XTLbio RESCHEDULES AGM FOR JUNE 19th
20 Mayo 2003 - 2:01AM
UK Regulatory
XTLbio RESCHEDULES AGM FOR JUNE 19th
External directors address shareholders
Rehovot, Israel, 20 May 2003 - XTL Biopharmaceuticals Ltd. (XTLbio) announced
today the convening of its Annual General Meeting (AGM) at 9:00 am (Israel
time) on 19 June 2003. A circular concerning the upcoming AGM is being posted
to shareholders today and will be made available on the Company's website at
www.xtlbio.com. This document includes the following letter from the external
directors of XTLbio, which was written in response to the request from certain
shareholders to remove existing members of the Board and to appoint new members
of the Board.
Letter from XTLbio External Directors
To holders of ordinary shares in XTL Biopharmaceuticals Ltd ("XTLbio" or the
"Company") and, for information only, to participants in the Company's share
option schemes
Dear Shareholder,
On 8 May 2003, Puma Nominees Limited and Pershing Keen Nominees Limited wrote
to the Board "requisitioning" that certain resolutions be proposed to
shareholders at the Company's annual general meeting to "implement a new
strategy which will take strong action to ensure the preservation of as much
shareholder value as possible".
Your Board believes this is nothing more than an opportunistic attempt to take
control of the Company's assets and cash reserves by financiers who have only
one objective: to exploit their purchase of the Company's shares at low prices
and make a quick profit.
The requisitioners' resolutions state that each of the current Directors
(excluding Rusi K. Kathoke and Patricia A. Smith as the independent "External
Directors" of the Company) should not be re-appointed to the Board, that
certain new individuals should be appointed as Directors in their place and
that the articles of association of the Company should be amended to reduce the
minimum number of Directors on the Board from seven to five.
On 15 May 2003, the Company announced that it was cancelling the annual general
meeting that was to have been convened on 3 June 2003 and that a new annual
general meeting would be convened no later than 30 June 2003 incorporating the
resolutions proposed by the requisitioners.
This letter and the notice of annual general meeting which forms part of this
document give formal notice of the cancellation of the meeting on 3 June 2003
and the convening of a new annual general meeting on 19 June 2003 at 9.00 a.m.
(Israel Time) at The Hilton Hotel, Hayarkon St., Independence Park, Tel Aviv
63405, Israel. You should discard the circular sent to you on 1 May 2003 and
the form of proxy, which accompanied that circular.
Under Israeli Company Law, the External Directors have no pre-existing
relationship with the Company prior to their appointment and have a particular
responsibility to fully represent the best interests of all shareholders with
no conflicts of interest. Accordingly, this letter has been issued by the
External Directors. Given that all of the Directors other than the External
Directors are the subject of the resolution proposed by the requisitioners
stating that they should not be re-appointed, the recommendations to
shareholders contained in this letter relating to the appointment or
re-appointment of Directors and associated issuances of share options and the
approval of the extension of the contract of employment of the Chief Executive
Officer have only been considered by the External Directors.
Background to the requisition
On 9 December 2002, XTLbio announced that it was restructuring its activities
to focus the Company's resources on programmes, which the Board believes are
most likely to lead to the earlier creation of value. The Company's lead
products, HepeX(tm)-B for the treatment of hepatitis B and HepeX(tm)-C for the
treatment of hepatitis C, were re-targeted onto the liver transplant market
which has significant unmet clinical need and, in the case of hepatitis C, has
no existing competition.
The Board took this approach because it believes that by focusing on the liver
transplant market, it could commercialise these antibody based products more
quickly and at a lower cost than if they had remained targeted on the chronic
hepatitis market. The Company's focus on the chronic hepatitis C market was
maintained through a separate small molecule product - HepeX(tm)-C SM.
The restructuring was intended to ensure that the Company would have sufficient
cash resources until at least the beginning of 2005 without taking into account
the potential receipt of payments from licensing agreements or co-development
deals that might be secured by the Company.
Drug research and development is complex, expensive and, most of all, time
consuming whilst offering the potential for significant financial benefit if
successful. The question is whether XTLbio is on the right track and the Board
firmly believes that it is, having considered other options in detail.
Investors have become disenchanted with the biotech sector resulting in a
significant drop in share prices and the reduced availability of new money. The
Board is very conscious of the fall in the Company's share price. It knows that
the biotech sector is out of favour and that it will be difficult to raise new
money. That is precisely why it adopted its revised strategy.
The Board believes this strategy focuses on the programmes most likely to lead
to the earlier creation of value.
Issues raised by the requisitioners
In their letter the requisitioners have made a number of specific assertions
regarding the affairs of the Company. The Board entirely rejects the
requisitioners' analysis and believes that the course of action suggested by
the requisitioners would seriously damage shareholder value. The
requisitioners' main points are considered below.
