SCHEDULE: Activist Investor Blasts Adverum-Lilly Deal, Won't Tender Shares

BML Investment Partners and Braden M. Leonard, holding 15.6% of Adverum Biotechnologies, express deep disappointment with the Eli Lilly merger terms and the board's handling of the sale process.

Summary

• BML Investment Partners, L.P. and Braden M. Leonard collectively beneficially own 3,249,326 shares of Adverum Biotechnologies, Inc. common stock, representing 15.6% of the class.
• BML Investment Partners, L.P. acquired 3,057,526 shares using $28,041,322 of working capital.
• Braden M. Leonard acquired 191,800 shares using $1,509,466 of working capital.
• The reporting persons acquired the shares for investment purposes and may evaluate, acquire, or dispose of shares based on various factors.
• A letter was sent to Adverum's Board on November 10, 2025, expressing strong disappointment with the terms of the merger with Eli Lilly.
• The investor believes the deal is a result of a flawed process, lack of urgency, strategic errors, and poor decision-making by management and the Board.
• The investor criticizes the Board for not commencing a full sale process immediately after 'Party A' withdrew from a partnering transaction on June 3, 2025, especially given the company's limited cash runway of only several months.
• The Board explicitly decided against a sale process at multiple meetings (June 17, June 25, July 9, July 16, 2025) to avoid impacting Lilly negotiations, which the investor views as a breach of fiduciary duty.
• BML Investment Partners does not plan on tendering its 15.5% (stated in letter, 15.6% in filing) of total outstanding shares due to the unfavorable terms of the current deal.

Sentiment

Score: 2

Explanation: The sentiment is overwhelmingly negative due to the activist investor's strong criticism of the company's management, the merger terms, and the board's strategic decisions, culminating in a refusal to tender shares. This indicates significant dissatisfaction and potential conflict.

Negatives

• The terms of the merger with Eli Lilly are described as 'underwhelming and highly disappointing' by the reporting persons.
• The investor criticizes the Board for a 'flawed process,' 'lack of proper sense of urgency,' 'strategic errors,' and 'poor decision making' regarding the sale.
• The Board's decision to not immediately commence a full sale process after 'Party A' withdrew on June 3, 2025, is seen as a 'complete breach of fiduciary duty,' especially with only 'several months' of cash runway.
• The investor questions the Board's priority in spending time securing shareholder approval for repricing underwater options instead of focusing on a sale process.
• BML Investment Partners does not intend to tender its shares due to the unfavorable deal terms, indicating significant shareholder dissent.

Risks

• The company had a 'cash runway of only several months' around March-June 2025, indicating significant liquidity risk.
• The Board's decision-making process regarding the Eli Lilly merger and the timing of a potential sale process is being challenged by a significant shareholder, potentially leading to governance disputes.
• The current merger terms with Eli Lilly are considered 'unfavorable' by a major investor, suggesting potential undervaluation or dissatisfaction among other shareholders.
• Failure to secure a more favorable deal or address shareholder concerns could lead to further investor activism or impact future strategic initiatives.

Future Outlook

The reporting persons may continuously evaluate their investment in Adverum Biotechnologies, potentially acquiring or disposing of common stock. They may also engage in discussions with the Issuer, its representatives, and/or other stockholders, seek confidentiality agreements, and discuss strategic alternatives or changes to the Issuer's operations.

Management Comments

• "The terms of the merger the Adverum Board has struck with Eli Lilly are underwhelming and highly disappointing."
• "BML believes this is the result of a flawed process that lacked a proper sense of urgency, several strategic errors on behalf of management and the Board, and generally poor decision making that lacked common sense throughout the entire process."
• "It is simply unbelievable that a sale process was not commenced immediately after Party A indicated on June 3, 2025, that it was not moving forward with a partnering transaction."
• "The fact that the Board did not immediately enact a full-on sale process the moment it sensed it was down to one bidder (and, incidentally, in the middle of an expensive Phase 3 trial with just months of cash left) seems to us like a complete breach of fiduciary duty."
• "At this point, BML does NOT plan on tendering its 15.5% of total outstanding shares, based on the unfavorable terms of this current deal."

Industry Context

This filing highlights an activist investor's intervention in the biotechnology sector, specifically concerning M&A strategy and corporate governance. The criticism of the board's handling of a potential sale process, especially given a limited cash runway and the withdrawal of a potential partner, reflects common challenges in biotech where companies often face pressure to secure funding or strategic partnerships to advance costly clinical trials. The investor's stance against the Eli Lilly merger terms suggests a belief that the company could have achieved a better outcome through a more robust and urgent sale process, a frequent point of contention in biotech M&A.

Comparison to Industry Standards

• The investor's criticism of the Board's failure to initiate a full sale process immediately after a key partnering transaction fell through, especially with a 'cash runway of only several months,' suggests a deviation from best practices in managing liquidity and strategic options in the biotech industry. Companies in similar situations often explore all strategic alternatives, including a full sale, to maximize shareholder value and ensure operational continuity.
• The characterization of the Eli Lilly merger terms as 'underwhelming and highly disappointing' implies that the deal may not meet the valuation expectations typically seen in successful biotech acquisitions, particularly for companies with assets undergoing Phase 3 trials. While specific comparable deals are not named, the investor's strong negative sentiment suggests a perceived gap between the deal's value and what could have been achieved through a competitive bidding process, as seen in other biotech M&A scenarios where multiple bidders drive up valuations.

Corporate Governance

Stakeholder Impact

• **Shareholders:** The primary impact is on shareholders, particularly those who might be considering tendering their shares in the Eli Lilly merger. BML's refusal to tender its 15.6% stake signals significant dissatisfaction with the deal's value, potentially influencing other shareholders' decisions and creating uncertainty around the merger's completion or terms.
• **Management and Board:** The filing represents a direct challenge to the Adverum Board and management, accusing them of strategic errors and a breach of fiduciary duty. This could lead to increased pressure, potential governance disputes, and a need to address shareholder concerns.
• **Eli Lilly:** While not directly impacted by the investor's decision to not tender, the public dissent from a major shareholder could introduce uncertainty or complications into the merger process, potentially affecting deal timelines or public perception.

Next Steps

• The reporting persons may continue to evaluate their investment in Adverum Biotechnologies.
• They may acquire or dispose of additional common stock of the Issuer.
• They may engage in discussions with the Issuer and its representatives and/or other stockholders.
• They may seek to enter into a confidentiality agreement with the Issuer.
• They may discuss different strategic alternatives or changes to the Issuer's operations with the Issuer.

Key Dates

Recommendation

The filing reveals significant shareholder dissatisfaction with the Eli Lilly merger terms, with a major activist investor (15.6% stake) explicitly stating they will not tender their shares due to 'unfavorable terms' and criticizing the Board for a 'flawed process' and 'breach of fiduciary duty.' This strong dissent, coupled with the company's previously short 'cash runway,' suggests a highly contentious situation and potential undervaluation of the company in the proposed merger. The refusal of a large block of shares to tender could complicate the deal's completion or lead to further instability. For an investor, this signals substantial downside risk and a lack of confidence in the current strategic direction and the proposed merger's value, making a 'sell' recommendation prudent to avoid potential losses or prolonged uncertainty.

Keywords

Adverum Biotechnologies, BML Investment Partners, Eli Lilly merger, Schedule 13D, activist investor, corporate governance, shareholder activism, biotechnology, M&A, fiduciary duty, cash runway