SUWANEE, Ga. and
PETERBOROUGH, N.H., Jan. 31, 2018 /PRNewswire/ -- Digirad
Corporation, East Hill Management Company, LLC, and Thomas M. Clay (collectively with certain other
participants in the solicitation, the "Concerned Aviragen
Shareholders Group", the "CAS Group", "we" or "us"), who are
significant stockholders of Aviragen Therapeutics, Inc., a
Delaware corporation ("Aviragen",
"AVIR" or the "Company") (NASDAQ: AVIR), with collective beneficial
ownership of approximately 8.3% of AVIR's outstanding shares of
common stock, today wish to emphasize the potential value of the
Company's ongoing teslexivir (BTA074) program, which Aviragen
stockholders should not lightly trade away when clinical proof of
concept is fast approaching. In addition, the CAS Group today
announced that Glass, Lewis & Co., LLC ("Glass Lewis"), a
leading independent proxy voting advisory firm, has recommended
that Aviragen stockholders vote AGAINST the proposed merger
(the "Merger") with Vaxart, Inc. ("Vaxart") at the upcoming Special
Meeting of Stockholders (the "Special Meeting").
GLASS LEWIS RECOMMENDATION
In its report, Glass Lewis considered many factors and concluded
(emphasis added):
"While we understand the impetus for the board's exploration
of strategic alternatives, and further acknowledge the public
nature of the process and the number of counterparties involved,
we also find the presented combination was preceded by critical
procedural flaws and continues to rely heavily on the support of a
tenuous operational case and decidedly suspect quantitative
methodologies. We believe the net impact of this framework is
readily reflected in Aviragen's languid share price, which implies
very little value is being assigned to the combined enterprise, net
of the Company's current cash balance. In this regard, we
believe the CAS Group has successfully argued for a process
reset, which, though not free of cost, presents a much lower
risk to Aviragen's liquid resources than Vaxart's current cash
burning operational profile and uncertain development prospects, in
our view."
Other Excerpts from Glass Lewis's Analysis & Recommendations
(emphasis added)
On the Flawed Process Run by Aviragen:
"In redoubling our concerns in this regard, we are further
unable to identify clear citation in the circular or related
materials that indicates the transactions committee, when formed,
was comprised of members considered independent under Nasdaq
rules. We would argue this suggests the board's more recent
and ardent effort to characterize the committee's efforts as free
of conflict -- to be clear, with no reference to Nasdaq regulations
-- is specious and misleading to unaffiliated investors, at
best."
"There is no indication the underlying conflicts [of
directors Cox and Dunne] were ever sufficiently alleviated to allow
either director to return to full board participation, suggesting
the relevant affiliations persisted through the latest stages of
Aviragen's strategic review. We believe this raises
significant questions around possible connections between Messrs.
Cox and Dunne and Vaxart, given that the pre-execution process
effectively narrowed to a two-horse race -- Vaxart and one other
entity -- by mid-September 2017; the
definitive merger agreement was not signed for an additional six
weeks, during which the recusals of Messrs. Cox and Dunne remained
in place."
"We thus believe the board's conclusion that Party F's
"inadequate and highly conditional" bid might somehow "handcuff the
board" is fundamentally incongruent with -- and generally
undermines the basis for – its broader arguments on value."
"Taken together with our significant concerns in relation to the
composition of the transactions committee and the board's overall
conflict mitigation effort, we believe there is sufficient cause
to suggest pivotal components of the board's process were flawed
and potentially preclusive to a fulsome assessment and
understanding of Aviragen's value as a target. We thus believe the
presented framework fails to clearly establish the Vaxart
transaction is reasonably likely to represent the most attractive
strategic alternative presently available to Aviragen
investors."
On Aviragen's Valuation Analysis:
"Turning first to Stifel's review of comparable companies, we
agree [with the CAS Group] there appears to be a dubious
weighting in favor of Vaxart….We thus believe Stifel's election
to include significantly larger and arguably non-comparable
biotechnology enterprises in the assessment of Vaxart's intrinsic
value -- a benefit, to be clear, that is not afforded to Aviragen
-- may inappropriately inflate Vaxart's value and
significantly off-set the more sobering valuation conclusions that
might be derived from Vaxart's more direct peer set."
"Stifel does not make significant effort to address these
disparate assessments or explain why Vaxart was subjected to a
precedent transactions analysis to begin with. The board's own
rebuke principally relies on stock language acknowledging the firms
and transactions utilized were not identical to either Aviragen or
Vaxart, and that associated conclusions were drawn from complex
considerations and judgements. Given the breadth of our concern
here, we do not believe these responses are persuasive."
VALUE OF TESLEXIVIR (BTA074) PROGRAM
Because the proxy statement filed by Aviragen with the U.S.
Securities and Exchange Commission (the "SEC") on December 29, 2017, as amended (the "Aviragen
Merger Proxy Statement") focused on the pipeline of Vaxart, we
believe that inadequate attention has been paid to Aviragen's own
lead clinical asset, BTA074 (teslexivir).