The Company has made "limited progress" in advancing its treatments
The Board strongly believes that the Company is making good progress. XTLbio's
Hepatitis C liver transplant product (Hepex(tm)-C) is expected to complete phase 2
clinical trials within the next six months and the Company is in licensing
discussions with multinational pharmaceutical companies in relation to its
hepatitis B liver transplant product (HepeX(tm)-B). Positive clinical data from
the HepeX-C trial in the second half of this year could potentially lead to
co-development deals and the licensing of HepeX-B to a pharmaceutical company
would increase the realisable value of these products and lower XTLbio's cash
needs. Whilst not a guarantee of future success, data received from the earlier
phase 1 trials in both products showed excellent safety and good indications of
drug activity. Separately, the Company's chronic hepatitis C product (HepeX(tm)-C
SM) is expected to enter phase 1 clinical trials next year.
The Company has shifted its focus "from the larger chronic viral hepatitis
market to a much smaller market"
The markets that XTLbio is targeting are significant. The Board estimates that
the worldwide market for the treatment of viral hepatitis associated with liver
transplants is US$500 million. XTLbio is also maintaining its focus on the
chronic viral hepatitis C market which is estimated to be worth US$4 billion.
Your Board does not believe that any "upside" value has been lost by its
revised strategy and, indeed, this strategy is aimed to deliver earlier value
to the Company.
Losses increased last year despite the restructuring of the Company's
activities
Following the restructuring in December 2002 the Company reduced cash burn of
early stage programmes and headcount significantly. Your Board believes that
the Company's cash burn is well within the benchmark of other biotechnology
companies at similar stages of development. Some 80% of XTLbio's total spending
is now on clinical development. In any event, the effects of the restructuring
could not be reflected in last year's accounts on the basis that these changes
only came into force in December 2002, the final month of that financial year.
"Cash will be exhausted before any of XTLbio's therapies might begin to
generate meaningful revenues"
Your Board is wholly aware of the difficulties of raising new funds in the
biotech sector and of the need to preserve cash. This is why the Board
undertook the restructuring last December, giving XTLbio an additional year's
cash and focusing its efforts on programmes that can produce an early return.
As noted above, the Company's current resources are expected to last until 2005
without taking account of the possibility of receiving further funds through
licensing and/or co-development deals. Any such deals would increase the
realisable value of the Company's products and reduce XTLbio's cash needs.
"The only way of rescuing shareholder value is for urgent and significant
reductions in all expenditure to be implemented immediately and for XTL to seek
to conclude (so far as it is able) sale and/or licensing agreements for its
technology with other larger life sciences companies"
Your Board believes that it is over the next six to twelve months that the real
value of the Company's drugs in development will become apparent as the data
are delivered from the clinical trials. Your Board believes this upside will be
lost if the requisitioners are allowed to take control of the Company.
Your Board believes that the securing of maximum value of the Company's
intellectual property requires substantial knowledge of both that property and
the biotech sector. The Board proposed by the requisitioners does not appear to
have these skills.
In addition, any sale or licensing arrangement relating to the Company's
technology would not be so straightforward. The Board believes that an outright
sale of the intellectual property, will require the consent of Yeda Research
and Development Company Limited (the licensing arm of the Weizmann Institute
and the licensor of a key part of the Company's technology) and in addition,
the consent of the Office of the Israel Chief Scientist will be required. The
Board also believes that any cessation of the Company's technology development
activities may trigger a liability to repay certain grants from the office of
the Chief Scientist and certain contractual liabilities owed to Yeda.
Accordingly, the Board believes that the requisitioners' proposed strategy
carries very considerable uncertainty.
The Board's proposed amendments of the Company's articles of association and
the extension of the Chief Executive Officer's employment agreement are "not in
the best interests of the Company and its shareholders"
The Board has also been examining other strategies to introduce further funds
and build value for its shareholders. The Board's proposed amendments to the
Company's articles to remove pre-emption rights are intended to provide the
Company with the flexibility to ensure that all potential options are available
to the Company. In times of uncertain conditions in the financial markets, the
Board believes that this step is prudent and entirely in the best interest of
the Company and its shareholders. Furthermore, the External Directors believe
that the extension of the current employment agreement of the Chief Executive
Officer will assist the achievement of its revised strategy by maintaining
continuity of management. Accordingly, the External Directors are of the view
that it is in the best interests of the Company and its shareholders to extend
the employment agreement.
Details of the requisitioners
The Company has received the following information from the requisitioners in
relation to their holdings of shares in XTLbio.
* Pershing Keen Nominees Limited (Designation SHCLT) hold 12,600,000 ordinary
shares in the Company representing 11.25% of the existing issued share
capital of the Company. The Company understands that these shares are held
as custodian for Shore Capital Stockbrokers Limited.
