Despite a purge of the leadership team at Alexion, a key investor believes the company needs to do more in order to address its damaged reputation and lift its stock price.
Despite a purge of the leadership team at Alexion Pharmaceuticals by new Chief Executive Officer Ludwig Hantson, a key investor believes the company needs to do more in order to address its damaged reputation and lift its stock price.
This morning the New York Times reported that hedge fund Elliott Management has taken a stake in the company and is readying for a fight to push management in the direction the investor believes the company should go. That fight may be what other investors are wanting as share prices of Alexion are up more than 6 percent this morning, hitting $113.82 as of 10:55 a.m.
Although Elliott Management did not comment on the Times’ story, people “familiar with the matter” said the hedge fund wants Alexion’s management to provide more “aggressive financial performance guidance” or even consider putting the company up for sale. If no action is taken, Elliott Management is prepared for a proxy fight to claim seats on the company’s board of directors, the Times reported.
News of the potential proxy fight comes only months after Hantson took over the reins of embattled Alexion. Alexion and its management team has been under a cloud as lawmakers have looked into company sales practices surrounding its blood-disorder drug Soliris. In January, the company admitted that unnamed members of its senior management team used “inappropriate business tactics” to market the drug. Investigations into the company sparked the resignation of the former CEO David Hallal, as well as Vikas Sinha, the company’s chief financial officer.
Since taking over, Hantson has initiated other changes besides shaking up the C-suite team. In September, the company said it was laying off 20 percent of its staff, shuttering some sites and planning to relocate its headquarters from Connecticut to Boston. Alexion said the restructuring and changes will save the company approximately $500 million in GAAP and non-GAAP pre-tax savings yearly by 2019. Those savings are expected to be reinvested in its R&D efforts and other investment opportunities. At the time, Hantson said the streamlining of company resources will create a leaner organization with greater financial flexibility.
Additionally, Alexion has pushed forward with its R&D programs, including a licensing deal this week with California-based Halozyme Therapeutics for that company’s ENHANZE drug-delivery technology to develop subcutaneous formulations of its portfolio of products, including of ALXN1210, the company’s investigational long-acting C5 complement inhibitor. ALXN1210 is an improved version of its blockbuster blood-disorder drug Soliris.
In its report, the Times noted that Elliott Management began investing in Alexion in April, about a month after Hantson joined the company. While the fund managers have generally been supportive of the moves made by Hantson, the Times said it is pushing for the company to “further cut costs, set higher financial performance targets and better communicate with investors and analysts.” Elliott is also seeking additional board members who are biotech experts, the Times said. Additionally, Elliott Management warned leadership about making any M&A moves outside the company’s core area of expertise, a nod to the largely failed $8.4 billion acquisition of Synageva in 2015.
Leerink analyst Geoffrey Porges told the Times that he believes Hantson and his team are “doing everything that investors could ask of them.” Porges added though that if Alexion does not improve over the next six months, it could find itself in the crosshairs for acquisition, the Times said.
