Biotech Values

[DewDiligence]

Re: ENTA BoD changes

ENTA is permanently reducing the size of its BoD from 7 to 5, effective at the annual meeting on 2/6/14; no reason is given for the change, but the impetus is presumably to give more control to each director, one of whom is CEO, Jay Luly.

ENTA’s directors will continue to serve staggered 3-year terms; with 5 total directors following the reduction in size, there will be 2 directors on the 2015-expiration cycle, 2 directors on the 2016-expiration cycle, and one director (Luly) on the 2017-expiration cycle.

Two current directors (Marc Goldberg and David Poorvin) who would have been on the 2017-expiration cycle, if they had run for reelection, are resigning effective 2/5/14, the day before the annual meeting. According to an 8-K filed today (http://www.sec.gov/Archives/edgar/data/1177648/000119312514008032/d658819d8k.htm ), these two resignations are “not the result of any disagreement with Enanta on any matter relating to its operations, policies or practices.”

It makes sense that ENTA would want Marc Goldberg, one of the company’s founding VCs, to leave the BoD now that the company is public; Goldberg is deemed non-independent, and some investors consider it poor corporate governance to have more than one non-independent director on a small BoD.

David Poorvin was an independent director, so there is no particular impetus I know of for him to leave other than the desire to reduce the size of the BoD.

These matters are discussed in the Form DEF14A proxy statement for the annual meeting—see Proposal 1 (page 7):

http://www.sec.gov/Archives/edgar/data/1177648/000119312514008040/d649140ddef14a.htm

Why are Goldberg and Poorvin resigning on 2/5/14—one day before the annual meeting—rather than at the meeting on 2/6/14? There may be some legal nuance to explain this, but a simple practical reason might be that these two individuals do not wish to attend the meeting. By having them resign before the annual meeting, ENTA won’t get penalized on a metric used by some corporate-governance watchdogs: the proportion of directors who attend the annual shareholders’ meeting and meetings of the BoD.