Avid Bioservices Inc (CDMO)

[jbainseky]

Have to assume the deal will pass the "fair" test in the courts. Things are clearer, but as always with PPHM/CDMO, much is left to the imagination. The main question that still needs answering is if Team Ronin is a "sheepdog" or one of the "wolves".

What everyone should realize is the probably timeline associated with anti-PS targeting acquisition. There is little doubt that the deal was all but inked last fall, and might have been agreed to in principle long before. I won't re-argue whether PPHM or Ronin had the initial idea for PPHM to become a pure CDMO play, that is immaterial. Nor will I re-argue why the last ASM was delayed so long. However, what we do know:
* Team Ronin was attempting a hostile takeover
* On September 7th, PPHM announced dosing of the first patient in a Phase II clinical trial evaluating the combination of bavituximab, temozolomide, and radiation therapy in patients with newly diagnosed glioblastoma.
On September 11th, PPHM announced Dr. Lias as the new President of AVID and member of the PPHM BOD
* On October 19 Bamforth is named and on the 24th Walsh is named to the BOD
* On November 11, the date of the ASM is announced
* On November 27th, PPHM and Ronin had entered into a Material Definitive Agreement that placed Ronin appointees on the BOD but also included a standstill provision.
* On December 26th PPHM announces Dr. Lias as President and CEO replacing Steven King who resigns with essentially all options vested but only 6 months to exercise (at the current PPS, ZERO options are in the money)
* On January 19th, at the ASM, Lias stated there was essentially no interest from BP in PPHM's Anti-PS technology.
* On February 12th, CDMO announces the sale/licensing of its anti-PS intellectual property to a company that was only formed on January 31st with very questionable standing/finances etc.

One can tell by reading the standstill provisions that the deal to sell the IP was at least agreed to in principle at that time, and that Ronin knew the details of the agreement. If he did not, I don't think there is any way he waves his rights to try and buy the IP or take legal action.

(ix) institute, solicit, assist or join, as a party, any litigation, arbitration or other proceeding against or involving the Company or any of its current or former directors or officers (including derivative actions), other than
(A) to enforce the provisions of this Agreement,
(B) counterclaims with respect to any proceeding initiated by, or on behalf of, the Company or its Affiliates against the Ronin Group, or
(C) the exercise of statutory appraisal rights; provided , that the foregoing shall not prevent any member of the Ronin Group from responding to or complying with a validly issued legal process;

(x) disclose any intention, plan or arrangement inconsistent with the foregoing;

(xi) instigate, encourage, join, act in concert with or assist (including, but not limited to, providing or assisting in any way in the obtaining of financing for, or acting as a joint or co-bidder for the Company or any of its subsidiaries with) any third party to do any of the foregoing;

(xii) take any action that could reasonably be expected to require the Company to make a public announcement regarding the possibility of any of the events described in this Section 2; or

(xiii) request that the Company or the Board or any of their respective representatives amend or waive any provision of this Section 2 (including this sentence) other than through non-public communications with the Company that would not be reasonably determined to trigger public disclosure obligations for any Party, which the Board (excluding the Ronin Appointees) may accept or reject in its sole discretion.

There can be no doubt that Ronin knew of the deal and likely knew the details of the deal prior to signing the agreement. There is no doubt Ronin, Ronin's and PPHM's BOD appointees knew of the deal the moment they signed on and signed their non disclosure agreements.

Based on the timeline and what we have for a deal, I imagine King believed in anti-PS targeting technology and traded lower upfront and milestone payments for a much higher royalty and future AVID business producing BAVI etc. Making and winning a claim that the BOD did not exercise their fiducial responsibilities will be impossible.

With regards to Oncologi, what makes sense is that exosome test is close enough to commercialization to generate revenue to make the $8M payments a good risk/return. The alternative is somehow the company has financial backing to continue development/testing.

FFTT

JBAIN