Thursday, February 17, 2011

"We ARE Creating Shareholder Value," Argues Actelion's Clozel

Actelion's CEO Jean-Paul Clozel clashed entertainingly with one of the Swiss biotech's biggest (and newest) shareholders during the company's full-year results announcement Feb. 17.

The clash came despite Actelion's management unashamedly using the event to reassure investors that the company DOES have their interests at heart, that it IS creating optimal long-term value and that"to consider a sale at this time [in the company's evolution] would be the worst time imaginable" for existing shareholders.

The context: a Feb. 3 letter from Elliott Advisors, a hedge fund that only months before had become among the largest shareholders. The letter called for Clozel's resignation, accused management of stifling several alleged take-over approaches, thereby denying investors the chance to cash in, and claimed poor corporate governance (CEO on the board; board Chairman a supporter of CEO).

Actelion, we felt, fended off the letter rather well. (It also retorted that "there have been no offers for the company".) But it is surely no coincidence that the company chose today to declare its first ever dividend, the first of regular payouts to its shareholders? And that each member of the management team presaged his talk with a quick big picture sketch to drive home the "we're committed to unlocking shareholder value" message?

"I feel I'm a little closer to my shareholders as a result of this dividend distribution," said Clozel. "It's a way for us to share with our long-term investors what we have been able to build up." CFO Andrew Oakley seemed to suggest it was entirely normal for Actelion to pay a dividend given the company's strong profitability, commercial muscle and its healthy pipeline. "It's a logical step for the company."

This is a company staunchly defending its independence. Fighting off the sharks. It's a company arguing that it has gone through the start-up and build-up phases of a biotech's evolution and is now entering the 'leverage' stage, when it has its pipeline, its infrastructure, its buildings (including a spanking new five-storey steel business center, opened in Dec. 2010), and is now waiting for the rewards to pour in.

As such, to sell out now would "deprive all the employees and loyal shareholders the possibility of sharing in the rewards" that they're due, said Clozel, "for the benefit of a few people wanting to make a quick profit."

This dig at the hedge funds was picked up by a member of Elliott Advisors in the audience -- which is when the real fun began (fun that Actelion management had wanted to avoid, by allegedly barring some hedge funds from the presentation). "We're here for the long-term," the Elliott representative claimed, so don't accuse us of looking for quick gains. After pointing out that there weren't many shareholders in the room (it was an analyst and media event, mind you), he went on to ask about the company's processes for receiving and reviewing takeover approaches (read our letter, said Clozel), about how the company dealt with conflicts of interest generated by Clozel's being on the board (it's very useful and important that management is represented on the board, he said) and the company justified building such an expensive building...when pharma is facing severe regulatory challenges and when shareholders are being asked to finance hundreds of millions in R&D that have led to failures?"

This was getting funny: Clozel, who's built up Europe's most profitable and successful biotech company, was being saddled with all of Big Pharma's productivity woes. And being asked to justify his new business center (it came in "within budget" and "before it went up, Otto [Schwarz, BD and Operations] had been sitting in a container since 2008").

There was more entertainment to come. Did the audience like the building, Clozel asked. (We weren't there, but we gather hands were raised). Who didn't like it? Well, this Elliott guy, surprise surprise. Who was then, in the grand finale to this extraordinary -- public -- exchange between CEO and shareholder, accused of being "the son of Prince Charles." An allusion, we hasten to add, to that British royal family member's well-known disregard for modern architecture.

What about the numbers? Ah, the numbers. Revenues up 13% in local currencies, EBIT up 19% in local currencies, lots about managing the cost base, lots about how wonderfully the shares have done over the long-term...and plenty of reminders about the CHF 800 million share buy-back program, initiated in Nov. 2010.

image by flickr user USFWS Pacific used under a creative commons license.

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