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THE INVESTOR
December 08, 2019
Big Reunion

Stocks & Bonds

Alpha Holdings’ US expansion hits snag as OncoSec proxy fight looms

  • PUBLISHED :December 03, 2019 - 16:12
  • UPDATED :December 04, 2019 - 09:24
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US-based cancer immunotheraphy developer OncoSec is fighting tooth-and-nail to go through with its proposed takeover by a Chinese entity that its South Korean stakeholder Alpha Holdings is allegedly trying to sabotage.

On Dec. 2, OncoSec sent a letter to shareholders slamming Alpha for misleading shareholders and falsifying claims. Alpha is a semiconductor-to-biotechnology business group that owns 15 percent stake in OncoSec. 

Related:
Alpha Holdings becomes largest shareholder of OncoSec Medical


The Nasdaq-listed OncoSec is looking to raise $30 million cash by selling a controlling stake at market price plus a 25 percent premium. As a result of the transaction, a 53 percent stake would fall into the hands of China Grand Pharmaceutical and Healthcare Holdings’ subsidiary Grand Decade Developments and its affiliate Sirtex Medical US Holdings.

‘While we believe this transaction clearly is the best outcome for all shareholders, Alpha has been making false and misleading statements to try to get you to vote against the transaction -- which we believe would put your investment and the company at risk,” OncoSec wrote in the letter.

OncoSec argued that Alpha was wrong to say that the transaction would give the proposed Chinese firm control of OncoSec’s board. The Korean company also falsified claims that China Grand would be able to exercise the option to offer to acquire OncoSec’s remaining outstanding shares -- at roughly 110 percent of the closing price -- because the option can be freely rejected by the board, it said.

Moreover, OncoSec said it faithfully took options for maximizing its value with financial advisory firms, unlike Alpha's claim.

The struggle between the two parties began with OncoSec’s need of cash.

Alpha argued that OncoSec can receive additional financing “without giving up control, particularly if clinical trials continue to go well,” by the third quarter next year. But OncoSec called it “gambling with the money of our shareholders,” given its cash burn rate at $2.5 million per month.

As this means the $25 million cash ammunition it had as of end-July would dry up in 10 months, OncoSec sought to raise $10 million immediately, but discovered that $8 million is the maximum amount it could generate by selling all shares.

“Even if we sold every share available to us today, including warrants and discounts that would be inevitable, we won’t have enough capital to get us through the end of the third quarter of 2020, as Alpha falsely suggests,” OncoSec said.

Alpha said in November it intends to solicit proxies for shareholders to oppose the proposed takeover. A hearing for a preliminary injunction blocking a shareholder vote will be held prior to the special shareholder meeting, as it sued OncoSec for breaching fiduciary duties in October. OncoSec will hold a special shareholders meeting to discuss the takeover and related issues on Jan. 17, 2020.

Since September 2018, Alpha has issued 52 statements to its shareholders, and 38 were about OncoSec.

By Son Ji-hyoung (consnow@heraldcorp.com)

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