Allergan mauled by investors in public letter

Last week, Allergan announced that a strategic review of its operations had led to a decision to divest its women’s health and infectious diseases unit – in doing so it hoped that investors would respond well to a leaner business.

However, it clearly went down like a lead balloon with some investors, as Douglas Silverman, Managing Partner at Senator Investment Group, and David Tepper, CEO of Appaloosa, penned an open letter stating, in no uncertain terms, how "underwhelmed" they were with the changes.

The investors suggested that the changes were only "token measures", which were representative of the company’s management’s "desire to cling to a status quo that has produced three years of steadily declining stock performance and a fire-sale market valuation".

They did not end there but instead suggested some changes were needed at the top level of the company; in particular, they state that Brent Saunders’ role should be reduced to either Chairman or CEO, not the current combination of both.

Finding a replacement for either role should then come from outside of the company – as well as bringing in two additional directors to the current board by replacing two existing members.

The letter concluded, "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".

This seems a direct reference to Allergan’s flirtation with pursuing a deal for Shire, which the investors had previously damned in strong language as not being a "viable strategy" for the company.

Takeda eventually purchased Shire but Allergan had released a statement announcing that it was considering making a move for the company, only for it to renege on this statement only hours later after shareholder discontent.

All of this did not give the impression of a particularly coherent leadership strategy.

Allergan responded to the letter with a fairly muted release that restated the intention of the strategic review, without addressing the criticism that the changes did not go far enough: "Allergan's board of directors and management welcome input from all our shareholders, and take into account their views. Our board and management are committed to creating a world class biopharmaceutical and aesthetics business and driving shareholder returns."

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