2021 Annual Meeting

2021 Annual Stockholders Meeting


       SWK Holdings Corporation’s 2021 Annual Meeting of Stockholders to be held in a virtual meeting format only via the Internet. You will not be able to attend the Annual Meeting in person. The Annual Meeting will be held on Thursday, June 17, 2021 at 4:00 p.m. central time. You can attend the Annual Meeting at the URL below. You will be required to provide the Control Number from your Proxy Card and the Password listed below in order to join the Annual Meeting as a stockholder and vote during the meeting. Otherwise, you are welcome to join the meeting as a Guest.

Meeting Website: www.meetingcenter.io/255174454

Password:  SWKH2020

       The matters expected to be acted upon at our 2021 Annual Meeting of Stockholders are the election of seven (7) directors, the ratification of the appointment of BPM LLP as our independent auditors for the fiscal year ending December 31, 2021, and the approval on an advisory basis of the compensation paid to certain officers.

The materials for the annual meeting can be found at the following links:

Message From Our Chief Executive

Dear Fellow Stockholders:

       2020 was a productive year for SWK despite the unprecedented challenges from the COVID-19 pandemic. SWK’s Specialty Finance and Enteris Pharmaceutical Development segments each had a successful year and progressed key strategic initiatives. SWK also improved our investor relations outreach and repurchased over $2 million of shares. SWK management believes these efforts position our company for outperformance going forward.

      As of March 30, 2021, our Specialty Finance investment assets totaled an all-time high of $219 million, and more importantly, our internal credit evaluation was as healthy as it has ever been. Despite the frothy lending market, we remain committed to growing our investment assets responsibly and differentiating SWK compared with the large venture lenders. As many of our competitors gather assets and fight over sponsored deals, we remain committed to being the partner of choice for small to mid-sized life science companies and royalty owners seeking tailored financing.

       Our Enteris team diligently supported Cara Therapeutics’ Oral KORSUVA™ program while progressing each of the three legs of the Enteris value creation strategy: licensing its Peptelligence and ProPerma intellectual property, launching a CDMO and manufacturing services business line, and developing its owned pharmaceutical assets. Dr. Rajiv Khosla and his team are building an exciting CDMO business and we anticipate providing further detail on these core Enteris value drivers throughout 2021.

       2020 was a turbulent and unprecedented year for all of us and I appreciate the dedication and hard work of our employees. The team worked diligently and safely during the COVID-19 disruption to maintain operations and progress our key initiatives. In particular, we are grateful for our colleagues at Enteris. Enteris was deemed an essential business and maintained a limited in-person presence throughout the pandemic to support its pharmaceutical partners.

       Finally, we would like to thank our loyal stockholders for their continued support as we refine our operating model and seek to grow SWK’s per share value. We appreciate that you have numerous options to deploy your hard-earned capital, and we come to work each day focused on making SWK a more valuable enterprise for you.

Strong Specialty Finance Trends in 2020

       If one slept through 2020 and simply evaluated our financial statements, it would be easy to assume 2020 was business as usual for our Specialty Finance segment. In many ways this is true as evidenced by the strong results including 17.6% growth in income producing assets, a robust portfolio credit profile, and an 11.9% adjusted return on tangible financing book value, our keystone metric. As a reminder, our goal is double-digit return on tangible book value and in 2020 we achieved this target while using minimal leverage.

       These trends continued through early 2021 and led to our tangible book value growing to $16.31 per share at March 31, 2021, with a 12.5% adjusted return on tangible financing book value for the LTM period ending March 31, 2021. These results would not have been possible without constructive dialogue and, in a few cases, accommodations to our borrowers to ensure they could operate through the pandemic. While we acknowledge the situation would have been more challenging without the robust response from the US Government and Federal Reserve, we are nevertheless extremely proud that our portfolio’s credit profile improved during 2020. In fact, several borrowers improved operations and strategic positioning throughout the year, an impressive feat.

       We believe our track record validates our investment focus and continues to warrant capital deployment in the strategy. Since 2012 SWK has completed financings with 42 parties deploying nearly $600 million of capital. Over this span we have exited twenty financings for a total 1.3x cash-on-cash return and a 20% weighted average IRR. While we have been far from perfect, we highlight that twelve of the twenty exits were to strategic buyers with a median loan-to-value of 30% of SWK’s original loan value, demonstrating what we believe to have been modest risk taken to achieve the low-to-mid teens yields we target.

       Looking to 2021, we are focused on maintaining and perhaps modestly growing our investment assets while not sacrificing underwriting discipline. While the newly initiated Strategic Review process, which I discuss below, has caused a pause in certain growth initiatives, we remain confident we can keep our assets deployed in high quality small and mid-sized life science companies.

