Biotech Values

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Activist Investor Demands Actelion Shakeup

http://online.wsj.com/article/SB10001424052748704376104576122280224150752.html

›FEBRUARY 4, 2011
By GORAN MIJUK

ZURICH—Investment firm Elliott Advisors Ltd. called for a boardroom overhaul at Actelion Ltd., launching a battle that could lead to the sale of Europe's largest biotech company.

In a letter sent to Actelion's board Thursday and expected to be received Friday, Elliott Advisors called for Actelion Chairman Robert Cawthorn and Chief Executive Jean-Paul Clozel to step down from the company's board immediately.

Elliott, a unit of U.S.-based hedge fund Elliott Management Corp., is one of Actelion's largest shareholders, with a voting stake of about 5.12% as of Jan. 20, according to data provided by the Swiss bourse.

Elliott appears to be seeking the chance to explore a sale of the company. It indicated in the letter that it believes management has dragged its feet in doing so.

Elliott said that "shareholders are being given no choice regarding the future direction and management of Actelion" and that "a sale of the company to a strategic investor at the appropriate price could unlock substantial value."

The investment firm, which has assets valued at $17 billion, is known to pick high-profile fights with companies it has invested in to boost the value of its stake. In 2007, after a two-year battle, Elliott Management forced Swiss recruiter Adecco SA to pay a higher price for its acquisition of Germany-based competitor DIS.

Elliott said in the letter that it had tried to reach out to Actelion's board but "found that little progress was made to address [its] concerns." It said it will place the issues on the agenda for Actelion's shareholder meeting on May 5.

Actelion has been considered a takeover target since October in the wake of a series of drug-development setbacks. U.K.-based GlaxoSmithKline PLC, which has a drug research partnership with Actelion, U.S.-based Amgen Inc., Eli Lilly & Co. and Bristol-Myers Squibb Co. have all been named as potential bidders.

No formal offer has been made, and the companies have repeatedly declined to comment on the market speculation. Actelion said in November that it was in regular dialogue with industry participants, but Mr. Clozel, the chief executive, has repeatedly said the company wants to stay independent.

Elliott Advisors criticized the defensiveness of Mr. Clozel, a cardiologist who helped found the company in 1997 out of a spin-off from Roche Holding AG. "We believe (Mr. Clozel's) public statements and apparent campaign to keep the company independent are wholly inconsistent with his position as a board member," it said.

While asking him to step down from the board, Elliott Advisors said it has "great respect" and is "happy for him to remain as CEO." But Elliott said that Chairman Cawthorn's "continued support of Clozel's actions conflicts with shareholders' interests...and that he should therefore step down." Instead, Actelion's board should "select a new independent chairman."

Including Messrs. Clozel and Cawthorn, a former chairman and CEO of Rhone-Poulenc-Rorer Inc., Actelion's board consists of nine members. Among them are several pharma and chemicals specialists such as Werner Henrich, a Roche veteran, and Michael Jacobi, a former chief financial officer of Ciba Specialty Chemicals.

"In our view, it is crucial that an independent board member with a proven track record in this field leads this committee," Mr. Elliott said. "We firmly believe that, if a fair process is allowed and facilitated by the board of directors, a number of these potential acquirers will be in a position to offer shareholders a purchase price for their shares well in excess of the company's stand-alone value."

According to analyst estimates, a potential bidder may pay up to 70 francs ($74.72) per Actelion share, valuing the company at about nine billion Swiss francs. An acquirer could thus access the biotech company's solid cash flow, which stems from its blockbuster hypertension drug Tracleer. However, some say that Actelion's weak pipeline and the fact that Tracleer's patent will expire in 2015 could hold off bidders. Actelion closed at 52.5 francs Thursday, indicating a market capitalization of about 7.1 billion francs.‹