Concerned Shareholder Group Calls for Atea Pharmaceuticals to Appoint a New, Shareholder-Oriented Lead Independent Director to Oversee Strategic Review Process

Rhea-AI Summary

Atea Pharmaceuticals (NASDAQ: AVIR) is facing pressure from a Concerned Shareholder Group owning approximately 3% of outstanding shares. The group criticizes the company's performance and governance, particularly focusing on Lead Independent Director Franklin M. Berger's recent sale of 359,606 shares at $2.84 per share, near all-time lows and below net cash value.

The shareholders highlight that the Board previously rejected Tang Capital's bid of $5.75 per share plus rights to 80% of net proceeds from drug programs in May 2023. They believe the company can deliver $4.75 per share in cash to shareholders, representing a 50% premium over current price. The group demands Berger's immediate resignation and calls for appointment of a new, shareholder-oriented Lead Independent Director to oversee the ongoing strategic review process with Evercore.

Positive

• Phase 2 study results reported as overwhelmingly positive
• Company has sufficient net cash to potentially return $4.75 per share to shareholders
• Strategic review process ongoing with Evercore for potential monetization of clinical asset

Negative

• Lead Independent Director sold nearly half his shares at $2.84, representing a 50% discount to net cash value
• Board rejected previous acquisition offer of $5.75 per share plus CVR rights in May 2023
• No cost reduction initiatives disclosed despite Phase 3 COVID-19 study failure
• Stock trading near all-time lows

Insights

Financial Analyst

The shareholder activism at Atea Pharmaceuticals represents a critical inflection point for the company's valuation. With a current net cash position supporting a $4.75 per share value - 50% above current trading levels - and the rejection of Tang Capital's previous $5.75 per share offer, there's significant disconnect between intrinsic and market value. The Lead Independent Director's decision to sell 50% of holdings at $2.84 per share, well below cash value and following positive Phase 2 data, raises serious governance concerns.

The activist demand for board changes and potential liquidation strategy creates a clear value catalyst. With approximately $263.5M market cap, successful strategic alternatives review or liquidation could unlock immediate shareholder value. The company's strong Phase 2 data in an increasingly attractive HCV market adds potential upside beyond cash value. Key focus should be on the strategic review outcome and potential partnerships, which could drive valuation well above net cash levels.

Corporate Governance Expert

The governance issues highlighted in this activist campaign are particularly concerning. The Lead Independent Director's substantial share sale at historical lows, immediately following positive clinical data and preceding a strategic review, represents a significant red flag. This timing pattern raises questions about board oversight and alignment with shareholder interests.

The 3% ownership stake of the activist group provides sufficient standing for their governance demands. Their call for immediate board changes and focus on strategic alternatives demonstrates a constructive approach to value creation. The previous rejection of Tang Capital's offer, which included both cash and contingent value rights, warrants scrutiny of the board's decision-making process and commitment to shareholder value maximization.

HOUSTON--(BUSINESS WIRE)-- Bradley L. Radoff and Michael Torok, the Managing Director of JEC Capital Partners (together with their affiliates, the “Concerned Shareholder Group” or “we”), who collectively own approximately 3% of the outstanding shares of Atea Pharmaceuticals (NASDAQ: AVIR) (“Atea” or the “Company”), today issued the following open letter to the Company’s Board of Directors:

***

December 18, 2024

Board of Directors (the “Board”)
Atea Pharmaceuticals, Inc.
225 Franklin Street, Suite 2100
Boston, MA 02110

Directors,

We own approximately 3% of the outstanding shares of Atea, collectively making us one of its largest shareholders. We are writing to express our concerns about the Company’s share price performance, strategy, capital allocation, and corporate governance.

On December 10, 2024, we met with Chief Financial Officer Andrea Corcoran, Chief Medical Officer Arantxa Horga, and Chief Commercial Officer John Vavricka. During that meeting, Ms. Horga was adamant that the Phase 2 data from the Bemnifosbuvir and Ruzasvir study was outstanding. Mr. Vavricka reiterated that Atea would only commercialize its drug with a partner, stating his belief that the partner market would be robust. On December 12, 2024, we met with Chairman and Chief Executive Officer Jean-Pierre Sommadossi, who was similarly confident, stating his belief that many parties would be potentially interested in commercializing Atea’s treatment.