* Puma Nominees Limited holds 6,212,339 ordinary shares in the Company
representing 5.55% of the existing issued share capital of the Company. The
Company understands that these shares are held on trust for Shore Capital
Stockbrokers Limited.
The requisitioners, a group of financiers led by London-based Shore Capital,
purchased a significant holding of shares within the last eleven weeks, when
the XTLbio share price was at its lowest historical levels (approximately 6p
per share). The requisitioners claim that they are "rescuing" you by
"preserving" shareholder value from the "residual interests of the Company".
They intend to accomplish this by first installing a new Board of Directors,
then selling or licensing out the Company's assets and obtaining access to its
cash reserves.
As noted above, your Board believes that the requisitioners are simply trying
to make an opportunistic attempt to take control of XTLbio's cash and assets to
make a quick profit. The Board does not believe the requisitioners have any
real interest in advancing the clinical progress made by the Company.
Directors proposed by the requisitioners
The first resolution proposed by requisitioners seeks the appointment of Dr.
Zvi Marom, Mr. Eli Pery, Professor Roni Aloni, Mr. Simon Jaffa and Mr. Adam
Teeger as Directors of the Company. From the limited background information
that has been provided to the Company, none of these individuals has any
experience in the development and marketing of pharmaceutical or therapeutic
products. Dr. Marom is the founder and Chief Executive of a telecommunications
company, Mr. Pery is a fund manager, Professor Aloni is a professor of botany
and Messrs. Jaffa and Teeger are both lawyers.
Based on the information provided to the Company, your Board does not believe
that the proposed Directors have the necessary sector experience and expertise
to maximise value from the Company's technology.
Position of External Directors and Sponsor
Should resolutions 3 to 9 be defeated (seeking the re-appointment of the other
existing Directors seeking re-appointment) and resolution 18 (seeking the
appointment of the Directors proposed by the requisitioners) be passed, the
External Directors (being Mr. Rusi Kathoke and Dr. Patricia Smith) have
indicated that they will consider resigning as Directors of the Company unless
their current concerns regarding the expertise and experience of the new Board
proposed by the requisitioners and the maintenance of effective operational
management of the Company are addressed.
WestLB Panmure Limited, the Company's financial adviser, sponsor and
stockbroker has informed the Board that it intends to resign from these roles
if resolutions 3 to 9 are defeated and resolution 18 is passed.
Details of your existing Board
In contrast to the Directors proposed by the requisitioners, your existing
Board has a broad combination of skills, including a wealth of pharmaceutical
industry experience and financial and management expertise, which positions it
very well to build on past successes and, crucially, to deliver real value from
the Company's unique assets to its shareholders.
Geoffrey Vernon, BPharm, PhD, MBA, ChDir
Non-executive Chairman
A former Executive Director of Rothschild Asset Management Limited, Dr. Vernon
was one of the first Directors in the UK to be admitted as a Chartered Director
at the Institute of Directors.
Martin Becker, PhD
President and Chief Executive Officer and Director
As former Vice President of Technology, Corporate Business Development at
Syntex, Dr. Becker concluded alliances with Agouron Pharmaceuticals, Chiron
Corp. and Gene Medicine, Inc.
Jonathan Burgin, CPA, MBA
Chief Financial Officer and Director
Mr. Burgin formerly served as Senior Manager at PricewaterhouseCoopers and as
Vice President of Finance at a leading investment bank in Israel.
Shlomo Dagan, PhD
Chief Scientific Officer and Director
Dr. Dagan formerly served as acting Scientific Director at ImClone Systems with
expertise in cytokine mutines and chimeric, single chain and humanised
antibodies.
Glenn Kazo, MSc
Chief Business Officer and Director
As a founder of Enzon, Inc., Mr. Kazo headed the steering committee between
Enzon and Schering-Plough responsible for the development of Pegylated
Interferon, currently the leading drug for treating hepatitis C with 2002 sales
exceeding US$1 billion.
Zvi Artstein, PhD
Non-executive Director
Dr. Artstein is a Director of the Board of Directors of Yeda, the technology
arm of the Weizmann Institute, which holds a good portion of the intellectual
property of XTLbio and other Israeli biotech companies.
Ehud Geller, PhD MBA
Non-executive Director
As former President and CEO of Interpharm (currently a division of Serono), Dr.
Geller was responsible for bringing that start-up company public on NASDAQ and
grew it to a market cap of US$380 million.
Elkan Gamzu, PhD
Non-executive Director
As former Vice President of Drug Development at Parke-Davis, Dr. Gamzu was
responsible for the clinical and regulatory development of the first drug for
the treatment of Alzheimer's Disease to be approved by the US Federal Drug
Administration (FDA).
