Sernova Responds to Dissident Shareholders’ Misleading Statements and Provides Corporate Updates

Rhea-AI Summary

Sernova Corp. addressed misleading claims from dissident shareholders regarding its board renewal process and proxy battle. The company asserts that its management has positioned Sernova for value creation, evidenced by a 17% year-to-date share price increase, outperforming the 8% decline in the Nasdaq XBI biotech index. Despite challenges in the biotech sector, Sernova's clinical trial advancements and technology partnerships, specifically with Evotec SE, are poised to enhance shareholder value. Upcoming milestones include clinical trial updates for type-1 diabetes and a hypothyroid disease program. Sernova ended Q1 2023 with cash resources of $45.6 million, providing a solid financial foundation for ongoing and future projects.

Positive

• Year-to-date share price up 17%, outperforming Nasdaq XBI biotech index which declined by 8%.
• Strong cash resources of $45.6 million as of Q1 2023, supporting ongoing projects.
• Upcoming milestones in clinical trials for type-1 diabetes and hypothyroid disease, enhancing growth potential.
• Strategic partnership with Evotec SE to advance cell therapy technologies.

Negative

• Proxy battle with dissident shareholders may distract from management's focus on business development.
• Shareholder opposition to the revised compensation plan due to miscommunications about stock options.

• The dissident director nominees declined to follow proper protocol to participate in Sernova’s board renewal process and instead are imposing themselves on the Company through a costly and disruptive proxy battle
• Management and the Board have placed Sernova in a position to bring value to shareholders and in a challenging time for companies in the biotech sector, Sernova’s share price is up 17% year-to-date compared to an 8% decline in the benchmark Nasdaq XBI biotech index over the same period
• Shareholders who have questions or need assistance with voting their shares should contact Sernova’s proxy solicitation agent, Laurel Hill Advisory Group by telephone at 1-877-452-7184 or by email at assistance@laurelhill.com
  

LONDON, Ontario, April 06, 2023 (GLOBE NEWSWIRE) -- Sernova Corp. (“Sernova” or the “Company”) (TSX:SVA) (OTCQB: SEOVF) (FSE/XETRA:PSH), a clinical-stage company and leader in cell therapeutics, today responds to misleading statements made in a press release from a group of dissident shareholders. Additionally, Sernova is pleased to highlight select upcoming milestones for the remainder of 2023 and into 2024 and provides an update on key achievements and events since the Company’s last annual general meeting (AGM) in 2022.

BACKGROUND TO DISSIDENT ACTIONS AND BOARD RENEWAL PROCESS

Leading up to the Company’s 2023 annual meeting of shareholders and pursuant to Sernova’s Advance Notice By-law, the Company received two nominations for the position of director to Sernova’s board of directors (the “Board”) from the dissident shareholders. A third candidate also expressed interest in joining Sernova’s board of directors. With three candidates to consider for a single board seat, the board’s Nominating and Governance Committee (the “NGC”) invited all three candidates to participate in a formal review and rigorous evaluation process, including presentation of their respective credentials and expertise to the board. Following good corporate governance practices, Sernova’s NGC evaluates candidates against formalized criteria and a skills matrix that align with the Company’s current, and more importantly, future needs to ensure the best candidates are selected as nominees for election to the board.

The Dissident Shareholders’ claim that the board did not meaningfully engage is simply untrue

• Only one candidate, Mr. Brett Whalen, chose to participate in the formal process. After rigorous evaluation, vetting and determination that his background and experience would be beneficial to the future direction of the Company, Mr. Brett Whalen was selected for nomination for election to the board at Sernova’s 2023 annual meeting of shareholders.
• The two individuals nominated by the dissident shareholder group elected not to participate in the interview process nor did they meet with Sernova’s board. Instead, they have chosen to go the route of a costly and distracting proxy battle.

The Dissident Shareholders are opposing the revised / amended compensation plan based on their claim that management unilaterally decreased their price from $1.30 to $0.91, which is simply untrue

• No outstanding stock options have been repriced by the Company nor is there any intention.
• The pricing of any future stock options granted by the Company would be in compliance with the policies of the TSX.