The BTA074 Program is a Valuable Asset
The CAS Group wishes to emphasize the value we place on the
BTA074 program, and we encourage Aviragen stockholders to remember
that it is a valuable asset. In fact, the Aviragen Merger
Proxy Statement revealed that BTA074 will provide the only clinical
trial readout possible for the combined company during 2018.
We believe that stockholders of Aviragen should not hand a 60%
economic interest in BTA074 to Vaxart just a few short months
before clinical proof of concept for this program could potentially
be announced. We believe that a successful result from
BTA074's currently ongoing Phase 2 CT4 trial could significantly
increase the value of the program and that Aviragen stockholders
can best capture this value by voting AGAINST the proposed Vaxart
Merger on the BLUE proxy card at the upcoming Special Meeting.
Aviragen's current management and board of directors (the
"Board") approved the acquisition of Anaconda Pharma ("Anaconda")
for its condyloma program, which became BTA074, in February
2015. Aviragen paid Anaconda stockholders $8 million cash upfront and issued them 3.5
million shares of Aviragen, then worth approximately $9 million. Aviragen also agreed to
contingent payments totaling $30
million upon the occurrence of successful clinical
development and commercial milestones, plus an undisclosed royalty
on product sales. We understand that a $10 million contingent payment in cash or stock
will be due to Anaconda upon successful results from BTA074's
ongoing Phase 2 CT4 trial or, if the Phase 2 results are positive
but do not satisfy the pre-set targets, upon the commencement of a
Phase 3 trial. Although we have not seen Aviragen quantify
the cost of the ongoing Phase 2 CT4 trial, we estimate that the
Company will have spent approximately $10
million in clinical, regulatory, manufacturing, and other
costs developing BTA074 between the time of acquiring the program
from Anaconda in 2015 and acquiring top-line data from the CT4
trial, expected in the second quarter of 2018.
Aviragen's Actions vs. Words
We believe that the Company's stockholders should closely
compare the value that Aviragen management assigns to BTA074 in the
Aviragen Merger Proxy Statement (management's words) against the
value that they have been willing to spend on the program
(management's actions). It appears that Aviragen assigns very
little if any positive future value to BTA074 in the standalone
business scenario to which they assign an overall corporate value
of $25 million ($0.65 per share). However, by the middle of
2018, we estimate that Aviragen's current management and Board will
have spent at least $27 million
($8 million + $9 million + $10
million) to bring BTA074 to the point of generating topline
Phase 2 trial results, or $37 million
if the CT4 trial results hit pre-established targets and
$10 million is paid to Anaconda
stockholders. Unless Aviragen management means to say that
the money spent on BTA074 has been squandered, we believe that the
program could have considerable value to the Company on a
standalone basis. Based on costs that will have been incurred
by the end of June 2018, that value
should be at least $27 million
($0.70 per share). In fact, we
believe that positive Phase 2 trial results would constitute
compelling proof of concept supporting the continued clinical
development of BTA074 and could even represent a significant value
inflection point for the program and for Aviragen stockholders.
CAS Group Will Seek to Maximize the Value of
BTA074
The CAS Group is committed to maximizing the value of the BTA074
program for current Aviragen stockholders and expects that our
slate of director nominees, if elected, will do the same.
Despite insinuations by Aviragen management to the contrary, the
CAS Group has explicitly not set out to pursue a liquidation of the
Company that would compromise the value of BTA074. Instead,
we believe that the proposed Vaxart Merger undervalues Aviragen's
assets tremendously (especially BTA074) and will divert the
Company's cash from BTA074 to fund Vaxart's risky, earlier stage
programs. We believe it is highly unwise and shortsighted for
Aviragen stockholders to trade away a 60% economic interest in
BTA074 just a few short months before a major value inflection
point, without being paid a premium price for the value that
program could soon represent.
We believe the Aviragen Board should ensure that the Company has
the necessary personnel and expertise available to effectively
develop BTA074 and maximize its value for Aviragen
stockholders. We are troubled by reports that Aviragen has
terminated employees associated with the BTA074 program in the
expectation of replacing them with Vaxart employees. We are
worried that important familiarity with the BTA074 program may
thereby be lost and that current Vaxart employees will likely be
more invested in Vaxart's programs than in BTA074. We believe
that this was a false economy for the Company, since BTA074 is
possibly the Company's most valuable asset.
We note with dismay that Aviragen management was unable to find
any savings by cutting compensation to the Company's CEO, CFO, or
Board, despite the dramatically reduced activities they have
overseen as a result of the Company's clinical failures in recent
periods. By comparison, BTA074 is entering a critical period
in which its future value will be determined by a robust analysis
of the Phase 2 CT4 trial data and end-of-Phase 2 meetings with the
FDA. Underinvesting in BTA074 at this time is a shortsighted
way to cut costs that could harm Aviragen stockholders.
