Polygon request special audit at Biotest AG in connection with the Proposed Appointment of Competitor CEO to Biotest's Supervisory Board

LONDON, May 6, 2020 /PRNewswire/ -- In April 2020, Biotest AG published the "Invitation to the Virtual Annual General Meeting 2020" which is due to take place on 8 May 2020.  Item 6 of the agenda submitted for the approval of shareholders includes the proposed nomination to the Supervisory Board of Mr. Xiaoying (David) Gao, the current Chief Executive Officer and Executive Vice Chairman of Bio Products Laboratory Ltd. (BPL).

BPL is a UK limited company ultimately owned by the Creat Group, the majority but non-dominating shareholder of Biotest.  BPL carries out the majority of its operations in the United States, a geographic market that Biotest has clearly and explicitly stated it has an intention to enter through its Biotest Next Level project.  As such, Polygon believes that allowing the CEO and Board member of a competitor into the Supervisory Board of Biotest creates a clear conflict of interest.  Surprisingly, Biotest's Board of Directors does not believe that such a conflict of interest exists.

On 20 April 2020, Polygon, in its capacity as a shareholder of Biotest, submitted a counter-motion to the Annual General Meeting asking for a special audit to determine the circumstances that have led the Board of Directors of Biotest to determine that Mr. Gao's appointment does not give rise to a conflict of interest.  This counter-motion was formally rejected by Biotest on 24 April 2020.

For the sake of transparency to all Biotest stakeholders, Polygon attaches to this release its correspondence with Biotest related to this matter, including a letter sent today rebutting the arguments presented by Biotest on April 24.

Polygon believes that it is in the interest of all Biotest stakeholders to properly scrutinise and, where necessary, prevent, potential conflicts of interest that could detrimentally impact the company and its stated strategy.

Contact: Polygon Global Partners LLP ([email protected])

Biotest Aktiengesellschaft
Investor Relations
Landsteinerstraße 5
63303 Dreieich

London, 5 May 2020

Counter-motion to agenda item 3 / special audit

Dear Sirs,

we reply to your statement of April 24, 2020 as follows:

1.         The motion is a counter-motion in accordance with sec. 126 AktG

The motion we sent on April 20, 2020 is in fact a counter-motion pursuant to sec. 126 German Stock Corporation Act (Aktiengesetz) (AktG). In the interest of a transparent opinion-forming among shareholders, case law and corporate law literature agree that no excessive demands exist with regard to the formal requirements for a counter-motion to an annual General Meeting held once a year.

Contrary to what you write in your statement, a counter-motion, particularly with regard to the agenda item "discharge", is not contained to the contradictory opposite being proposed for resolution. On this agenda item, the contradictory motion for "non-discharge" would merely be the announcement of a nay-vote on the resolution proposed by the boards.

Rather, the characteristic feature of a counter-motion is that, in addition to the mere negation of the resolution proposed by the boards, it is aimed at a resolution that differs in content. This is precisely the case with our counter-motion of April 20, 2020: It implies that the actions of the members of the Management Board should not be approved and that instead a special audit should be carried out with regard to events in connection with the management of the company.

Contrary to your highly formalistic and, incidentally, factually incorrect statement, the fact that the motion submitted is a counter-motion to the agenda item "discharge of the members of the Management Board" is evident not only from our e-mail accompanying the motion submitted, but also from the motion document itself. This states: "We propose the following counter-motions regarding item 3 of the agenda".

2.         Motion also possible under the COVID-19 Act in the virtual annual General Meeting 2020

Contrary to what you said, motions on agenda items remain possible, also under the COVID-19 Act, in the virtual annual General Meeting on May 8, 2020.

In your invitation to the annual General Meeting, p. 4, you explicitly confirmed for counter-motions that they are to be treated as if they had been submitted at the annual General Meeting. Even if, for highly formal reasons, one did not want to regard the motion of April 20, 2020 for the special audit to be treated as a counter-motion, but as an ordinary motion not subject to publication pursuant to sec. 124 (4) sentence 2 AktG, you would still be required, pursuant to the commitment in your invitation to the Annual General Meeting, to treat the motion submitted as a counter-motion. Any other handling and non-admission would be contrary to shareholders' rights and the transparency requirement.

