Shareholders raise concern over the fairness of the reverse merger and question potential conflicts of interest of OvaScience’s co-founder.
Nearly three months after it was announced OvaScience will be absorbed in a reverse merger with privately-held Millendo Therapeutics, Inc., a group of shareholders is attempting to block the deal when a vote is held this week.
A number of lawsuits have been filed against the companies that allege the deals are not fair to OvaScience shareholders, who will own about 20 percent of the combined companies if the deal goes through. The lawsuits allege that OvaScience has withheld information regarding some of the various bids it received for the company, the Boston Business Journal reported this morning. According to the report, OvaScience received 42 different bids from other companies interested in merging with the beleaguered Massachusetts-based OvaScience. The shareholders allege they received little information about these other bids, the Business Journal said, citing the lawsuits.
In particular, the shareholders who hope to stop this reverse merger have raised concerns over the role of OvaScience co-founder Richard Aldrich in the deal with Michigan-based Millendo. The Business Journal reported that Aldrich has connections to the privately-held Millendo through the venture capital firm, the Longwood Fund. Aldrich is a co-founder of that fund, which has invested in Millendo and is also helping finance the merger. Citing the lawsuits, the Business Journal said the Longwood Fun has pledged $30 million to the new combined company. The shareholder vote is scheduled for Tuesday.
In a federal filing with the U.S. Securities and Exchange Commission, OvaScience said that Aldrich has disclosed his relationship with the fund and has recused himself from the merger discussion with the company’s board of directors. In the filing, OvaScience said Aldrich is not involved with negotiating the financial aid provided by the Longwood Fun, the Business Journal reported.
OvaScience began looking at potential deals after a series of setbacks rocked the company. It began in December 2016, when the company’s chief executive officer resigned and about 30 percent of employees were let go. That happened as the company struggled to sell its fertility treatment products in the United States. More trouble occurred in 2017. In June, OvaScience slashed about 50 percent of its remaining employees as part of a restructuring plan. Then in January of this year, it happened again. OvaScience cut 50 percent of its staff as part of yet another restructuring.
If the deal goes through, the merged companies will operate under the name Millendo Therapeutics and will be traded on the Nasdaq exchange under the ticker symbol MLND. The new Millendo will focus on the advancement of Millendo’s pipeline of transformative treatments for orphan endocrine diseases.
An updated merger agreement announced last month showed that an investor syndicate that includes New Enterprise Associates, Frazier Healthcare Partners, Great Point Partners and Roche Venture Fund will invest approximately $50 million in the combined company. The financing will fund the development of Millendo’s lead assets, livoletide (AZP-531), an unacylated ghrelin analog being developed for the treatment of Prader-Willi syndrome, and nevanimibe (ATR-101), an ACAT1 inhibitor for the treatment of two orphan adrenal diseases: classic congenital adrenal hyperplasia (CAH) and endogenous Cushing’s Syndrome.
As of this morning, there have been no injunctions to block the vote from happening tomorrow. If the shareholders approve the reverse merger, the Business Journal said some of the shareholders will ask the court to overturn the merger or seek damages as the merger moves ahead.