We believe Aviragen stockholders can benefit from the
development of BTA074 and should not hand 60% of that program, plus
a healthy cash balance that could fund that program, to Vaxart just
a few months before data that could confirm the program's value
become available. We believe that the terms of the proposed
Merger assign little to no value to the BTA074 program despite
Aviragen's significant investments in that program to date.
We believe that any acquisition of Aviragen should be delayed until
data from the Phase 2 CT4 trial become available, and we also
believe that, if the trial is successful, an acquirer should not
obtain control of Aviragen and the BTA074 program without paying a
significant control premium. By contrast, we believe Vaxart
is not paying any control premium in the proposed Merger and
instead views the transaction primarily as a financing event for
that company, as Vaxart management indicated on the conference call
held to announce the Merger. To ensure that all Aviragen
stockholders receive full value for the BTA074 program, we urge
them to vote AGAINST the proposed Merger on the BLUE proxy card at
the upcoming Special Meeting.
About Teslexivir (BTA074)
Teslexivir is a
topical antiviral agent that is a potent and selective inhibitor of
the interaction between two essential viral proteins, E1 and E2, an
interaction that is a necessary step for Human Papilloma Virus
(HPV) 6 and 11 DNA replication and thus viral production. HPV
types 6 and 11 are responsible for more than 90% of anogenital
condyloma.
About the CT4 Clinical Trial
BTA074 is
currently being evaluated for the treatment of condyloma in
Aviragen's Phase 2 CT4 clinical trial. The CT4 trial
completed patient enrollment in November
2017 and is expected to produce top-line results in the
second quarter of 2018. CT4 is a Phase 2 double-blind,
randomized, multi-center, placebo-controlled trial designed to
evaluate the safety, tolerability, and efficacy of teslexivir 5%
gel in male and female patients with condyloma, or anogenital
warts. Over 210 patients were enrolled, randomized 2-to-1
(teslexivir to placebo gel), and dosed twice daily for up to 16
weeks. The primary efficacy endpoint is the complete clearance rate
for baseline anogenital warts from the commencement of therapy to
the end of the treatment period. Secondary efficacy endpoints
include various efficacy assessments of clearance and wart area
reduction for both baseline warts and post-baseline emergent warts,
as well as the assessment of condyloma recurrence over a 3-month
follow-up period, in patients who experience clearance.
About Condyloma (Anogenital Warts)
Condyloma
infections from HPV represent the most frequent viral sexually
transmitted disease in adults worldwide. In the United States, approximately one to two
percent of sexually active adults between the ages of 15 to 49
develop condyloma as the primary clinical manifestation of HPV
infection. Currently available treatments for anogenital warts
typically are divided into two categories, ablative/destructive
therapies and topical therapies. Existing topical therapies are
associated with significant mucosal toxicities manifesting as
erosions and ulcerations, which can result in therapy
discontinuation. Ablative options can be painful and scarring and
can lead to sexual dysfunction. Another significant limitation with
current therapies is a high incidence of recurrence after
successful primary treatment.
THE CAS GROUP URGES ALL AVIRAGEN STOCKHOLDERS
TO CONSIDER THE VALUE OF AVIRAGEN'S BTA074 PROGRAM AND VOTE THE
BLUE PROXY CARD TODAY AGAINST THE ILL-ADVISED MERGER WITH VAXART AT
THE UPCOMING SPECIAL MEETING.
PLEASE SIGN, DATE, AND MAIL THE BLUE PROXY
CARD TODAY
|
|
|
|
|
|
If you have any
questions, require assistance in voting your BLUE proxy
card,
|
or need additional
copies of the CAS Group's proxy materials,
|
please contact
InvestorCom at the phone numbers listed below.
|
|
InvestorCom
SHAREHOLDER INTELLIGENCE
|
|
65 Locust Avenue,
Suite 302
|
New Canaan, CT
06840
|
Shareholders call
toll free at (877) 972-0090
|
Banks and Brokers may
call collect at (203) 972-9300
|
|
You may find more
information at:
|
www.icommaterials.com/CAS
|
|
About Digirad
Digirad delivers convenient, effective, and efficient healthcare
solutions on an as needed, when needed, and where needed
basis. Digirad is one of the largest national providers of
in-office nuclear cardiology and ultrasound imaging services, and
also provides cardiac event monitoring services. These
services are provided to physician practices, hospitals and imaging
centers through its Diagnostic Services business. Digirad
also sells medical diagnostic imaging systems, including
solid-state gamma cameras, for nuclear cardiology and general
nuclear medicine applications, as well as provides service on the
products sold through its Diagnostic Imaging business. For more
information, please visit www.digirad.com.
About East Hill Management Company
East Hill Management Company, LLC is a registered investment
adviser with the Securities and Exchange Commission.
Investor Contact:
John Glenn Grau
InvestorCom
(203) 295-7841
jgrau@investor-com.com
View original
content:http://www.prnewswire.com/news-releases/cas-group-announces-glass-lewis-recommendation-that-aviragen-stockholders-vote-against-merger-and-emphasizes-value-of-teslexivir-bta074-program-300590890.html
SOURCE Digirad Corporation