This applies all the more so because on page 4 of your invitation to the annual General Meeting you systematically distinguish between requests for additions to the agenda that require separate announcement on the one hand and motions on published agenda items that do not require separate announcement (sec. 124 (4) sentence 2 AktG) on the other. Since an ordinary motion that does not require publication falls into the latter category, as does a counter motion, both types of motion must be treated equally from the point of view of systematic and reasonable interpretation.

3.         Reference of the special audit motion to the discharge period given

Contrary to what you represent, the proposed resolution on the discharge of the members of the Management Board announced under agenda item 3 does not relate solely to the past calendar year of 2019. It is trite law that the discharge also represents a resolution on a declaration of confidence for the present and the future. Since the events in connection with the submission of the declaration of conformity in March 2020 are inseparably connected with the annual financial statements for the financial year of 2019, which were also prepared and adopted in March 2020, they are covered by this year's resolution on the discharge. It would be highly artificial to postpone these matters to the following financial year.

4.         Insufficient and factually incorrect answers

In your statement of April 24, 2020, you dealt with the points to be examined in the special audit inadequately. For example, you do not state when and how the meeting of the members of the Management Board was convened to adopt a resolution, nor who, for example, initiated the circulation procedure for resolutions in the Supervisory Board. It must be investigated whether the resolution was actually passed as you have stated. Your "voluntary" answers to the questions cannot replace an independent special audit.

This is already evident from the fact that you indicate in your statement that Bio Products Laboratory Ltd. (BPL) led by Mr Gao, is not a major competitor of the company. Your reasoning that this should result from the fact that the Company, unlike BPL, is not active in the USA, is misleading. It is rather true that the Company is making considerable efforts to expand its presence in the USA.

This is proved by statements made by the Company in the current annual report of 2019, where on page 9, the report states: "Biotest is also aiming to double its production capacity and obtain approval for the American market as part of the [Biotest Next Level] project".

Also in recent investor calls, the Company has confirmed that it is aiming to accelerate the development of igG Next Generation, which is a product to be sold in the USA, and that it is actively looking for partners to distribute its existing product range in the USA. Specifically, on the Q3 2019 results call held on November 14, 2019, Dr. Ramroth, Chairman of the Management Board, CEO & CFO, stated the following:

• "You may recall that we always said that we are looking for partners, helping us on the one hand side, to the security products in the future in the United States and/or also helping us to develop such products like IgG Next Generation or IgM Concentrate. And discussions are ongoing."
  
  
• "You may have seen that the FDA had issued some kind of warning letter for the United States. And therefore, we have got even more incentivized to accelerate our development of IgG Next Generation, which is designed, also to be sold in the United States."
  
  
• "Two Phase III studies are ongoing. One in Primary Immune Deficiency (PID) for Europe and the United States."
  
  
• "Currently, we are coordinating with the FDA in United States as well as in the European Medicines Agency and the German Paul-Ehrlich-Institute, the design of the Phase III study. We have got green light from all 3 agencies to really come up with the same design as we had it with our Phase IIb study. In a few years, community-acquired pneumonia, that will be the indication where we have the Trimodulin studied in. And currently, we are preparing this Phase III study together with the pediatric development plan."
  
  
• "To answer your question, yes, as I said, we are in discussions with partners about partnering our products, either with regard to distributing them in the United States or in some kind of co-development."

Against this background, it is obvious that BPL is a major competitor of the Company. It is therefore unclear how the Management Board and Supervisory Board of the Company were able to adopt their respective declarations of conformity regarding the German Corporate Governance Code (Deutscher Corporate Governance Kodex) pursuant to sec. 161 AktG. It is imperative that the Company's shareholders be afforded the opportunity to vote on a special audit to investigate the circumstances surrounding these declarations.

SOURCE Polygon Global Partners