Oncosec Medical Incorporated · OTC:ONCSQ
Oncosec Medical — Proxy Contest (December 2019)
25 slides from Oncosec Medical's proxy contest presentation, Dec 18, 2019
Slide 1: Alpha Holdings Opposes Proposed Takeover of OncoSec
A LPHA H OLDINGS O PPOSES P ROPOSED T AKEOVER OF O NCO S EC Proposed Transaction with China Grand and its Affiliate Sirtex Clearly Not in the Best Interests of OncoSec Stockholders 1 D ECEMBER 2019
Slide 2: Forward-Looking Statements
ALL STATEMENTS CONTAINED IN THIS PRESENTATION THAT ARE NOT CLEARLY HISTORICAL IN NATURE OR THAT NECESSARILY DEPEND ON FUTURE EVENTS ARE "FORWARD - LOOKING STATEMENTS," WHICH ARE NOT GUARANTEES OF FUTURE PERFORMANCE OR RESULTS, AND THE WORDS "ANTICIPATE," "BELIEVE," "EXPECT," "POTENTIAL," "COULD," "O
Slide 3: Additional Information and Where To Find It
THIS COMMUNICATION IS BEING MADE IN CONNECTION WITH A SOLICITATION OF PROXIES BY ALPHA HOLDINGS, INC. IN RESPECT OF THE PROPOSED TRANSACTION BETWEEN ONCOSEC MEDICAL INCORPORATED (“ONCOSEC”) AND DECADE DEVELOPMENTS LIMITED, A DIRECT, WHOLLY - OWNED SUBSIDIARY OF CHINA GRAND PHARMACEUTICAL AND HEALTHC
Slide 4: Introduction
alpha HOLDINGS INTRODUCTION
Slide 5: Introduction to the China Grand transaction
▪ On October 10, OncoSec entered into a transaction with China Grand and its affiliate Sirtex (together, “China Grand”) that significantly undervalues OncoSec , gives China Grand control over the Company and its future sales in over 40 jurisdictions, including China and India, and seve rel y limits
Slide 6: Summary of Most Egregious Deal Terms
▪ Provides 10 - 12 months of financing – insufficient to get TAVO TM to market, meaning more dilution coming in future ▪ Future dilution impacts non - China Grand stockholders disproportionately – but China Grand is protected: can maintain board control with only 23% stake ▪ China Grand can restrict
Slide 7: Alpha's Investment in OncoSec and the Potential of TAVO
A LPHA ’ S I NVESTMENT IN O NCO S EC AND THE P OTENTIAL OF TAVO TM 7
Slide 8: About Alpha Holdings
▪ Alpha is OncoSec’s largest stockholder, with a 15.1% stake ▪ Founded in 2002, headquartered in Seongnam , South Korea ▪ Publicly listed on the KOSDAQ Market ▪ Engaged in development of biotechnologies and thermal compound materials, and design - development service and manufacture of semiconductor
Slide 9: Alpha's Investment in OncoSec
I NVESTMENT T ERMS ▪ Alpha invested $15 million in OncoSec in two tranches – First: $8 million on 10/9/18 – Second: $7 million on 12/10/18 ▪ Received ~15.1% ownership stake, a seat on the Board of Directors, and a Board Observer ▪ Named Joon Kim Director, and Julie Shin Board Observer I NVESTMENT R
Slide 10: About TAVO
▪ TAVO TM is DNA - based interleukin - 12 (IL - 12), a naturally occurring protein in the body with immune - stimulating functions ▪ Can be used either as a monotherapy or in combination with leading checkpoint inhibitors – Potential treatment for multiple cancer indications ▪ Could become first mar
Slide 11: TAVO safety and anti-tumor activity
▪ F AVORABLE SAFETY PROFILE – In clinical studies, TAVO TM + EP gene delivery has shown a favorable safety profile to date and has been generally well - tolerated across multiple treatment cycles with no reports of serious adverse events related to treatment ▪ A NTI - TUMOR ACTIVITY – Data from Onco
Slide 12: Alpha's Opposition to the China Grand Takeover
A LPHA ’ S O PPOSITION TO THE C HINA G RAND T AKEOVER 12
Slide 13: Management's Long-Term Interests Not Aligned With Stockholders
▪ OncoSec management and Board collectively hold ~1.3% of OncoSec’s stock compared to Alpha’s 15.1% stake ▪ We believe the vast majority of management’s shares have been granted to them rather than purchased on the open market ▪ Dan O’Connor’s current equity stake in OncoSec is worth less than $35,0
Slide 14: Transaction Amounts to a No Premium Takeover
