Intends to Withhold Its Votes Against All
Three Board Members Up for Election at the Annual Meeting Citing
the Board's Failure to Hold Management Accountable for Years of
Underperformance
Plans to Carefully Scrutinize the Process
Undertaken by the Board in Approving the Proposed
Sale and May Vote Against the
Proposed Transaction
DALLAS, June 27,
2023 /PRNewswire/ -- NexPoint Asset Management, L.P.,
together with its affiliates (collectively, "NexPoint"), who
beneficially own approximately 12% of the outstanding common stock
of Paratek Pharmaceuticals, Inc. (NASDAQ:PRTK) (the "Company")
today issued an open letter to the Company's Board of Directors
(the "Board") announcing its plans to withhold its votes against
all three Board members up for election at the Company's upcoming
Annual Meeting of Stockholders scheduled for July 6, 2023 (the "Annual Meeting"). In the open
letter, NexPoint notes its reasons for withholding its vote against
these directors, including its serious concerns with the Board's
lack of oversight in holding management accountable for years of
underperformance. NexPoint also states in the letter that it
intends to carefully scrutinize the process undertaken by the Board
in approving the proposed acquisition of the Company by Gurnet
Point Capital, LLC, once the Company makes available additional
information, and may vote against the transaction if the
information provided does not demonstrate a robust sale process to
justify the proposed purchase price.
The full text of the letter is set forth below.
Board of Directors
c/o Corporate Secretary
Paratek Pharmaceuticals, Inc.
75 Park Plaza, 3rd Floor,
Boston, MA 02116
To the Board of Directors (the "Board") of Paratek
Pharmaceuticals, Inc.,
NexPoint Asset Management, L.P. (together with its affiliates,
"NexPoint" or "we") is the largest independent stockholder of
Paratek Pharmaceuticals, Inc. ("Paratek" or the "Company") with
economic exposure equal to almost 12% of the Company's outstanding
common stock. We are writing today to express our serious concerns
with the Company's long-term underperformance, the Board's failure
to hold management accountable for such underperformance and the
process the Board may have undertaken in approving a sale of the
Company to Gurnet Point Capital LLC in a deal that upon preliminary
review appears to grossly overcompensate Company leadership to the
detriment of stockholders. While we will wait to review materials
to be filed by the Company before determining how we will vote on
the proposed acquisition, we intend to withhold our votes against
each of the directors up for election at the Company's upcoming
annual meeting of stockholders to express our discontent with the
Board's history of not properly aligning pay for performance and
approving an executive compensation structure that we believe has
not been in the best interest of stockholders and may provide a
financial windfall for management upon a sale of the Company.
We have had an investment in the Company since 2016 because we
believe the Company's most important
drug, NUZYRA (omadacycline), will become a great
commercial success as a once-daily oral and intravenous antibiotic
for the treatment of adult patients with community-acquired
bacterial pneumonia, and acute skin and skin structure infections
caused by susceptible pathogens. However, five years after
receiving approval from the U.S. Food and Drug Administration
("FDA"), the Company's revenue is far below many analysts'
expectations despite management having spent over approximately
$440,000,000 on sales, marketing, and
administrative expenses, which includes what we perceive as
excessive amounts of compensation for senior management. We believe
this underperformance is largely due to senior management's
inability to execute its sales plan. As a result, the stock price
has suffered. Since receiving FDA approval on October 5, 2018, the Company's stock price has
declined from $8.86 to $1.24 as of May 31,
2023, constituting an 86% decline.1
As a long-term stockholder, we have spent a considerable amount
of time reviewing the Company's corporate governance, executive
compensation practices and capital allocation decisions and
attempted to engage meaningfully with management to better
understand its overall strategy. Based on our diligence, we believe
that the Board has consistently failed to carry out its critical
role to supervise management's performance and hold management
accountable. We are deeply troubled by the Board's stewardship,
especially as it relates to executive compensation, which we
believe illustrates that several incumbent directors have been
either unable or unwilling to advance stockholders' best interests
or embrace and act on stockholder feedback. We contend:
- The Board has consistently prioritized the interests of
management by enriching Company executives at the expense of
stockholders.
- For years, management and the Board have taken harmful actions
that dilute stockholders.
- The Board has failed to hold management accountable for poor
total stockholder returns.
- Management and the Board have failed to diversify Paratek's
drug pipeline through business development efforts.
- The independent directors' limited stockholdings have only
perpetuated its misalignment with investors since the independent
directors own less than 1% of the Company's outstanding common
stock.
As such, we plan to withhold our votes for all
three directors up for election at the 2023 Annual Meeting of
Stockholders to be held July 6,
2023. If the Board was not classified, we would have
withheld our support against the entire Board.
Against this backdrop, on June 6,
2023, Paratek announced that they would be acquired by
Gurnet Point Capital, LLC and Novo Nordisk Foundation (such
transaction, the "Proposed Acquisition"). We intend to carefully
scrutinize the Proposed Acquisition once more information regarding
the sale process and valuation is made available in the proxy
statement which should be filed soon by the Company with the
Securities Exchange Commission. If we believe that the Proposed
Acquisition is unfair to public stockholders because, for example,
it provides a financial windfall to certain managers and Board
members which we believe are directly responsible for severe value
erosion to the detriment of stockholders, we will vote
against the Proposed Acquisition.
We pride ourselves on being a patient, constructive and
relationship-oriented investor. However, when the evidence of
management's entrenchment becomes undeniable and the opportunity
for long-term stockholder value creation is so high, we will always
consider exercising our stockholder rights.
Please note that NexPoint reserves all rights to take any
actions that it deems necessary to protect value for all
stockholders.
Sincerely,
NexPoint Asset Management, L.P.
About NexPoint Asset Management, L.P.
NexPoint Asset Management, L.P. is an SEC-registered investment
adviser. NexPoint Asset Management, L.P. is the adviser to a suite
of registered funds, including open-end mutual funds, closed-end
funds, and an exchange-traded fund. The funds draw on NexPoint's
investment capabilities, covering a range of asset classes and
strategies. For more information visit
nexpointassetmanagement.com.
CONTACT
Mike Geller
Prosek Partners for NexPoint
mgeller@prosek.com
1 Source: Bloomberg
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SOURCE NexPoint Asset Management, L.P.