Regenerative medicine startup Sernova has received support from proxy adviser Institutional Shareholders Services (ISS) in its ongoing dispute with activist investors who have accused it of “sluggish progress” in developing a therapeutic implant. ISS said the dissident shareholders had failed to provide detailed reasoning for their stance and recommended that shareholders vote for all director nominees put forward by Sernova’s management. The activist investors were attempting to secure two board seats. Sernova’s share price has fallen by over 45% in the past year but was up 5% at the start of the week. Voting on the board members closes on 25 April.

ISS is one of two companies that dominate the US proxy advisory market. In 2014, research from George Mason University estimated that it and Glass Lewis controlled 97% of the sector. Large investors pay advisers for voting recommendations to help them make thousands of decisions during proxy season.

Sernova rejected the allegations of the activist investors in a statement earlier this month. ISS supported this stance, stating that the activists’ “arguments do not provide context in support of its claims, and the proposed solution does not include a reasoned basis for how it could lead to a superior outcome”. The advisory company added that the group’s “broad-based allegations with respect to company communication look dubious” given that Sernova reports interim data or study progress updates to shareholders multiple times each year. ISS also noted that the firm’s “ability to secure relevant industry partnerships, as evidenced by its agreement secured with Evotec during 2022, seems difficult to call into question.”

Risking “an additional near-term impact at the management level which diverges from a status quo that does not seem unreasonable”, shareholders are advised to vote for the management proxy card for the eight management nominees, according to ISS. The firm observed that the activist investors were targeting “two of the more tenured and experienced board members.”

Sernova has developed a device which automates the measurement of insulin dosage for diabetics, and the Company has described its long-term aim as being to create “a real-time, continuous, fully-automated diabetes management system that releases insulin based on parameters including glucose level, carbohydrate intake and daily rhythms”. Its preclinical diabetes cell replacement therapy combines medical devices and novel cell technologies to create a platform aimed at overcoming damage associated with insulin-dependent diabetes.

ISS’ recommendation followed a similar announcement from advisory firm Glass Lewis, which said the activists had not provided “a clear, coherent narrative” on the reasons behind their call for change. Glass Lewis added that the dissidents’ criticisms of Sernova were based on “inconsistent metrics” and a lack of “meaningful comparisons”.

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By Rachel Chen

Rachel Chen is an investigative journalist with a passion for uncovering corruption and wrongdoing. Her fearless reporting has led to several high-profile exposés and has earned her numerous awards and accolades.

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