Essa Pharma is facing a call to wind down operations. Soleus Capital Management, one of the company’s largest shareholders, put the proposal to Essa’s board of directors after concluding that the best option is to return cash to investors.
The biotech ran into difficulties late last year, when prostate cancer data drove its management to stop a phase 2 study and start considering strategic alternatives. Essa confirmed it was still weighing its options in February without providing an update on its progress or a timeline for reaching a decision. The lack of progress prompted Soleus Chief Investment Officer Guy Levy to write to Essa’s board.
Levy said Soleus supported Essa’s decision to halt clinical studies and pursue strategic alternatives. But the “deterioration of the macroeconomic environment” over the past three months “has placed an even greater premium on cash and liquidity for investors,” Levy said. Soleus wants to cash out.
“The company’s share price, currently around $1.60, is significantly below its roughly $2.40 of cash per share,” Levy said. “While we support management’s thoughtful evaluation of various strategic paths, we now believe it is in shareholders’ best interest for the company to wind down operations and return remaining cash to shareholders, and we urge you to take action to do so.”
The call reflects a belief that, for investors, the best thing Essa can do with the $120.6 million it had at the end of last year is throw in the towel and hand whatever cash is left to shareholders. Other biotechs are in similar positions. Yesterday, the share price of Mural Oncology skyrocketed more than 100% when it gave up on its only clinical asset and began looking for strategic alternatives.
Soleus owned 9.7% of Essa as of Jan. 8, making it the biotech’s joint second-largest shareholder. BVF Partners topped the list, and Soleus was tied with Tang Capital Management, an investment firm that has built a business buying and liquidating troubled biotechs. A financial filing published April 15 put Soleus’ stake at 5.1%.
Shares in Essa rose 12% to $1.82 in premarket trading Wednesday from a Tuesday closing price of $1.63. Fierce Biotech has reached out to Essa for comment.