Proxy War Between Bay Area Innovia and Sarissa Heats Up, Could Mother of All Bombs Follow at Next Week’s Board Meeting?
April 14, 2017
By Mark Terry, BioSpace.com Breaking News Staff
Only two days after activist hedge fund Sarissa Capital Management publicly attacked Brisbane, Calif.-based Innoviva , Innoviva announced it was going to make a major review of its costs and executive compensation.
On April 11, Sarissa Capital Management issued a press release as part of its plan to nominate a minority slate to the board of directors of Innoviva at the company’s 2017 annual meeting, which will be held next week on April 20. Sarissa argued that shareholders should not believe that the company’s current board and management team would make the right “capital allocation decisions.”
It stated, “Innoviva is spending approximately $25 million per year, or $1.8 million per employee, to simply collect royalties. This sum is an outrageous amount of money for a company with such a simple business. But Innoviva disagrees and disturbingly refers to itself as ‘a very lean company.’ And to make matters worse, Innoviva has said that it seeks to ‘build over time a recurring revenue business.’”
Sarissa argues that the company’s plan is to buy assets in order to justify its spending and compensation, and “imprudent acquisitions will irreversibly alter the strategic position of the company and thereby irreparably damage shareholder value.”
It called for the company to publicly confirm to shareholders that it wouldn’t make an acquisition without shareholder approval.
It then nominated George Bickerstaff, Jules Haimovitz and Odysseas Kostas to the Innoviva board. And in all caps, it wrote: “INNOVIVA DOES NOT MARKET OR SELL ANY DRUGS. IT JUST COLLECTS ROYALTIES. SO WHY IS INNOVIVA’S SPENDING AND COMPENSATION SO EXORBITANT? IT IS TIME FOR INNOVIVA TO BE OPTIMIZED FOR SHAREHOLDERS.”
It then urged shareholders to vote on the Gold Proxy Card.
This came about two weeks after calling for dramatic cuts to Innoviva’s compensation for its chief executive officer and board.
Yesterday, Innoviva announced that it appreciated its support during its proxy battle with Sarissa Capital and welcomed constructive feedback. “As a result of our recent conversations with shareholders,” the company stated, “your Board of Directors has determined to undertake a fresh, comprehensive review of all of our costs, including executive compensation structures.”
It expects to provide the results of its review in the third quarter. Innoviva then urged shareholders to vote on the White Proxy Card. GlaxoSmithKline has a 29.3 percent stake in Innoviva. According to Reuters, GSK supports Innoviva’s efforts to delivery shareholder value. In addition to the stake, GSK and Innoviva have a partnership. The two companies made a regulatory submission to the U.S. Food and Drug Administration (FDA) for a once-daily, closed triple combination therapy fluticasone furoate/umeclidinium/vilanterol for patients with chronic obstructive pulmonary disease (COPD) in November 2016. This New Drug Application (NDA) is for the maintenance of patients with COPD, including chronic bronchitis and emphysema.
“We are delighted that the U.S. submission has been achieved some 18 months earlier than planned,” said Mike Aguiar, chief executive officer of Innoviva, in a statement at the time. “If approved, FF/UMEC/VI as a once daily triple combination in a single inhaler could be a meaningful addition to the treatment options available for advanced COPD patients.”
Sarissa owns 2.72 percent of Innoviva.