SUWANEE, Ga. and PETERBOROUGH, N.H., Jan. 29, 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 announced that Institutional Shareholder
Services Inc. ("ISS"), a leading independent proxy voting advisory
firm, has recommended that Aviragen stockholders vote on the CAS
Group's BLUE proxy card to vote AGAINST the Vaxart
Merger at the upcoming Special Meeting of Stockholders (the
"Special Meeting").
In reaching its conclusion, ISS performed a detailed review of
both sides' positions in the election contest as well as its own
thorough independent analysis, stating: "For every M&A
analysis, ISS reviews publicly available information and evaluates
the merits and drawbacks of the proposed transaction, balancing
various and sometimes countervailing factors, including, but not
limited to, the valuation, market reaction, strategic rationale,
negotiations and process, conflicts of interest, and
governance." In its report, ISS considered many factors and
concluded:
"Aviragen is in a difficult position. Following multiple
unsatisfactory clinical trial results, AVIR shares have declined
substantially, reflecting a dim outlook for the company on a
standalone basis. While management has advocated that a merger with
Vaxart provides the best long-term value opportunity, AVIR shares
currently trade at a small fraction of the company's implied
post-merger valuation, which seems to indicate that management has
not made a sufficiently compelling argument that justifies the
terms of the deal. In exchange for its net cash position and status
as a publicly traded company, Aviragen would be ceding control to a
company with significant net debt, a pipeline of potentially
rewarding but still very early stage trials, and that is likely in
need of future possibly dilutive funding."
"An alternative would be for shareholders to reject the deal
in the hope that the board finds another transaction that
adequately compensates shareholders for Aviragen's assets (cash, a
public listing, and a royalty stream). This proposition is not
without risk, though it is reasonable to believe that other suitors
would be interested in a transaction with Aviragen, given what it
brings to the table. Moreover, by choosing this alternative,
shareholders would preserve their liquidation option. Based on the
above, a vote AGAINST is warranted."
Thomas M. Clay, Manager of East
Hill Management Company, LLC stated, "We greatly appreciate ISS's
recommendation that stockholders vote against the Vaxart merger on
the CAS Group's BLUE proxy card at the upcoming Special
Meeting. ISS's impartial analysis considers the arguments of
both Aviragen management and the CAS Group and comes to the
conclusion that the proposed merger is not in the best interests of
AVIR stockholders. We continue to believe that Aviragen's analysis
of the merger overvalues Vaxart and undervalues Aviragen by every
valuation method, most egregiously through a precedent transaction
analysis that awards Vaxart a control premium despite the fact that
it is actually the acquirer in this transaction. We are
confident that stockholders who closely consider the two sides'
arguments will vote AGAINST the merger to protect their
investment."
Concluded Clay, "We greatly appreciate the strong support from
stockholders who have already voted against the merger on the
BLUE proxy card. We urge all of our fellow
stockholders to vote their BLUE proxy card today to reject
the ill-advised Vaxart merger."
Other Excerpts from ISS's Analysis & Recommendations
On Aviragen's Liquidation Valuation and Ability to
Continue on a Standalone Basis:
"In the filing, Aviragen estimated that the liquidation value
for the firm as of Oct. 31, 2017, was
$22.4 million ($0.58 per share) after all future liabilities
were subtracted from the cash balance of $31.5 million. However, in that calculation,
Aviragen assumed a contingent payment of $10
million related to the Anaconda stock purchase agreement,
which would become payable if Aviragen's phase 2 clinical trial of
BTA074 achieved successful results. However, it does not appear
that Aviragen assumed any increase in value of the BTA074 program
in the event of successful phase 2 results. Adding back that
$10 million payment to Aviragen's
calculated liquidation value results in a value of $32.4 million or $0.84 per share."
"Aviragen estimated a status quo valuation of $25.0 million, or $0.65 per share. Unlike its analysis of the
liquidation scenario, for its standalone valuation, the company did
not include the $10 million
contingent payment associated with the Anaconda stock purchase
agreement. As such, the standalone case appears to offer less value
to shareholders than the liquidation of the company.
Despite the negative view of Aviragen's business
prospects, the standalone case does not appear to imply short-term
risk to shareholders. Assuming a cash burn rate adjusted for
eliminated research and development spending in line with what was
observed in 1Q18, it seems that Aviragen's cash balance would allow
the company to remain independent for an additional four
years."
On Vaxart as a Poor Merger Partner:
"On one hand, shareholders have the option of merging with
Vaxart, a company with the potential to develop
multi-billion-dollar vaccines. As these vaccines remain in, or
have just completed, phase 1 clinical trials, the probability of
success is still very low. According to a study published by
the Biotechnology Innovation Association, only 9.6 percent of drugs
in phase 1 trials and 15.2 percent of drugs in phase 2 trials end
up being approved for commercialization."
"A key consideration for shareholders is Vaxart's high
leverage. Biotech companies often seek to reach milestones that
will allow them to obtain additional funding to continue the
development of their drug candidates. Leveraged balance sheets like
Vaxart's, however, could dissuade investors who might require
seniority in the company's capital structure in return for
injecting capital in a high-risk business."
On the Proposed Vaxart Merger and the Market's
Reaction:
"Given the risks outlined above, it appears the valuation of
a combined company as presented by management paints an optimistic
view of the future potential. The proposal indicates a
post-merger valuation of $264
million, which implies an Aviragen valuation of $106 million (40 percent of the combined
company), or about $2.74 per share.
But with AVIR trading at $0.61 per
share, or roughly only 22 percent of the estimated value (and down
26 percent since the deal was first announced), it seems clear
that the market disagrees with management's estimates."
"Aviragen management estimates that the value of the combined
entity post-merger will be $264
million based on a publicly traded peer group with an equity
valuation range of $14 million –
$1.2 billion. This implies Aviragen's
contribution to the new entity would be $106
million (40 percent of $264
million) or about $2.74 per
share. With AVIR currently trading for $24.0 million ($0.62 per share), or less than a quarter of the
company's estimate, the market appears to be pricing in significant
skepticism about the company's valuation assertions. As a result,
the liquidation value of $32.4
million represents a 35 percent premium to the market's
value assessment."
"Aviragen Therapeutics, Inc.'s stock price declined by 18.1
percent on the day of the announcement versus a 0.1 percent
appreciation in the Nasdaq Biotechnology Index. Though it is not
unusual for an acquirer's stock price to decline in response to a
transaction, the severity of the decline is unusual.
Through Jan. 19, 2018, AVIR shares
have declined by 19.3 percent since the announcement,
underperforming the Nasdaq Biotechnology Index by 25.6 percentage
points."
On the Viability of Alternative Options:
"The remaining alternative would be for shareholders to reject
the deal in the hope that the board finds another transaction that
adequately compensates shareholders for Aviragen's assets (cash, a
public listing, and a royalty stream). This proposition is not
without risk, as the board appears to have already run an extensive
process before selecting Vaxart as a merger candidate. There is no
indication that either Party F with its previous bid of
$0.84 per share or any other suitors
are currently seeking to engage with Aviragen. At the same time,
it is not unreasonable to believe that other biotech companies,
including some with a lower risk profile than Vaxart, would be
interested in a transaction with Aviragen, given what it brings to
the table. Moreover, by choosing this alternative, shareholders
would preserve their liquidation option."
THE CAS GROUP URGES ALL AVIRAGEN STOCKHOLDERS
TO CONSIDER ISS'S RECOMMENDATION AGAINST THE MERGER 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
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SOURCE Digirad Corporation