Billionaire investor David Tepper’s hedge fund Appaloosa Management and Senator Investment Group on Tuesday called on Allergan’s board to split the office of the chief executive officer and chairman.
In a letter, the hedge funds also urged the Botox-maker to hire a new CEO or chairman from outside the company and to replace at least two additional board members.
Allergan should not look to pursue an ambitious M&A strategy at this time, the hedge funds said, and should instead focus on running its core business.
“We renew our calls for the company to stop hiding behind an arbitrary debt reduction target as an excuse to preserve the means to pursue a transformative M&A transaction,” the letter said. “It is time for Allergan’s management to concentrate on running a world class pharmaceutical and aesthetics business and forego thoughts of, or the exhilaration from, an ambitious acquisition strategy.”
Allergan said last week it was planning to sell off two businesses it considers non-core to the company, including its women’s health and infectious disease businesses. This way, the company could focus on its core aesthetics business which includes products like Botox and double chin treatment Kybella as well as its eye care brands like Restasis for dry eye, as well as its urology and gastroenterology units.
While Allergan and its CEO were once investor darlings, things took a turn in September 2017 when the company touted a deal it had struck with the Saint Regis Mohawk Tribe to transfer patents of the eye drug Restasis. The move gives the drug sovereign immunity from certain patent challenges.
In October 2017, a district judge invalidated some of Restasis’ patents through another channel. The loss meant Allergan wouldn’t get much of the upside from the St. Regis deal, especially after the negative reaction it received from lawmakers and the public.
Matters didn’t get better when Allergan announced in April it was in the “in the early stages of considering a possible offer” for the UK-listed Shire, only to say four hours later that it wouldn’t make an offer.
Business Insider had previously reported that investors had raised concerns about Allergan’s direction after seeing the drugmaker’s shares plummet 33% in the past year. That’s compared to a 12% rise for the Nasdaq Biotech Index during the same period.
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