Actelion Ltd. (ATLN)’s shareholders should oust board members and replace them with former executives from Novartis AG (NOVN) and Merck KGaA, a hedge fund said as it stepped up pressure on the biotechnology company to consider options, including a sale.
Elliott Advisors (UK) Ltd. nominated James Shannon, the former head of global development at Novartis, as chairman of the Actelion board, and also proposed five other directors, the fund said today in a statement. Today is the deadline for shareholders to submit agenda items for the Allschwil, Switzerland-based company’s May 5 annual meeting.
The proposal sets up a contest between Elliott, part of a $17 billion hedge fund founded by Paul Singer, and Actelion to win over shareholders. Elliott has retained proxy adviser Georgeson, while Actelion hired Goldman Sachs Group Inc. and Wachtell Lipton Rosen & Katz to help defeat Elliott.
“The first thing I would do is put all options back on the table, including a merger, including acquisition of other companies or late-stage or marketed products,” Shannon said in a telephone interview. While Actelion “fundamentally is sound,” waiting until a shareholder meeting in 2012 wouldn’t leave enough time to make changes, he said.
Actelion’s board has taken note of Elliott’s requests and will provide shareholders with the full list of agenda items and recommendations “in due course,” the company said in an e-mailed statement.
Elliott, whose 6 percent stake makes it Actelion’s biggest shareholder, sent two letters to the drugmaker’s board last month, asking the company to study a sale and disclose any takeover approaches. Elliott also said Actelion Chairman Robert Cawthorn should resign and Chief Executive Officer Jean-Paul Clozel, who helped found the company in 1997, should leave the board.
The fund today also nominated Elmar Schnee, former head of pharmaceuticals at Merck KGaA; Anders Haerfstrand, former chief executive officer of Swiss drugmaker Nitec Pharma AG; Peter Allen, acting chief executive of ProStrakan Group Plc; Robert Hock, a former investment banker at JPMorgan Chase & Co. and Lehman Brothers Holdings Inc., and Hans-Christian Semmler, chief executive at Haupt Pharma AG, a contract manufacturer and developer of medicines.
Elliott’s list of nominees may not win over undecided shareholders, Olav Zilian, an analyst at Helvea SA in Geneva, said in a telephone interview.
“They don’t have a stellar track record and they needed that,” Zilian said. “They should have brought in retired executives from companies such as Amgen and Genentech, where you can claim that they’re experienced in the biotech field and have that entrepreneurial spirit.”
Actelion contends the drugmaker should remain independent so shareholders can benefit from the value of new medicines such as the macitentan lung treatment. Clozel has said Actelion will be a “completely different company” by the end of 2011 because of the experimental therapy, which is in clinical testing. The Swiss drugmaker has also said Elliott’s proposals risk “destabilizing” Actelion.
People with knowledge of the situation said in November that Amgen Inc. (AMGN), the world’s biggest biotech company, was considering a takeover bid for Actelion.
Shannon, a physician by training, worked at Novartis for 14 years, according to Elliott. He sits on the boards of South San Francisco-based Cerimon Pharmaceuticals Inc. and Biotie Therapies Oyj.
Shift to Macitentan
Actelion got about 85 percent of its 1.93 billion Swiss francs ($2.14 billion) in revenue last year from sales of the Tracleer medicine, which treats a lung condition known as pulmonary arterial hypertension. Macitentan would be a successor to Tracleer, which begins to lose patent protection in 2015.
Efforts to reduce reliance on Tracleer have faltered after a slew of clinical trial setbacks. The drug failed a test to widen its use last year, while another treatment, clazosentan, didn’t help patients in a study who had suffered from bleeding in the brain.
“They have played two late-stage development cards and so far both of those have failed,” Shannon said. “Really they’re left with one significant late-stage card to turn over and that card, macitentan, still carries significant regulatory risks but even more significant are the commercial risks.”
It can be difficult to replace a “very good” product with a new medicine that could be much more expensive, he said.
Elliott proposed today that all directors should go through annual re-election and that the chairman of the board be elected by shareholders. The fund also is seeking information or a “special investigation” to clarify whether Actelion has received any takeover approaches since the start of 2010 and how any such approaches were handled.
Actelion’s stock lost almost a third of its value in the first nine months of last year, and Clozel said the development setbacks made the company more vulnerable to a takeover. The stock has jumped 21 percent since then on speculation a drugmaker would try to buy Actelion. The shares fell 40 centimes, or 0.8 percent, to 48.20 francs in Zurich trading.
The drugmaker halted development of an experimental insomnia pill because of concern that patients wouldn’t be able to tolerate the medicine, the company said Jan. 28.
Elliott said March 7 it started a website to help investors register their shares and vote at the May 5 meeting. Later that day, Rudolf Maag, who owns 4.2 percent of Actelion’s shares, said he “fully supports” the company’s strategy.
Of the nine board members, Elliott is proposing the ouster of Juhani Anttila, Werner Henrich, Michael Jacobi, Armin Kessler and Jean Malo in addition to Clozel and Cawthorn. The fund “supports the retention” of current board members Joseph Scodari and Carl Feldbaum, according to the website started by Elliott.
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