Ocata Therapeutics shareholders have again told Astellas Pharma that the proposed tender offer is not good enough to secure a deal. In a filing made on 1/22/16, Astellas Pharma revealed that they have not gathered the support of the required 50.1% of shares necessary to consummate a tender deal with Ocata (SYMBOL: OCAT). In the filing, they report that only 47% have agreed to tender and have extended the tender offer through February 9, 2016.
With Astellas now extending the offer for the second time, again with no increase in the offer price, shareholders might dig in even further and test the resolve of both Astellas and current Ocata management. It is now the time for shareholders to take back their company and rescind their tender instructions made to their broker, assuming that they are not content with settling for $8.50. With the general market now in a window of recovery, shareholders have the time to rethink their decision and easily rescind their prior instructions. It is my belief that the sharp sell off in the first weeks of 2016 had led many shareholders to acquiesce to the price offered, but with market improvement will now have the resolve to continue the fight against Ocata management.
Recent Seeking Alpha articles, including my own, have been extremely critical of Paul Wotton, CEO of Ocata, and question the viability of his tenure should this tender offer fail. A tremendous amount of documentation and time lines of his presumed managerial transgressions have been exposed, demonstrating his lack of transparency and his willingness to ensure golden parachute deals for himself and his executive team at the expense of his loyal shareholder base. It is extremely disheartening that while Paul Wotton witnesses his shareholders dissatisfaction with the terms that he continues to align himself with the Astellas team. In my opinion, Paul Wotton needs to be fiercely scrutinized by the SEC to unravel the motives and self dealing interest he represented in the terms of the proposed deal.
But, finally, with the shareholders once again pushing Astellas away, the writing might certainly be on the wall for Paul Wotton and the words are not pretty. Should the tender offer fail, either by shareholder dissent or by Astellas simply walking away, it would be a fair presumption that Mr. Wotton would either immediately resign, or face the potential of a shareholder proxy to oust him from his CEO position. In either of the cases, Mr. Wotton might have a difficult time finding a role to lead a different company, as the shareholders , as well as executive teams will view the deception played against his Ocata shareholders a potential precursor of the damage he might cause as a leader for their company.
Instead, I see Mr. Wotton taking a long breather, with a far smaller bank account than expected and warrants, that if exercised, will help to increase the Ocata cash coffers before he departs. It would be a win/win for Ocata and its shareholders.
And while many think that the share price of Ocata would fall back to pre-tender announcement levels, the chances for a quick rebound to current and higher levels would be quite warranted. Take the fact that Mario Gabelli and a suite of his investment vehicles has taken a 5.1% stake in Ocata. Perhaps what might have been a pure arbitrage play by Gabelli can turn into an investment ally that would have the ability to easily fund Ocata through the next several years of development. If such an announcement was made, the share price of Ocata would most likely appreciate in dramatic fashion, as the pending question about the near and long term success has rested upon the financial health of the company. If Mr. Gabelli did indeed tender, he now has the opportunity to rescind, as based on the percentages revealed today, it is my opinion that he provided the 5% jump in authorized tender shares.
Ocata clinical successes have been published in peer reviewed journals, they have received important ATMP designations in Europe and the FDA is has cleared the company to enter its phase two trials to treat macular degeneration.
The company has stated that it would need a approximately one hundred million dollars to fund the trials into a revenue generating vehicle by the year 2020. From there, the company becomes profitable as early as 2022 and has demonstrated exponential growth potential from years 2020 forward. Even with the most conservative corporate presentation, the company would expect to generate several hundred million dollars of revenue by the year 2024. Based on providing a high flier multiple to a company with the potential of Ocata, the share price could ignite in the likes of Regeneron, with a P/E of 91 based much on future potential and only cratering if results severely under-delivered. But, with what the company has already released, the chances of failure are only discounted by 35% by the current executive and medical team as stated in the 14D 9 filing.
If you are a shareholder and have still not made the decision as to whether or not you will tender your shares, I ask that you read and/or re-read the most recent Seeking Alpha publications related to Ocata. From there, you can make the decision as to where Ocata will be in five years with a new management team that is dedicated to growing the company and protecting the science. My goal is to hold my shares and ask the courts to force additional disclosure to the public that has already been made to Astellas via confidentiality clauses.
With the deal now failing for the second time. shareholders have time to make the necessary maneuvers that can force management to disclose all information that has been provided to Astellas. If the share price falls following the failure of this tender offer, I view it as an opportunity to purchase shares and tuck in for the long haul. If Gabelli and his money get behind Ocata, it might just lead to the rapid rise in the price per share of Ocata stock.
This is a good day for shareholders.
Disclosure: I am/we are long OCAT.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.