options after it was blindsided by a phase 3 fail in 2021 that forced a pivot from pancreatic cancer to leukemia.
The combined company was expected to maintain Pherecydes’ focus on extended phage therapies—natural bacteria-killing viruses—to combat antimicrobial resistance (AMR). The business was set to have around 41 million euros ($35.6 million) in the bank that could fund both current and new clinical programs into the third quarter of 2024.
Top of the combined company’s to-do list was due to be a European expansion of the ongoing PhagoDAIR phase 2 trial in patients with knee or hip prosthetic joint infections due to the bacteria Staphylococcus aureus. There were also plans to build an R&D strategy around Erytech’s expertise. The idea is to use the company’s red blood cell-derived vesicle and oncology know-how to develop phage and endolysins therapeutic approaches in anti-infective fields like AMR and beyond.