FBRX – Multiple Activist Campaigns – 30% Upside
NEW QUICK PITCHES
Forte Biosciences – Multiple Activist Campaigns – 30% Upside
A pretty unusual activist campaign situation. Not often one can find 4 outraged activists who together hold 37% of shares and are pushing for shareholder value creation/liquidation. Management here is clearly self-interested and a poison pill is in place. However, it will be interesting to see how the situation develops and whether the activists with such a massive stake will be able to push for a change.
FBRX is a preclinical-stage $29m market cap biopharma that focuses on inflammatory skin diseases. The company trades at at $1.3/share vs $1.77/share net cash (cash-total liabilities) – 36% potential upside. In May’22, FBRX abandoned most of its drug developments and announced that it will focus solely on the company’s lead FB-102 treatment, with clinical-stage expected to be reached in H2’23. Since then, four activists have acquired a 37% stake and have been pushing the company to liquidate, arguing that the new drug was just an excuse to siphon away resources. Recently, however, FBRX management adopted a poison pill and despite sufficient capital resources for at least another 2 years issued 6.8m shares (46% dilution) at an average price of $1.42/share vs $2.60/share in net cash before the offerings. This sparked further outrage from the activists who are now demanding for a special committee to rectify dilutive capital raise by formulating a plan to return capital to shareholders.
Two activists – Camac Fund and Funicular Fund – have experience with biopharma industry. Funicular Fund is also present in another similar situation that was covered on SSI Weekly a few months ago – ABIO. There it managed to pressure the board to start a strategic review and received a board seat. Another activist Camac Fund has been involved with Pasithea Therapeutics – the situation seems rather similar to FBRX. Camac has recently started to collect consents in an effort to call a special shareholder meeting, seeking to appoint its nominees to the board of Pasithea Therapeutics. The same might be expected with FBRX.
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