Bay Area's Depomed Craters as New CEO, Directors are Named in Deal With Activist Investor
March 29, 2017
By Mark Terry, BioSpace.com Breaking News Staff
Newark, Calif.-based Depomed has been in an ongoing battle with Jeffrey Smith, managing member of hedge fund Starboard Value LP, and appears to have lost.
Depomed announced today that the company’s president, chief executive officer and board member, James Schoeneck, had resigned. He is being replaced by Arthur Higgins. The company also indicated that Higgins, William McKee, former chief financial officer of Barr Pharmaceuticals, and Gavin Molinelli, a partner at Starboard Value LP, were joining the company’s board of directors. They are replacing Samuel Saks and David Zenoff, who resigned from the board.
Remaining board members include Karen Dawes, James Fogarty, Louis Lavigne, Jr., Robert Savage, Peter Staple and James Tyree. Fogarty will act as the new board chairman.
Higgins served as the chief executive officer of Bayer HealthCare . He was previously chairman and chief executive officer of Enzon, and president of Abbott Laboratories ’ Pharmaceuticals Division. Most recently he was senior advisor to The Blackstone Group.
“I am honored to be able to work with the management and the Board of Depomed,” Higgins said in a statement. “We have an opportunity to accelerate Depomed’s journey as a leader in pain management and neurology as we maximize value for all shareholders.”
Depomed focuses on pain treatment and other central nervous disorders. It markets Gralise (gabapentin) for Postherpetic Neuralgia, Cambia (diclofenac potassium for oral solution) for acute migraines, and Zipsor (diclofenac potassium) liquid filled capsules for mild to moderate acute pain, and Lazanda (fentanyl) nasal spray CII for breakthrough pain in cancer patients. It also offers a drug delivery technology called Acuform.
Starboard has been trying to oust Depomed’s board since at least April 2016. Last year, Starboard reported that it had a 9.8 percent stake in the company. The news was revealed after Depomed attempted a hostile takeover of Horizon Pharma . Starboard argued that it did not approve of the company’s governance and had concerns about its capital allocation.
The activist hedge fund is noted for this approach, which it used with Darden Restaurants (DRI) in 2014. It was semi-successful in a similar attempt with Yahoo. After a year and a half of criticism and attempts to fully replace the board, Yahoo gave it four seats on the board of directors, including one to Jeffrey Smith.
Depomed shares dropped 3.79 percent on the news, although it was perhaps related to the first-quarter report that indicated revenue was lower than expected.
There have been takeover rumors for some time. It’s not clear what the company’s direction will be, but it, like many companies that develop and market pain killers, is receiving more scrutiny from the federal government. Bill Meagher, writing for TheStreet, says, “The company received a letter March 28 from the committee on Homeland Security and Governmental Affairs and ranking member Senator Claire McKaskill requesting sales and marketing documents. Other companies receiving the same request include Johnson & Johnson , Mylan , Insys Therapeutics and Purdue Pharma.”
Depomed are currently trading for $13.70.