▪ OncoSec plans to issue 12 million shares to China Grand – cutting stake of each current owner to less than half of their current holdings ▪ OncoSec’s current stockholders receive no consideration ▪ In exchange for a year’s worth of financing (or less, net of fees), China Grand would: 1. Own 53% of
Slide 15: Torreya's "Fairness" Opinion
▪ Torreya stands to make $1.5 million for its “fairness opinion” ▪ Fairness opinion fee is 5% of the entire transaction value ▪ $1.2 million – or 80% of their fee – is contingent on the transaction closing ▪ Torreya did not conclude China Grand is best available deal: 15 Torreya’s “Fairness” Opinion
Slide 16: Torreya's Analysis Indicates Price Should Be Higher
▪ OncoSec has not widely publicized that Torreya performed a financial analysis on comparable transactions ▪ Torreya’s analysis was summarized in OncoSec’s definitive proxy statement ▪ Torreya identified comparable transactions in the range of $5.31 per share to $9.65 per share 1 ▪ Torreya performed
Slide 17: The Incredible Shrinking "Premium"
O NCO S EC STATES THAT THE $30M TRANSACTION IS A 25% PREMIUM . I S IT ? 12 million shares @ $2.50 = $30 million ▪ Torreya Fees ($1.5 million) ▪ Estimated Legal Fees, Proxy, PR ($1.5 million) ▪ Net Proceeds $27 million ▪ License Agreement No upfront payment to OncoSec 17 The Incredible Shrinking “Pre
Slide 18: What Would Deal Achieve?
▪ OncoSec gets $30 million, or likely $27 million net of fees 1 ▪ OncoSec has given away control of the company for the equivalent of one year’s worth of financing (~10 - 12 months of funding at stated burn rate of $2.5 million/month) ▪ OncoSec will likely need to seek funding again ▪ China Grand’s
Slide 19: The Minority Holder/Majority Control Provisions
▪ OncoSec has given China Grand the continued right to appoint 5 of 9 board members even if China Grand reduces its holdings to 23% ▪ China Grand is purchasing 12 million shares – but director appointment rights remain if it retains 4.8 million shares 1 – OncoSec currently has 10.6 million shares ou
Slide 20: Supermajority Blocking Rights
▪ OncoSec has given certain rights to China Grand that continue as long as China Grand owns 23%. Without China Grand’s permission, OncoSec cannot: – Amend its by - laws – Increase the size of the Board – Declare a dividend or distribution – Redeem or repurchase shares – Take on debt more than $250,0
Slide 21: Transaction Caps OncoSec's Upside
▪ As a company with a promising oncology treatment, OncoSec’s Board should look for potential upside. Instead, it has capped upside through: – A “ NO TALK ” AGREEMENT – Prevents OncoSec from exploring better offers from third parties – A LICENSING AGREEMENT WITH C HINA G RAND – Does not require Chin
Slide 22: OncoSec Has "Gamed the System" by Lowering the Vote Threshold
▪ OncoSec’s initial proxy statement had two resolutions: – Approve the issuance of 12 million shares to China Grand and Sirtex – Approve an amendment to OncoSec’s articles of corporation to increase the number of authorized shares to 30 million ▪ The increase in the number of authorized shares would
Slide 23: The Right Path Forward
▪ If China Grand deal were truly the best option, Alpha would have more incentive than anyone to be in favor ▪ Blocking transaction with no other option would hurt Alpha most ▪ Alpha believes in OncoSec’s future ▪ If China Grand transaction is voted down, Alpha is willing to lead a consortium to pro
Slide 24: Appendix
alpha HOLDINGS APPENDIX
Slide 25: Per Share Equity Value Range from Torreya Analysis
From Page 21 of OncoSec’s Definitive Proxy Statement An analysis of selected precedent M&A transactions involving biopharmaceutical companies for which publicly available estimat ed peak revenue was available. Using publicly available information, Torreya calculated, for each selected transaction, t