Settlement Ends Fight at Arcturus Therapeutics; New Board Named

Xconomy San Diego — 

The San Diego RNA drug developer Arcturus Therapeutics (NASDAQ: ARCT) named four new board members Tuesday, after the four directors who fired founding CEO Joseph Payne resigned as part of a settlement agreement that was approved Monday by an Israeli court.

The agreement, announced in a statement from Arcturus, ostensibly brings an end to a power struggle for control of the fledgling biotech that pitted Payne against his own board of directors. No financial terms were disclosed. The fight spilled into the open earlier this year, when the board announced it had fired Payne, who is the largest Arcturus shareholder with a 13.7 ownership stake in the company.

Both sides also agreed to terminate all pending litigation.

Many questions remain unanswered, though, including Payne’s plans for rejoining the company. He did not respond to an e-mail inquiry from Xconomy. A spokesman for Arcturus declined to comment, saying he wanted to confirm his information before responding to press queries.

The battle that played out in dueling lawsuits and press releases was headed for a showdown at a special shareholders meeting set for June 25. The vote was focused chiefly on deciding whether the incumbent board would remain in control. Payne had mounted a proxy challenge that asked shareholders to replace the incumbent board with an alternative slate of four directors that he had submitted, and who would presumably re-hire Payne as CEO.

The company appointed those four directors (see below) to serve on the company’s board. With the matter decided, it’s unclear whether the shareholder meeting will be canceled or rescheduled. Some pending issues for Arcturus also must be decided by shareholders, such as approval of the company’s auditor.

A key aspect of the fight played out in Israel because of a so-called reverse merger that Arcturus completed last fall with Alcobra, an inactive Israeli biomedical company. The merger provided a way for Arcturus to become a publicly traded company on the Nasdaq exchange without a conventional IPO.

As part of the merger, an Israeli-based holding company was formed to operate Arcturus in San Diego. The holding company was organized under Israeli law, and Payne maintained that the Israeli district court had jurisdiction.

The settlement was approved on May 28 by the Israeli District Court.

The four new directors at Arcturus are:

Peter Farrell, the founder, former CEO, and current chairman of ResMed (NYSE: RMD), a San Diego-based maker of sleep apnea ventilation machines. Farrell also is a director of NuVasive (NASDAQ: NUVA), serves on the board of trustees at The Scripps Research Institute in La Jolla, and is chairman of WaveGuide, a Boston-based diagnostics company.

Andrew Sassine was a board member at New Hampshire-based iCAD for two years, and also serves on the board of directors of Gemphire Therapeutic (NASDAQ: GEMP). Sassine previously served in various positions at Fidelity Investments from 1999 to 2012.

James Barlow is a board member of North American Health Care, a privately held company that provides contractual services to facilities specializing in post-acute care, subacute care, short and long-term rehabilitation, and skilled nursing in the United States.

Magda Marquet is the co-founder and co-CEO of Alma Life Sciences, an investment and consulting firm with a portfolio of more than 20 companies in the areas of diagnostics, digital health, and pharmaceuticals. She also is the chairman and co-founder of Althea, an Ajinomoto company, and co-founder of AltheaDx, a precision medicine company.