Two shareholders in Sesen Bio said Tuesday they remain opposed to a planned merger of the troubled biotechnology company and cancer drug startup Carisma Therapeutics, proposing the agreement be terminated instead.
In a statement, investors Bradley Radoff and Michael Torok, who with their affiliates hold a collective 8.4% stake in Sesen, said the company “has placed an absurdly high value on Carisma despite the fact that valuations across the early-stage biotech sector have been resetting.”
The deal, announced in September, would give Philadelphia-based Carisma a path to public markets through a reverse merger with Sesen, based in Cambridge, Mass. Under the original agreement, Carisma shareholders would own about 58% of the combined company, with Sesen stockholders controlling the remainder.
Sesen shares climbed 20% last week after the company announced it would increase its one-time cash dividend payout to investors to $70 million, or roughly $0.34 per share. In their statement, Radoff and Torok said they want to see that payout increased to $100 million, and for Sesen to obtain a new “fairness opinion” on Carisma’s valuation.
“To date, despite the [board of directors] squandering a massive amount of capital on external advisors, there has been a concerning level of resistance to obtaining an updated fairness opinion and ensuring stockholders have the most current information to inform their voting decision,” the duo said.
Radoff and Torok declined to comment.
In a statement Wednesday morning, Sesen rebutted the investors’ claims, saying “the pending merger with Carisma delivers significant and immediate value to stockholders.”
“The pending merger with Carisma provides immediate cash value for Sesen Bio stockholders and additional upside through ownership in the combined company,” the company said, “which the Company believes is far superior to the risk, uncertainty and prolonged timeline associated with other potential strategic alternatives, including a dissolution and liquidation of Sesen Bio.”
Alone, the two shareholders don’t have enough votes to scuttle the merger. But their dissatisfaction reflects the tumbling valuations of biotech companies over the course of 2022. Radoff and Torok note, for instance, that the market values of companies cited in the original fairness opinion on Carisma’s value have declined in value by between 30% to 60% since the deal was announced.
Sesen said the group of investors “seems to deliberately ignore” the changes to the merger agreement, and described the exchange ratio for shares in the newly created company as “fair, from a financial point of view, to [Sesen Bio].”
Formerly known as Eleven Biotherapeutics, Sesen has faced financial difficulty before. Its shares peaked in 2014 at more than $17 apiece, but dove in 2015 when its lead eye drug candidate failed in a Phase 3 trial.
Its stock further declined in 2021 when the Food and Drug Administration rejected its lead candidate, Vicineum, as a bladder cancer treatment.
Should the merger go through, the new company will operate under Carisma’s name and develop its portfolio of cancer cell therapies, which are led by a treatment in early clinical testing for solid tumors.