ISS Recommends Adverum Stockholders Vote to Elect Sonic’s Three Independent, Highly Qualified Nominees
May 04 2021 - 8:30AM
Business Wire
Leading Proxy Advisory Firm Agrees that Change
Is Needed at Adverum
Criticizes Company’s “Governance Games” and
“Brute Force” Tactics in Its Conduct of Proxy Campaign
Highlights that Chair Patrick Machado Exerts
Outsized Influence Over Passive Board with Fundamental Need for
Unquestionable Independence
Finds that Sonic Is Not Seeking Control of Company and that Its
Nominees Would Add Independence to the Boardroom
Sonic Urges Fellow Stockholders to Vote on the
GREEN Proxy Card Today to Elect Its Three Independent Director
Nominees – Jean Bennett, Jodi Cook and Herbert Hughes
The Sonic Fund II, L.P. (“Sonic”), which beneficially owns
approximately 6.8% of the outstanding common stock of Adverum
Biotechnologies, Inc. (NASDAQ: ADVM) (the “Company” or “Adverum”),
today announced that leading proxy advisory firm Institutional
Shareholder Services Inc. (“ISS”), recommended that stockholders
vote on the GREEN proxy card FOR Sonic’s three independent, highly
qualified nominees (the “Nominees”) – Jean Bennett, Jodi Cook and
Herbert Hughes – for election to the Company’s Board of Directors
(the “Board”) at the upcoming 2021 Annual Meeting of Stockholders
(the “2021 Annual Meeting”), which will be held on Wednesday, May
12, 2021.
Highlighting the pressing need for change on the Adverum Board,
ISS emphasizes:1
- “… an underperformance of ADVM shares, relative to the
benchmark index, that is substantially worse than that of its
gene therapy peers, notwithstanding the read through effect of
ostensibly unrelated developments.”
- “During the tenure of the newly appointed CEO, through the
March 17, 2021, unaffected date when Sonic's proxy contest became
public, ADVM shares returned (54.6) percent, 82.8 percentage points
below the peer median and 76.4 percentage points below the Nasdaq
Biotech Index.”
- “It is difficult … to dismiss the fact that a potential
issue the dissident has been warning about all along has actually
come to pass – despite the company's previous assurances
regarding the safety of ADVM-022 – in the sense that a clinical
trial patient (for DME) experienced inflammation and subsequently
lost vision in one eye.”
- “It is worth noting that the dissident nominees have strong
backgrounds in gene therapy and finance, and therefore seem well
qualified to provide investors with an independent assessment of
the aforementioned concerns; by contrast, the management
nominees include an incumbent director who had indicated his
intention to resign prior to the dissident campaign, and two new
appointees who, while well qualified, seem to possess skill sets
that appear less critical to the board under current
circumstances.”
- “Non-employee directors Patrick Machado and Scott Whitcup
received total compensation in the last fiscal year of $762,858 and
$1,081,988, respectively. These amounts are significant outliers as
compared to non-employee directors in the same industry and index.
This represents a cost to shareholders and raises questions
about the impact on director independence.”
Rejecting Adverum’s specious argument that Sonic is seeking
“control” of the Company, ISS concludes the following:
- “Given that the two settlement nominees, who were appointed in
2019, appear supportive of the company's position in this fight, we
do not consider them to be "dissident" directors for the purposes
of this analysis. Moreover, the three dissident nominees this
year, like the 2019 nominees, do not appear to have any preexisting
ties to Sonic.”
- “The dissident's nominees … would be independent voices on
the board. By contrast, all three of the management nominees
appear to have preexisting ties to the chairman or CEO.”
Focusing on the very serious Suspected Unexpected Serious
Adverse Reaction (SUSAR) of hypotony in its INFINITY clinical trial
evaluating ADVM-022 gene therapy for the treatment of diabetic
macular edema (DME), ISS elucidates:
- “Putting to one side, for a moment, all arguments about
experience and expertise, following the April 28 update from the
company there may be a fundamental need for unquestionable
independence in Adverum's boardroom, as investors seek urgent
reassurance regarding the board's oversight of key issues, such
as the inflammation during trials and capital allocation
decisions.”
- “Given that recent events have likely delayed the prospect of
commercialization, placing far greater emphasis on the testing and
regulatory approval process, Bennett and Cook's expertise seems
highly relevant.”
- “The 60 percent decline in the share price in reaction to the
company's SUSAR disclosure, coupled with multiple Wall Street
downgrades and price target reductions, are indicative that it may
be much more costly than previously believed for Adverum to raise
the financing that will be needed to eventually see this treatment
through to commercialization. This would appear to support the
need for additional financial experience and investor perspective
on the board.”