The current board members are well positioned to build on the progress the Company has made to date and take Sernova to its next stage of development as outlined under the Corporate Updates below.

CORPORATE UPDATES

Sernova’s board and management team are committed to creating value for the Company’s shareholders through delivering results from clinical trials, driving preclinical programs, expanding the Company’s Cell Pouch System technology platform to additional indications, and evolving industry relationships for potential future partnership opportunities to create long term shareholder value. The Company is providing the following updates to keep shareholders abreast of developments and work that will create value for shareholders.

BIOTECH INDUSTRY PERFORMANCE AND SERNOVA SHARE PRICE

After a record-breaking year in 2021, 2022 was one of the most challenging years for the general healthcare and biotech industries in capital markets history. Similar to that experienced by peer companies and healthcare related industries as a whole, Sernova’s share price was negatively impacted with investors reallocating capital to other market sectors. Despite the ongoing difficult markets, Sernova has made encouraging progress in 2023 as reflected in its share performance being up 17% year-to-date (as of April 3, 2023) compared to an 8% decline in the Nasdaq XBI biotech index over the same period. The 25% relative advance of Sernova’s share price compared to this benchmark index recognizes the sound fundamentals and progress as the Company continues to deliver results from the clinic and evolve preclinical programs and key technologies to create long term shareholder value.

UPCOMING EVENTS AND PROGRAM MILESTONES

• On April 24, 2023, the Company’s global iPSC strategic partner, Evotec SE (Evotec), will showcase the first data on the use of its iPSC pancreatic islet-like clusters in Sernova’s Cell Pouch™ in a podium presentation at the IPITA / HSCI / JDRF Summit. The peer reviewed abstract is entitled: “Manufacturing of Optimized Human Islet-like Clusters (ILCs) from iPSCs and Functional Testing of an ILC + Cell Pouch Combination In Vivo.”
• On June 24, 2023, the research team of Dr. Piotr Witkowski, primary investigator for the Company’s ongoing Phase 1/2 clinical trial for type-1 diabetes (T1D), will deliver an oral presentation at the American Diabetes Association (ADA) 83^rd Scientific Sessions, providing an update on interim results from patients enrolled and treated in the ongoing study. The peer reviewed abstract is entitled: “Islet Allotransplantation into Prevascularized Sernova Cell Pouch – Early Results from the University of Chicago.”
• During 2023 H2, Sernova anticipates providing the first interim data for the recently initiated second cohort of patients for its ongoing Phase 1/2 T1D clinical trial using the dose-optimized higher capacity 10-channel Cell Pouch.
• In 2024, Sernova plans to initiate a Phase 1/2 clinical trial for T1D with Evotec’s iPSC islet-like cluster technology in Sernova’s Cell Pouch.
• In 2024, Sernova plans on initiating a Phase 1/2 clinical trial for treatment of hypothyroid disease following complete thyroidectomy and transplanting a patient’s own healthy thyroid tissue into the Sernova Cell Pouch.
  

SELECT HIGHLIGHTS SINCE SERNOVA’S 2022 AGM

Advances in Sernova’s U.S. Phase 1/2 clinical trial for the treatment of T1D and hypoglycemia unawareness (the “Phase 1/2 T1D Study”)

• November 2022 – Completion of enrollment for the first cohort of patients.
• November 2022 – Regulatory clearance received to proceed to enroll a second patient cohort (of up to seven patients) with the dose optimized higher capacity 10-channel Cell Pouch.
• January 2023 – The first two patients in the second cohort were enrolled and implanted with the dose optimized 10-channel Cell Pouch.
• March 2023 – The second cohort’s third patient was enrolled and implanted with the dose optimized 10-channel Cell Pouch and initial islet transplantation completed for the first two patients.

