Alexion CEO Resigns Amid Improper Sales Probe; Shares Dropby
CEO, CFO said to have lost board confidence as probe ongoing
Former AstraZeneca CEO Brennan takes over as interim chief
Alexion Pharmaceuticals Inc. Chief Executive Officer David Hallal and Chief Financial Officer Vikas Sinha have both left the drugmaker amid allegations that the company engaged in improper sales practices.
The board lost confidence in the two top executives because of information that was uncovered during an internal investigation, according to a person familiar with the matter who asked not to be identified.
The shares slumped 16 percent to $111.20 at 11:14 a.m. in New York, after earlier falling 17 percent in the biggest intraday decline since 2008.
Hallal and Sinha were among the key executives who built the drugmaker from a small company with $1.1 million in revenue in 2005 to the rare-disease powerhouse that brought in $2.6 billion in sales last year. Almost all of that revenue came from top drug Soliris that’s now at the center of the probe Alexion unveiled last month following allegations of improper sales practices made by a former employee.
Hallal will be replaced in the interim by David Brennan, 63, a board member and former CEO of AstraZeneca Plc, Alexion said in a statement Monday. The investigation is nearing completion and so far nothing has been found that would require making changes to past financial results, the New Haven, Connecticut-based company said.
“The assumption will be that there’s something wrong with this company and until their rationale is better known it’s going to be eating at investors’ minds,” said Eric Schmidt, an analyst with Cowen & Co. who rates the shares outperform.
Analysts estimate that Soliris will generate 92 percent of Alexion’s $3.1 billion in sales this year. It’s approved for paroxysmal nocturnal hemoglobinuria, which causes the body to destroy its own red blood cells, and atypical hemolytic uremic syndrome, a rare genetic disease that can damage organs including the kidney and heart.
Hallal joined Alexion in 2006 to start the drugmaker’s sales organization, and rose to become its CEO in 2015 after overseeing the introduction of Soliris. In its statement, Alexion said he resigned for personal reasons. He’ll get $3.65 million in connection with his exit, according to a company filing, and agreed to cooperate with the firm.
Sinha, who left the company for other opportunities according to the statement, had joined in 2005 as CFO. He will receive payment in line with being terminated without cause, according to the filing. He’s being replaced by David Anderson, 67, who was finance chief at Honeywell for 11 years.
Alexion, which delayed its quarterly report last month amid the investigation, now expects to submit it by January.
Interim CEO Pay
Brennan will receive $6 million in annual cash compensation, a $5,000 monthly housing allowance, transportation expenses and similar equity awards he’d have gotten as a director, according to Monday’s filing. He was awarded stock and options worth about $225,000 for his services in 2015. Cash-dominated pay packages are rare among biopharma companies, which often rely heavily on stock options to reward executives.
Anderson joined Honeywell in 2003 as CFO and is credited with helping CEO Dave Cote turn around the maker of a diverse range of products including jet engines and work boots, which had been missing financial targets and was losing talent after a failed takeover by General Electric Co. Anderson, who stepped down from Honeywell in 2014, helped sell off underperforming units while purchasing companies to expand the company’s business lines.