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Novelion Rises 50% After Activist Investor Demands Exploration Of Strategic Alternatives

Novelion Rises 50% After Activist Investor Demands Exploration Of Strategic Alternatives

Novelion Therapeutics Inc (NASDAQ: NVLN) shares were rallying Tuesday on news of activist involvement.

What Happened

Novelion revealed through an amendment to a SEC 13-D filing that biotech-focused venture capital firm Healthcare Value Capital sent a letter to Novelion's board urging the exploration of strategic alternatives.

The VC firm has a 9.5-percent stake in Novelion.

In the letter signed by Joseph Riccardo, managing member at Healthcare Value Capital, the firm accused Novelion of allowing costs to spiral out of control.

For the first nine months of 2018, Novelion's SG&A and R&D expenses ate 73 percent and 35 percent of revenue, respectively, as opposed to the industry average of 20-30 percent and 10-20 percent, according to Healthcare Venture Capital. 

Novelion was also blamed with for delaying efforts to normalize its unsustainable cost structure and appointing its general counsel as CEO. 

"We would welcome the opportunity to meet with you and management to discuss our thoughts on an immediate program to decisively and permanently normalize costs as well as the relative merits, timing and terms for the strategic alternatives available to Novelion," Healthcare Venture Capital's letter said. 

Why It's Important

Apart from its core issues, Novelion's purchase of Aegerion in November 2016 has also made matters worse, as the latter's Juxtapid for high cholesterol in people with a rare genetic disease was marketed to those patients without the condition.

The company was forced to pay over $40 million to settle litigation brought forward by the Department of Justice and SEC. 

Since merging with Aegerion, Novelion has realized more than $135 million of cumulative cash operating losses, Healthcare Value Capital said in the letter.

Novelion shares were up 51.02 percent at $1.48 at the time of publication Monday. 

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