ISS backs Dynavax directors in board fight with Deep Track Capital

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By Svea Herbst-Bayliss

NEW YORK (Reuters) -Proxy advisory firm Institutional Shareholder Services urged Dynavax Technologies shareholders on Friday to reelect all of the company’s directors instead of backing the four nominees of life sciences investment firm Deep Track Capital.

“Vote for all four management nominees,” ISS wrote in a note to clients that was seen by Reuters. “The dissident has failed to present a compelling case that change is necessary at this meeting.”

Investors will vote on June 11. Recommendations from ISS and its rivals Glass Lewis and Egan-Jones, which also supported management’s directors, often help guide shareholders’ decisions.

Deep Track Capital, which is Dynavax’s second largest shareholder with a nearly 15% stake, is pushing on with a proxy fight and wants new directors to prioritize development of the company’s hepatitis B vaccine instead of pursuing new acquisitions.

Deep Track wants Dynavax to focus exclusively on growing Heplisav, a vaccine designed to prevent the hepatitis B infection that can lead to chronic liver disease and death, into an asset that a large pharma company would want to own.

While ISS recommended against Deep Track’s nominees, it acknowledged certain challenges for Dynavax. “There has been a stall in momentum,” ISS said in a report, though it noted that “the market has in no way rebuked the company’s strategy.”

Dynavax’s stock price has fallen 18% over the last 12 months.

A representative for Dynavax said the “company has the right strategy and board” while Deep Track said in a statement that “ISS reached the wrong conclusion.”

(Reporting by Svea Herbst-Bayliss; Editing by Richard Chang and Leslie Adler)