Pharma Takeover Target Paratek Is Being Too Obvious
Pharma Takeover Target Paratek Is Being Too Obvious
(Bloomberg Gadfly) -- Paratek Pharmaceuticals Inc.'s management could try being a little more subtle.
The Boston-based biopharmaceutical company, best known for developing antibiotics that treat bacterial pneumonia and skin infections, has been weighing a sale amid takeover interest, according to a Bloomberg News report in late August. But even before this scoop, tweaks to the company's executive compensation acted as crumb-droppings for astute observers.
Earlier in August, Paratek's compensation committee granted key executives some performance-based restricted stock units. Conveniently, if there's a "change in control" (translation: sale), these executives will earn the ability to vest the entirety of these stock units in a bevvy of scenarios. These includes termination, resignation for any set of pre-defined "good reasons" or if Paratek's would-be buyer doesn't substitute or otherwise maintain the units.
Paratek also amended, restated, and superseded the executives’ existing employment agreements, which were inked only seven weeks prior in mid-June. The key change? Reimbursements for federal, state and local taxes that arise from golden-parachute payments, up to a certain amount. Those details are yet to be filed with the SEC, but even without, it appears that Paratek's executives are attempting to ensure they'll directly benefit from the company's sale.
For what it's worth, Paratek is currently valued at $600 million but could climb to more than $1.2 billion by this time next year, according to Wall Street analysts.
So, who's buying? The FT suggested that Paratek's partner on an acne-treatment product, Allergan PLC, had already put forth a proposal this year. And Merck & Co., Medicines Co., Pfizer Inc., Roche Holding AG and GlaxoSmithKline PLC have been named as other potential buyers by analysts including those at Gabelli & Co. But considering that the $2.4 billion Medicines Co. is unprofitable itself, I believe it's the least likeliest of that group, especially since the others rely in part on developing their own drug pipelines by snapping up potentially successful biopharma companies like Paratek.
Paratek is slated to release its third-quarter results in two weeks, and shareholders will be hoping the company reiterates the timing around new drug applications to the FDA that were shared at its recent investor day. Even if a deal isn't announced imminently, when one is eventually struck, it should come as no surprise that Paratek's management will be handsomely rewarded. The timing around shoring this up though, while odd, may have simply been unavoidable -- better late than never, right?
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
Gillian Tan is a Bloomberg Gadfly columnist covering deals and private equity. She previously was a reporter for the Wall Street Journal. She is a qualified chartered accountant.
To contact the editor responsible for this story: Beth Williams at bewilliams@bloomberg.net.
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