Money

Elliott Management Is Said Push for Changes at Alexion

Elliott Management Is Said Push for Changes at Alexion

By MICHAEL J. de la MERCED

Continue reading the main story
Share This Page

Continue reading the main story

Photo

oliris, a drug to treat twoa rare blood disorders, is Alexion’s primary product. The company has high hopes for a new drug that is essentially an improved version of Soliris and could extend the company’s patent protection by 20 years.

Credit
Rick Madonik/Toronto Star, via Getty Images

LONDON — Alexion Pharmaceuticals has remade its executive ranks over the past year in a bid to turn around its fortunes. But one of the biggest activist hedge funds around thinks that the company’s efforts haven’t been enough.

Elliott Management, which has previously taken on the likes of Samsung and the aluminum parts maker Arconic, has built a stake in Alexion and has urged the biopharmaceutical company to do more to lift its stock price, according two people with direct knowledge of the matter who were not authorized to speak publicly.

If Alexion’s management does not take action — from offering more aggressive financial performance guidance to considering strategic alternatives such as selling itself — Elliott could end up taking actions like beginning a proxy fight to claim seats on the company’s board, these people added.

A spokeswoman for Elliott declined to comment. In a statement, a representative for Alexion said that the company “believes in active and constructive dialogue with all of our shareholders, and we value their perspectives.”

Advertisement

Continue reading the main story

The potential battle between the drugmaker, whose market value as of Thursday was $24 billion, and the hedge fund, which oversees $34 billion in assets, demonstrates the continued clout of activist investors. Such hedge funds now oversee $125 billion in assets, according to Hedge Fund Research, and remain on the hunt for targets on which they can deploy that capital.

Continue reading the main story

The latest activist target is Alexion, a 25-year-old biotech whose primary product, Soliris, is used to treat two extremely rare blood disorders. The drug's annual costs to patients can run into the hundreds of thousands of dollars.

But the company has been trying to recover after numerous problems under previous management came to light this year, including an internal investigation into Alexion’s aggressive sales practices. The company’s $8.4 billion takeover of a fellow biopharmaceutical company, Synageva, in 2015 has proved to be a failure. Alexion has written off much of the value of Synageva’s main drug, Kanuma.

In March, the company hired Ludwig Hantson, the former chief executive of the drugmaker Baxalta, as its new leader. Mr. Hantson quickly replaced much of the senior management team, adding industry veterans like Paul Clancy, formerly Biogen’s chief financial officer.

Mr. Hantson has moved aggressively to right-size operations. In September, Alexion announced plans to lay off 20 percent of its roughly 3,000-employee work force and rebuild its product pipeline by investing roughly $100 million a year into new treatments. It has added two new directors and named a new chairman this year, while three incumbents have announced their plans to retire.

Annual profits at Alexion, which is based in New Haven but plans to relocate to Boston, have begun to recover from the Synageva acquisition. Alexion reported $399 million in net income last year, more than double what it earned in 2015 but still below the $657 million figure from 2014.

Analysts have been largely optimistic about the company’s future, and hopes are high for Alexion’s next drug, ALXN1210. The drug, essentially an improved version of Soliris, has begun clinical trials and could extend the company’s patent protection by 20 years.

Elliott began investing in the company in April, the people said. In several meetings since then, the hedge fund has expressed support for the company’s overall strategy. But it has also urged Alexion’s new management team to further cut costs, set higher financial performance targets and better communicate with investors and analysts.

Elliott also argued that further changes are necessary to Alexion’s board, including the addition of more biotech experts as directors. The company said in its statement that it has already changed up its board to add directors who have “highly relevant experience.”

Advertisement

Continue reading the main story

The hedge fund also cautioned against ambitious acquisitions outside of the company’s core expertise.

Shares in Alexion have risen and fallen sharply since Mr. Hantson’s hiring was announced, though they are down about 8 percent during that period. While the company’s stock originally climbed significantly after Mr. Hantson’s arrival, its began to fall in October amid investor worries over the turnaround.

That month, during the most recent meeting between the company and the hedge fund, Elliott gave Alexion management a list of four potential director candidates, the people with knowledge of the matter said. Those candidates could end up becoming part of Elliott’s slate of directors if it decides to pursue a proxy fight.

Some analysts have said Mr. Hantson and his team have made significant progress fixing the company’s problems.

“I absolutely think they’re doing everything that investors could ask of them,” said Geoffrey Porges, an analyst at Leerink.

But he added that Alexion could eventually be a takeover target — if conditions did not improve in the next six months.

“That’s where the industry as a whole has to go,” Mr. Porges said of consolidation, “and it’s hard for me to see that Alexion doesn’t ultimately get drawn into that.”

Follow Michael J. de la Merced @m_delamerced on Twitter.

A version of this article appears in print on December 8, 2017, on Page B2 of the New York edition with the headline: Activist Hedge Fund Will Push for Changes at Alexion Pharmaceuticals. Order Reprints| Today's Paper|Subscribe

Continue reading the main storyOriginal Article

Translate »
%d bloggers like this: