Irenic Capital urges Theravance to conduct review, add shareholder to board (updated)

Theravance Biopharma

27/02/2023 16:26

(Adds details on stock price, updated company statement,
background)
    By Svea Herbst-Bayliss
       NEW YORK, Feb 27 (Reuters) - Activist investor Irenic
Capital Management is urging Theravance Biopharma Inc  TBPH.O 
to initiate a review of strategic alternatives, including a full
sale, and to add a shareholder to its board, according to a
letter seen by Reuters.
    Irenic owns a 4.2% stake in the biotechnology company and
has criticized its lagging valuation and stock-based
compensation to Chief Executive Rick Winningham, who is also
board chair.  
    Theravance, which sells a treatment for chronic obstructive
pulmonary disease, could be worth $21 a share, roughly double
its $9.87 closing price last week, Irenic co-founders Adam Katz
and Andy Dodge wrote in the letter. They estimate the company's
assets exceed "$1.4 billion in value." The stock price climbed
5.5% in early trading on Monday to $10.41.
    "Were the company to conduct a proper strategic review with
independent financial advisers, we strongly believe that there
are buyers for all of the company and/or individual assets at a
substantial premium to Theravance's trading price," they wrote.
    Theravance is reporting quarterly results later on Monday
and declined to comment before they are released.
    Irenic also called on Theravance to use excess cash to
immediately issue a $300 million special dividend to
shareholders. The company does not pay a dividend now but has
been repurchasing its stock and has said it plans to continue
repurchases this year.
    The company in 2021 announced a strategic restructuring that
included cutting 75% of staff and led to operating expense
savings of $165 million in 2022. The company also eliminated its
debt. 
    Irenic criticized Theravance's executive compensation,
writing that the CEO received more than $48 million in
compensation since the company's split from Innoviva  INVA.O  in
2014. During that time "shareholders have endured substantial
losses," the letter said. The stock price has dropped 57% since
then.
    The fund also asked the company to adopt several other
changes, including having all directors stand for elections
annually and splitting the CEO and chairman roles. 
    Irenic's founders said they want to work constructively with
Theravance and said in the letter that they asked for a
shareholder representative to be appointed to the eight-member
board. They suggested Dodge as a director candidate but wrote
that the company rejected him.
    The company engaged several times with Irenic and vetted
Dodge as a possible director candidate but concluded he lacked
the healthcare background and other experience it wants to see
on the board, a person familiar with the discussions said. The
window to nominate directors at Theravance closed earlier this
month. 
    Theravance's largest shareholders include The Baupost Group
and Madison Avenue Partners.
    Since launching last year, Irenic has established itself as
a successful newcomer among activist investors. The fund
invested in News Corp  NWSA.O  and was the first to publicly
come out against a planned reunification with Fox Corp months
before a deal was abandoned. It also played a role in
overhauling the board of Capricorn Energy  CNE.L . 
    Irenic is the latest hedge fund to propose changes at poorly
performing biotech companies. Last week, Caligan Partners urged
Anika Therapeutics  ANIK.O  to consider strategic alternatives,
including a full sale, and is preparing to nominate directors to
the biotech company's board, according to a letter seen by
Reuters.
  
    
    

 (Reporting by Svea Herbst-Bayliss; Editing by Stephen Coates
and Bill Berkrot)
 ((svea.herbst@thomsonreuters.com; +617 856 4331; Reuters
Messaging: svea.herbst.thomsonreuters.com@reuters.net))