In a section of its report entitled “Governance Games,” ISS
critiques Adverum’s handling of this proxy contest:
- “… [T]he tactics employed by board over the course of this
proxy campaign, which it justifies as necessary to maximize
long-term value for shareholders, seem questionable,
particularly if the board is indeed confident that a significant
percentage of its shareholder base opposes Sonic's continued
efforts.”
- “It appears that the company selectively provided just the
opening sentences of an email from the dissident so as to make
it appear that Sonic is trying to restore the former Avalanche CEO.
There also appears to be an outsized influence exerted by the
chairman over the size of the board, its additions, and its
exits.”
- “It is disconcerting that the board, which cooperated with
Sonic to reach a compromise in 2019, appears to have adopted a
“brute force” response this year with tactics that imply its end,
maximizing shareholder value, justifies any means, including
mischaracterizing the dissident's statements, reducing the time
between filing the proxy and holding the shareholder meeting,
leaving the future board size to be determined, and re-nominating
director Woiwode.”
- “As of March 1, Woiwode had made a decision not to continue as
a director – he either had other priorities or believed his
contribution was no longer necessary. Despite that, the board is
keeping him on for seemingly tactical purposes, to shut out the
dissident's nominees – all of whom seem highly engaged and
interested in helping the company address its current crisis.”
Finally, in its summary of Adverum’s position, ISS notes the
following, which appears to be new information that has not been
previously disclosed, and which calls for immediate explanation to
the market by the Company:
- “The board feels comfortable that the current regimen for
mitigating inflammation, topical steroid eyedrops, is optimal.
Simultaneous with that, it indicates that inflammation mitigation
is a top priority and it seeks improvement, experimenting with
different dosages (which may demonstrate effectiveness with lesser
inflammation), enhancing the purity of its manufacturing process,
and planning a study of intravitreal, rather than topical,
steroids. In engagement with ISS, the board indicated that it
believes steroid eyedrops are the best approach to controlling
inflammation at the front of the eye, but the company can explore
other options to improve how steroids control the inflammation,
and, if it exhausts steroids as a mitigation tool, it can look at
other potential solutions.”
Commenting on the ISS report, Lawrence Kam, General Partner at
The Sonic Fund II, L.P., said, “The report from ISS comprehensively
validates our position that change is urgently needed at Adverum,
not only to exercise proper oversight of the Company and restore
independence to the Board, but also to regain investors’
confidence. Chair Machado has clearly exerted undue influence in
the boardroom and cultivated a culture of poor governance that was
exemplified by the Company’s desperate tactics in this proxy
contest. We look forward to continuing to engage with stockholders
around the election of our nominees, who ISS rightly recognizes are
all fully independent, highly qualified and bring precisely the
right experience needed on the Board.”
The situation at Adverum is clearly critical. Only immediate
intervention by stockholders to improve the quality and
independence of directors can counteract the undue dominance of the
Chair who has now overseen three instances of wholesale stock price
destruction that continually punish Adverum stockholders.
Sonic urges its fellow stockholders to vote
today on the GREEN proxy card FOR all its independent, highly
qualified director candidates – Jean Bennett, Jodi Cook and Herbert
Hughes – for election to the Adverum Board of Directors to serve
until the 2024 Annual Meeting.
VOTE ON THE GREEN PROXY CARD TODAY
If you have voted a white card from Adverum,
a later-dated Green card will revoke that vote
If you have any questions or require any assistance with your
vote, please contact Saratoga Proxy Consulting, LLC, which is
assisting us, at its address and toll-free number listed on the
following page. For more information, fellow stockholders can visit
our website at https://www.saveadverum.com/investor-materials.
If you have any questions
regarding your GREEN proxy card
or need assistance in voting your shares, please contact
Saratoga Proxy Consulting,
LLC
520 8th Avenue
New York, NY 10018
Stockholders may call
toll-free: (888) 368-0379
Banks and brokers call: (212)
257-1311
info@saratogaproxy.com
1 Permission to quote ISS was neither sought nor obtained.
Emphasis added.
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version on businesswire.com: https://www.businesswire.com/news/home/20210504005441/en/
Investors: Saratoga Proxy Consulting LLC John Ferguson /
Ann Marie Mellone 212-257-1311 jferguson@saratogaproxy.com /
amellone@saratogaproxy.com Media: Sloane & Company Joe
Germani / Sarah Braunstein jgermani@sloanepr.com /
sbraunstein@sloanepr.com
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