We agree that the results of the Company’s Phase 2 study were overwhelmingly positive. Based on the Company’s net cash balance, we are extremely confident the Board can deliver shareholders $4.75 per share in cash, a more than 50% return over the current share price. We believe there could be additional, more significant upside from the monetization of the Company’s sole clinical asset through the recently announced review of strategic alternatives with Evercore.

If the Company and Evercore cannot find a buyer for Atea’s only clinical asset, then we expect the Board to liquidate the Company and return all remaining cash to shareholders. In furtherance of the decision to wind down the Company in the absence of a transaction, we believe the Board should immediately take all available steps to reduce costs and conserve cash. Incredibly, despite the failure of Atea’s Phase 3 study for the treatment of COVID-19, Atea has not disclosed any cost reduction initiatives.

Despite our belief that there is an opportunity to deliver shareholders an immediate 50%-plus return based solely on the net cash balance, we lack confidence in the current Board’s ability to surface value for stockholders based on its recent actions. In May of 2023, the Board rejected an unsolicited bid from Tang Capital Partners, LP (“Tang Capital”) that would have paid Atea stockholders $5.75 per share in cash, plus a contingent value right through which stockholders would have the right to receive 80% of the net proceeds from Atea drug programs.¹ In December of 2024, 18 months after the Board rejected Tang Capital’s proposal and mere days after the Company disclosed best-in-class data from its Phase 2 trial, Lead Independent Director Franklin M. Berger sold nearly half of his shareholdings at a 50% discount to Atea’s net cash balance.

We believe this is the appropriate time to sell the Company. However, we are concerned that Mr. Berger is not qualified to represent Atea shareholders in any matter – let alone in the Company’s strategic review – given that he recently sold 359,606 shares at $2.84 per share, a fraction of the net cash value of the shares and at or near the Company’s all-time-low share price.² Again, Mr. Berger’s open market stock sales occurred on the heels of positive Phase 2 data and on the eve of a strategic review process to maximize shareholder value. We hereby demand that Mr. Berger immediately resigns from the Atea Board. Furthermore, we believe the Board should work with its shareholders to identify and appoint a new, mutually agreed upon Lead Independent Director. We look forward to engaging with the Board in the coming days to agree on a qualified, shareholder-oriented Lead Independent Director to replace Mr. Berger.

Sincerely,

Bradley Radoff and Michael Torok

_________________________
¹ Company press release dated May 30, 2023 (link).
² Company Form 4 filed by Franklin M. Berger, dated December 12, 2024 (link).

View source version on businesswire.com: https://www.businesswire.com/news/home/20241218287050/en/

Greg Lempel

greg@fondrenlp.com

Source: On behalf of a Concerned Shareholder Group

FAQ

What is the potential return to AVIR shareholders based on net cash balance?

According to the Concerned Shareholder Group, Atea Pharmaceuticals can potentially return $4.75 per share in cash to shareholders, representing a more than 50% return over the current share price.

Why are shareholders demanding the resignation of AVIR's Lead Independent Director?

Shareholders are demanding Franklin M. Berger's resignation after he sold 359,606 shares at $2.84 per share, near all-time lows and at a 50% discount to net cash value, shortly after positive Phase 2 data and before a strategic review process.

What was the Tang Capital offer for AVIR that was rejected in May 2023?

Tang Capital Partners offered $5.75 per share in cash plus a contingent value right giving stockholders 80% of the net proceeds from Atea drug programs, which was rejected by the Board.

What percentage of AVIR shares does the Concerned Shareholder Group own?

The Concerned Shareholder Group, consisting of Bradley L. Radoff and Michael Torok of JEC Capital Partners, collectively owns approximately 3% of Atea Pharmaceuticals' outstanding shares.