Rusi K. Kathoke, FCA
Non-executive & External Director
As Chief Financial Officer of BTG plc, Mr. Kathoke was responsible for
negotiating BTG's employee and management buyout in 1992, for managing its
subsequent listing on the London Stock Exchange in 1995 and for BTG's rights
issue, which raised �122 million in 2000.
Patricia A. Smith, B Med Sci, BM BS, MRCP(UK) Dip Pharm Med
Non-executive & External Director
As former UK Marketing Director for Zeneca, Dr. Smith was responsible for
launching 11 products in three years, with annual sales of �125 million.
Annual General Meeting / Action to be taken
A notice convening the annual general meeting of the Company to be held at 9.00
a.m. (Israel Time) on 19 June 2003 at The Hilton Hotel, Hayarkon St.,
Independence Park, Tel Aviv 63405, Israel is set out at the end of this
document.
* Resolution 1 seeks to approve the receipt of the annual report and accounts
of the Company for the year ended 31 December 2002.
* Resolution 2 seeks to re-appoint the auditors of the Company.
* Resolutions 3 to 11 seek to re-appoint existing Directors to the Board - in
contrast to resolution 18 proposed by the requisitioners, each Director is
proposed in turn in accordance with good corporate governance and to enable
shareholders to consider each Director individually.
* Resolutions 12 to 15 seek to approve the grant of certain share options to
the Executive Directors of the Company incorporating specified performance
criteria.
* Resolution 16 seeks to extend the employment agreement of the Chief
Executive Officer.
* Resolution 17 seeks to amend the articles of association of the Company to
exclude the provisions relating to pre-emption rights and to provide a
general authority to the Board to issue shares of the Company so as to
provide the Company with greater flexibility to take advantage of
fund-raising opportunities should they prove necessary.
RESOLUTIONS 1 TO 17 ARE SUPPORTED BY THE BOARD
* Resolution 18 is proposed by the requisitioners and opposes the
re-appointment of each of the existing Directors of the Company (other than
the External Directors) and seeks the appointment of Mr. Eli Pery, Dr. Zvi
Marom, Mr. Simon Jaffa, Professor Roni Aloni and Mr. Adam Teeger as
Directors of the Company.
* Resolution 19 is proposed by the requisitioners and seeks to modify the
articles of association of the Company by reducing the minimum number of
Directors from seven to five. Your Board believes this change to be
unnecessary.
RESOLUTIONS 18 AND 19 ARE OPPOSED BY THE BOARD
Shareholders are urged to take the following course of action to ensure that
their views are represented at the meeting.
You will find enclosed a form of proxy for use at the Annual General Meeting.
Whether or not you intend to be present at the meeting, please complete and
return the form of proxy so as to reach the Company's registered office at
Building 3, Kiryat Weizmann Science Park, Rehovot, PO Box 370, Israel 76100 as
soon as possible and, in any event, so as to be received no later than 9.00
a.m. (Israel Time) on 17 June 2003. The Board of Directors has fixed 12 June
2003 as the "record date" for determining those shareholders entitled to
participate and vote at the Annual General Meeting.
THE FORM OF PROXY PREVIOUSLY SENT TO YOU IS NO LONGER VALID AND SHOULD NOT BE
USED
Completion and return of a form of proxy will not preclude shareholders from
attending and voting at the annual general meeting, should they so wish.
Recommendations
The Directors recommend that shareholders:
* VOTE IN FAVOUR of resolutions 1 and 2 (relating to the receipt of the
Company's audited financial statements for the year ended 31 December 2002
and the re-appointment of the auditors) and resolution 17 (relating to the
amendments to the articles of association of the Company to remove
pre-emption rights) which, in the opinion of the Directors, is in the best
interests of the shareholders as a whole; and
* VOTE AGAINST resolution 19 (relating to the proposed amendment to the
articles of association of the Company to reduce the minimum number of
Directors from seven to five)
as they intend to do in respect of their own beneficial holdings which amount,
in aggregate, to 1,015,360 shares representing approximately 0.91% of the
issued share capital of the Company.
The External Directors recommend shareholders to:
* VOTE FOR resolutions 3 to 16 relating to the re-appointment of the existing
Board Members seeking re-appointment, the issuance of options to the
Executive Directors and the extension of the employment agreement for the
Chief Executive Officer; and
* VOTE AGAINST resolution 18 being the resolution proposed by the
requisitioners seeking the appointment to the Board of the new Directors
suggested by them
as they intend to do in respect of their own beneficial holdings which amount,
in aggregate, to 15,000 shares representing approximately 0.01% of the issued
share capital of the Company.
Yours faithfully,
Rusi Kathoke
Patricia Smith
Contacts:
XTLbio
Dr. Martin Becker, President and CEO, Tel: +972-8-930-4440
Financial Dynamics
David Yates, Sarah MacLeod, Tel: +44 (0) 20 7831 3113
END