Activist investor NexPoint threatens to block Paratek's $462M sale

Paratek Pharmaceuticals' annual meeting is set for July 6, but fireworks are already exploding over the company’s attempt to sell out to investment firms Novo Holdings and Gurnet Point for $462 million.

Activist investor NexPoint Asset Management—which holds 12% of Paratek’s common stock—is trying to detonate the deal. The Dallas-based investment firm has sent an open letter to the company’s board, explaining that the sale might not be in the best interest of stockholders.

NexPoint is scrutinizing the board’s approval of the deal and has asked Paratek for more information on how it was conducted. The investor also is threatening to withhold its vote on three board members who are up for election because of “serious concerns with the board’s lack of oversight in holding management accountable for years of underperformance.”

NexPoint also said it is withholding votes because the board has approved “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.”

In a regulatory filing, Paratek acknowledged the letter and said it has been in discussion with NexPoint over the “past several months.” But the company disagrees with the investor’s assessment of the company’s performance.

NexPoint said that it invested in Paratek in 2016 because of the promise of the company’s top drug, Nuzyra (omadacycline). The once-daily oral and intravenous antibiotic is for the treatment of community-acquired bacterial pneumonia and related skin infections.

Nuzyra, which was approved in 2018, generated $137 million in sales in 2022, far short of Leerink’s $500 million peak sales projection.

“The company’s revenue is far below many analysts’ expectations despite management having spent over approximately $440 (million) on sales, marketing and administrative expenses, which includes what we perceive as excessive amounts of compensation for senior management,” NexPoint wrote in its letter.

Paratek CEO Evan Loh, M.D., was paid $2.04 million last year, down from his $3.61 million compensation in 2021, the company said (PDF) in its annual report.

The investor also cited a decline in the share price of the company from $8.86 upon Nuzyra’s approval to $1.24 at the end of May of this year.

June 6, Paratek announced the planned sale of the company for $462 million. Paratek’s market cap is at $130 million, down from $780 million in 2018. Paratek reported revenue of $160 million in 2022.