Some Pharma Companies Attempt to Keep Shares from Falling in the Hands of Activist Investors Like Ackman and Icahn
November 16, 2015
By Alex Keown, BioSpace.com Breaking News Staff
NEW YORK – Some pharmaceutical companies are including activist shareholder protection clauses when striking financing deals with equity firms, Bloomberg reported this morning.
Bloomberg cited an October agreement between Concordia Healthcare Corp. and Cinven a private European equity firm for a 14 percent stake in the company that includes clauses preventing Cinven from transferring or reselling shares to 60 activist investors and hedge funds, including those run by Bill Ackman, Carl Icahn, and Dan Loeb. Concordia focuses on legacy pharmaceutical products and orphan drugs. It markets Nilandron for prostate cancer, Lanoxin for mild-to-moderate heart failure, and Zonegran, for partial seizures in epilepsy.
Blomberg’s research placed the reason for these protectionist clauses at the feet of Ackman and his company, Pershing Square Capital Management, a major investor in Canadian-based Valeant Pharmaceuticals International Inc. . Ackman, who is the third-largest investor in Valeant, was a major player in Valeant’s unsuccessful attempt to acquire Allergan Inc. the maker of the Botox anti-wrinkle treatment. As the deal fell apart, Allergen filed a lawsuit against Ackman for breaking insider trading regulations.
Loeb, who runs Third Point LLC, was behind a call to break up Amgen , which it had a large stake in, according to the Bloomberg report.
The term activist investor is defined as “a person or firm who has started a proxy contest against them, called a meeting of their shareholders, or made a hostile bid for their stock within the past two years,” Bloomberg said.
Ackman has been a point of focus as Valeant is facing troubles related to the pricing of recently acquired drugs as well as its relationship with Philidor RX Services, a specialty pharmacy company that has been the subject of scrutiny over its accounting practices. Although he ultimately stood behind J. Michael Pearson, Valeant’s chief executive officer, Ackman questioned Pearson’s leadership and at one point suggested the CEO should be replaced. Citing the Wall Street Journal, a Business Insider report said Ackman, who has lost approximately $2 billion as Valeant shares have lost more than 75 percent of their value, sent an email to Pearson on Oct. 27 saying the CEO’s reputation was “at grave risk” and that Valeant has become “toxic.” He also indicated that Pearson may have to be replaced as CEO of Valeant, Business Insider said.
Ultimately though, Ackman expressed his support in an email to Pearson.
“You are one of the most shareholder-oriented CEOs I know. You have assured me that you and the rest of the board are considering any and all alternatives that would benefit shareholders and other stakeholders. That is very comforting to us,” Ackman said in the email posted by CNBC.
Additional companies including the protection clauses in financing deals include Israel-based Teva Pharmaceuticals, which “included a ban on resales to activists when it agreed in July to purchase Allergan’s generic business for almost $41 billion in cash and stock,” Bloomberg reported. Mylan NV also added a no-activist clause in a 204 deal to acquire Abbott Laboratories ’ generics pharmaceutical business.
Over the past year, there have been more than $550 billion worth of M&A activity in the pharmaceutical industry.