A deal to bring back former CEO Robert Foster, Ph.D., didn’t completely quell investors’ concerns about Aurinia Pharmaceuticals.
An activist investor who owns 2.2% of Aurinia’s shares is calling for board and leadership changes at the Canadian biotech. The challenge comes after four of the nine Aurinia board directors—including CEO Peter Greenleaf—and the company’s proposed pay packages for its executives failed to win majority shareholder support during its annual meeting on June 14.
In a statement Tuesday, the activist investor, Lucien Selce, lashed out at Aurinia’s “unchecked spending, ineffective leadership, and a clear lack of strategic direction.”
With his new demand, Selce is trying to stage a similar investor activism movement at Aurinia last year that pushed out the company’s former chairman George Milne. Selce is demanding the immediate removal of Foster and Greenleaf from the board, the addition of two more members and a reduction in the board’s size.
He also called for an extraordinary general meeting to resolve concerns over Aurinia’s commercial and R&D performances and to “execute necessary leadership changes.”
This isn’t the first time that Selce attempted to shake up Aurinia’s organization. Back in early June, Selce threw various speculative allegations against Greenleaf and proposed an unnamed investment bank that’s “very active in the biotech space” to implement a new strategy at Aurinia, as well as an unnamed, “highly performing team, who successfully developed and sold a mid-sized biotech company” to supplant Greenleaf.
Aurinia immediately fought back at the time, calling out Selce’s lack of transparency and past charges of money laundering and insider trading.
“The company has serious doubts about whether he can be trusted to ethically serve shareholder interests and drive long-term value creation,” Aurinia said in a statement on June 4.
But perhaps Selce’s accusations sowed seeds of doubts, or disapprovals from powerful proxy advisory firms on the executive pay plan made an impact, the majority of shareholders withheld their votes for four of Aurinia’s board members and executive compensation in a showing of disagreement, a securities filing shows.
As required by Aurinia’s policy, the four board members, including Geenleaf, submitted their conditional resignations as directors. The board has 90 days to decide on the resignations. But Selce is now demanding three board members—including Foster, whose directorship won majority support by 51.4% during the annual meeting—to be removed immediately.
Foster was brought back to Aurinia in September 2023 as part of a deal with activist investor MKT Capital, which successfully removed the company’s former chairman Milne and director Joseph Hagan. Two other new board additions from that time, Karen Smith, M.D., Ph.D., and Jeffrey Bailey, both received majority shareholder support during Aurinia’s annual meeting in June.
Before the meeting, the two proxy advisory firms, ISS—according to Selce—and Glass Lewis, both urged investors not to support the Aurinia board’s proposed exec compensation. As Glass Lewis noted in its proxy report in May, Aurinia’s exec compensation proposal for 2022 only received 38% support during the 2023 annual meeting, when the advisory firm considered an approval rate below 80% “a meaningful level of shareholder concern.”
This year, Aurinia still only received 40% of support, as Glass Lewis in its May report labeled the new package “insufficient response to shareholder dissent.” The proxy adviser argued the company’s short-term incentive awards are “largely discretionary,” and the long-term awards are too light on performance and lack sufficient disclosure of goals.
The shareholder say-on-pay vote is non-binding.
Aurinia did not immediately reply to Fierce Pharma’s request for comments on the annual meeting vote results or Selce’s new proposals. Representatives from MKT Capital, the protagonist in last year’s investor activism, didn’t respond to Fierce’s inquiry by publication time.
The latest pressure from investors come at a turbulent time for Aurinia, which recently failed to find a buyer during a strategic review. As a result, Aurinia in February unveiled a plan to lay off 25% of the company’s workforce and to discontinue further development of its drug candidates AUR200 and AUR300.
But the company recently decided to revive AUR200, an APRIL/BAFF inhibitor, for autoimmune disease, and is now moving the drug into the clinic.
On the commercial side, Aurinia in the second quarter recorded $57.2 million in revenue thanks to its lupus nephritis therapy Lupkynis.