May 2022 – Sernova signed a landmark iPSC stem cell technology deal with Evotec

• Sernova and Evotec entered an exclusive global strategic partnership to develop a best-in-class iPSC stem cell-derived technology to provide a commercially viable supply of islet clusters for patients living with insulin-dependent diabetes.
• Sernova has option exercise rights for an exclusive global license up to and upon filing of an IND.
• Evotec will contribute its cell manufacturing capabilities through research, development and product commercialization and may also jointly fund future clinical development. Upon commercialization, royalties will be payable by Sernova to Evotec with the royalty rate dependent on Evotec’s participation in funding of the clinical development program.
• Evotec made a strategic investment into Sernova with an initial 6% equity stake.

June 2022 - Sernova common shares up-listed to the Toronto Stock Exchange (TSX)

• Transition from the TSX Venture Exchange to the TSX was part of the Company’s capital markets strategy to pursue more senior exchange listings, at the appropriate time, to access a broader base of investors and position the Company more favourably for institutional investment.
• This transition also further favourably readies the Company to leverage the unique advantages of the Multijurisdictional Disclosure System (“MJDS”) available to qualifying Canadian companies for a potential future senior U.S. exchange listing. A senior U.S. exchange listing would be contingent on further improvement to the challenging capital markets for healthcare companies.

June 2022 – Dr. Piotr Witkowski presented positive interim Phase 1/2 clinical data in an oral podium presentation at the American Diabetes Association 82^nd Scientific Sessions

• The first three transplanted patients presented positive serum C-peptide values confirming active insulin production after islet transplantation into the Cell Pouch System.
• All patients who had favorable immunosuppression achieved complete insulin independence with normal HbA1c measurements of 5.0, 5.2 and 5.2%.

January 2023 – Hypothyroid program proof-of-concept confirmed and advancements announced

• A pre-clinical study confirmed proof-of-concept for the thyroid indication – the third indication for the Company’s Cell Pouch System™ - demonstrating that thyroid auto-transplantation in the Cell Pouch can compensate for removal of the thyroid gland (total thyroidectomy), restoring normal thyroid hormone production.
• Sernova has engaged with regulatory authorities towards initiating clinical development of a prospective therapy for hypothyroidism.

FINANCIAL AND CASH RESOURCES UPDATE

• Sernova ended Q1 2023 with a strong balance sheet including cash resources of $45.6 million.
• Since the April 2022 AGM:
  • Proceeds of $8 million were raised from the full exercise of the remaining outstanding 2019 and 2020 private placement common share purchase warrants.
  • The Company completed a private placement with strategic partner Evotec resulting in a total equity investment of $27 million.

VOTE TODAY USING ONLY MANAGEMENT’S PROXY

Shareholders are encouraged to read Sernova’s 2023 AGM Management Information Circular available on the Company’s website at www.sernova.com/investor/agm. The best path forward is for shareholders to vote for management’s slate of directors and the resolutions contained within.

YOUR VOTE HAS NEVER BEEN MORE IMPORTANT. VOTE YOUR SHARES FOR SERNOVA’S NOMINEES USING ONLY MANAGEMENT’S PROXY AS SOON AS POSSIBLE, REGARDLESS OF THE NUMBER OF SHARES YOU OWN

The deadline for voting your shares is at 10:00 a.m. Pacific Time on Tuesday April 25, 2023.

SHAREHOLDER QUESTIONS

Sernova shareholders who have any questions or require assistance with voting may contact Sernova’s proxy solicitation agent and shareholder communications advisor:

Laurel Hill Advisory Group
Toll Free: 1-877-452-7184 (for shareholders in North America)
International: +1 416-304-0211 (for shareholders outside Canada and the US)
By email: assistance@laurelhill.com