Enteris Well Positioned for Value Creation in 2021 and Beyond

       SWK acquired Enteris in August 2019. Since that time, Enteris has improved its management talent, notably with the hiring of Dr. Khosla, built its IP licensing business development pipeline, completed the expansion of its manufacturing facility and launched a CDMO business, and advanced an owned pharmaceutical asset into the clinic for a new indication.

       Like a duck swimming through the propulsion of its underwater feet, investors can’t yet see Enteris’ progress in the numbers. However, we anticipate this will begin to change over the next year through the new CDMO business. While early, Enteris has received preliminary interest from several pharmaceutical companies, validating this investment. We also encourage investors to focus on the IP licensing business development pipeline and number of partners signing up for feasibility studies, which we believe is the first step to larger licensing agreements. While the long selling cycle was exacerbated by COVID-19 during 2020 and we have limited visibility into our pharmaceutical partners’ development programs, our dosing technology is applicable to peptides targeting billion dollar markets.

       Regarding the third leg of the Enteris value-creation stool, over the next year we anticipate providing updates on the clinical development of Enteris’ owned pharmaceutical assets. In 2021, Enteris advanced one asset into the clinic. While much work remains, we are excited about this 505(b)(2) opportunity that has the potential to improve the lives of pediatric patients. While we have committed to a modest investment in the development of this asset, Enteris is not pursuing a traditional biotech strategy and accompanying substantial R&D spend. If the asset is successful in our planned clinical trials, we anticipate seeking outside capital or potential out-licensing to fund further development.

       Enteris also remains focused on supporting marquee licensing partner, Cara Therapeutics, Inc. (“Cara”), whose Oral KORSUVA™ pharmaceutical development candidate uses Enteris’ Peptelligence® oral dosing technology. During 2020 and into early 2021, Cara has advanced the Oral KORSUVA™ clinical program, leading to Enteris receiving two milestone payments during the fourth quarter of 2020, which netted SWK $3 million of payments. Cara has disclosed that Oral KORSUVA™ is currently the subject of four separate clinical programs with additional milestones anticipated during 2021, including the initiation of a Phase 3 clinical trial for the treatment of pruritus in patients with stage III-IV chronic kidney disease expected in the second half of 2021. SWK anticipates additional milestones from Cara over the next year.

Investor Relations Outreach and ESG Initiatives

       We understand the primary way your management team can create value is through accretively deploying our capital and achieving the strategic goals of our two operating segments. However, we also appreciate as a public company, our assets are unlikely to reflect full value from public investors unless we employ investor relations best practices in conjunction with continued strong operational execution. We began professionalizing our investor relations efforts when we closed the Enteris acquisition, and our investor relations endeavors are starting to materialize. In 2020, we achieved several investor relations milestones including uplisting to Nasdaq, receiving Wall Street analyst coverage from two investment banks, attending several investor conferences, and being added to multiple Russell indices. In addition, our average daily trading volume increased over 800% in 2020 compared to 2019.

       Over the last year, we worked with our investor relations firm to improve our quarterly disclosure and our investor presentation. These efforts are a work in progress, and we welcome stockholder feedback on our disclosures and investor materials.

       Finally, during the first quarter of 2021, we engaged ISS Corporate Solutions, Inc. to assist our Board and management develop effective environmental, social and governance (“ESG”) policies and procedures. We recognize the disclosure of sustainability practices has become an expectation for institutional investors, and the importance of adapting to changing socio-economic and environmental conditions, which will better equip us to identify and execute strategic opportunities and meet competitive challenges. We believe that by pursuing these ESG initiatives, we will unlock competitive value for our stockholders. We expect to provide further updates on this initiative later this year.

Focus on Stockholder Value Creation and Strategic Process

       We have a long-term focus and believe both of our segments have several years of value creation ahead that should drive share price outperformance. However, we understand our stockholders’ frustration from SWK’s public market valuation persistently trading at a discount to the book value of our assets. We continue to believe that our stockholders have not been awarded full value to our specialty lending franchise and Enteris’ intangible assets and growth potential. We have attempted to address this disconnect through investor relations initiatives and share buybacks, including over $2 million of repurchases during 2020. That said, we also acknowledge the limits to these corrective mechanisms given SWK’s concentrated stockholder base and low public float.

       We are heartened with the steps our Board and our largest stockholder, Carlson Capital, agreed to pursue as outlined in our press release issued on May 17, 2021. We encourage you to review this press release, which can be found under the Investor Relations section of our website. The press release outlines the formation of a Strategic Review Committee to be chaired by a new member of our Board, Marcus Pennington. The Strategic Review Committee has commenced its work to identify, review and explore strategic alternatives for the Company with a view to maximizing stockholder value. We welcome Mr. Pennington to the Board, and we look forward to working with the Strategic Review Committee in an effort to unlock the value of SWK shares.


                                                                                                                             Winston L. Black III
                                                                                                                             Chief Executive Officer