Investment Firm Appaloosa Again Calls for Leadership Changes at Allergan

Allergan logo on large outdoor sign

After Allergan reported that its late-stage adjunctive treatment for major depressive disorder failed to distinguish itself against placebo, hedge fund investor Appaloosa LP is again calling on the Ireland-based company to make some changes to its board of directors, including tapping a new chairman.

On Thursday, Allergan said rapastinel failed to hit endpoints in three late-stage trials. Allergan did not provide many details of how the late-stage treatment stood up to placebo. The company said it will share detailed results from these three studies at future scientific meetings. That wasn’t enough for Appaloosa.

In a statement, the investment firm called on Allergan to install an independent chairman of the board of directors who will “bring new leadership to the board and rein in management’s predilection for value-destruction.” Brent Saunders currently serves as both chief executive officer and chairman of Allergan. Appaloosa wants to see a clear separation of those two roles. In its announcement, Appaloosa said Allergan’s “open science” business model is broken and someone needs to take over the board who will “rein in management’s predilection for value-destruction.”

“We view this action as only one in a long list of difficult decisions the board will need to confront, which may include a change in senior management, separation of business units, merger or sale of the entire company,” Appaloosa said in a statement.

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The investment firm added that there is a misplaced fear of disrupting business as usual at Allergan. That fear is “wearing thin” as an excuse, Appaloosa said. If the board continues to operate in the same manner, it will perpetuate additional erosion of shareholders’ investment.

“In fact, disruptive action is entirely warranted under these circumstances,” Appaloosa said.

Appaloosa is helmed by billionaire David Tepper. Thursday’s statement is not the first time that Tepper and Appaloosa have called on Allergan to make some changes. In February, the hedge fund called for the separation of the role of CEO and chairman of the board. That prompted a response from the company. In a letter to shareholders, the company said it strongly disagreed with the call for an immediate separation of those roles.

"Implementing a leadership change in the manner Appaloosa is recommending would be highly disruptive to the company and diminish Mr. Saunders' ability to continue to execute Allergan's strategy to create a world-class global biopharmaceutical business and develop the Company's promising pipeline. In contrast, the shareholder proposal that our board supports minimizes disruption and allows for the separation of the chair and CEO positions with the next leadership change, as these resolutions typically provide,” the company said.

As part of its response, Allergan said in 2018 the company exceeded its financial performance targets, advanced its robust pipeline and executed its disciplined capital allocation plan.

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