ABOUT SERNOVA CORP. AND THE CELL POUCH SYSTEM PLATFORM FOR CELL THERAPY

Sernova Corp. is a clinical-stage biotechnology company that is developing therapeutic cell technologies for chronic diseases, including insulin-dependent diabetes, thyroid disease, and blood disorders that include hemophilia A. Sernova is currently focused on developing a ‘functional cure’ for insulin-dependent diabetes with its lead asset, the Cell Pouch System, a novel implantable and scalable medical device with immune protected therapeutic cells. On implantation, the Cell Pouch forms a natural vascularized tissue environment in the body for long-term survival and function of therapeutic cells that release essential factors that are absent or deficient in the bodies of patients with certain chronic diseases. Sernova’s Cell Pouch System has demonstrated its potential to be a ‘functional cure’ for people with T1D in an ongoing Phase 1/2 clinical study at the University of Chicago. Sernova is also advancing a proprietary technology in collaboration with the University of Miami to shield therapeutic cells from immune system attack with the goal to eliminate the need for chronic, systemic immunosuppression. In May 2022, Sernova and Evotec entered into a global strategic partnership to develop an implantable off-the-shelf iPSC (induced pluripotent stem cells) based islet replacement therapy. This partnership provides Sernova a potentially unlimited supply of insulin-producing cells to treat millions of patients with insulin-dependent diabetes (type 1 and type 2). Sernova continues to progress two additional development programs that utilize its Cell Pouch System: a cell therapy for hypothyroid disease resulting from thyroid gland removal and an ex vivo lentiviral factor VIII gene therapy for hemophilia A.

FOR FURTHER INFORMATION, PLEASE CONTACT:

Corporate	Investors	Media
Christopher Barnes VP, Investor Relations Sernova Corp. christopher.barnes@sernova.com Tel: 519-902-7923 www.sernova.com	Corey Davis, Ph.D. LifeSci Advisors, LLC cdavis@lifesciadvisors.com Tel: 212-915-2577	Elizabeth Miller, M.D. LifeSci Communications emiller@lifescicomms.com Tel: 646-791-9705

FORWARD-LOOKING INFORMATION

This release contains statements that, to the extent they are not recitations of historical facts, may constitute “forward-looking statements” that involve various risks, uncertainties, and assumptions, including, without limitation, statements regarding the prospects, plans, and objectives of the company. Wherever possible, but not always, words such as "expects", "plans", "anticipates", "believes", "intends", "estimates", "projects", "potential for" and similar expressions, or that events or conditions "will", "would", "may", "could" or "should" occur are used to identify forward-looking statements. These statements reflect management’s beliefs with respect to future events and are based on information currently available to management on the date such statements were made. Many factors could cause Sernova’s actual results, performances or achievements to not be as anticipated, estimated or intended or to differ materially from those expressed or implied by the forward-looking statements contained in this news release. Such factors could include, but are not limited to, the company’s ability to secure additional financing and licensing arrangements on reasonable terms, or at all; ability to conduct all required preclinical and clinical studies for the company’s Cell Pouch System and or related technologies, including the timing and results of those trials; ability to obtain all necessary regulatory approvals, or on a timely basis; ability to in-license additional complementary technologies; ability to execute its business strategy and successfully compete in the market; and the inherent risks associated with the development of biotechnology combination products generally. Many of the factors are beyond our control, including those caused by, related to, or impacted by the novel coronavirus pandemic. Investors should consult the company’s quarterly and annual filings available on www.sedar.com for additional information on risks and uncertainties relating to the forward-looking statements. Sernova expressly disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. 

FAQ

What recent updates has Sernova Corp (SEOVF) provided regarding their shareholder meeting?

Sernova Corp responded to claims from dissident shareholders and highlighted a 17% year-to-date share price increase, strategic advancements in clinical trials, and upcoming milestones.

How has Sernova Corp's stock performed compared to other biotech companies in 2023?

Sernova's stock has risen 17% year-to-date, contrasting with an 8% decline in the Nasdaq XBI biotech index, indicating strong relative performance.

What financial position does Sernova Corp (SEOVF) hold as of Q1 2023?

Sernova ended Q1 2023 with cash resources of $45.6 million, providing a solid foundation for ongoing projects.

What are the upcoming milestones for Sernova Corp regarding their clinical trials?

Sernova plans to present interim results for its type-1 diabetes trial at the American Diabetes Association conference and to initiate a hypothyroid disease clinical trial in 2024.