Catalent faces board shake-up pressure from activist investor Elliott: WSJ

Catalent’s onerous year just got even more complicated. While the drugmaker stood out as the contract manufacturer to beat at the height of the COVID-19 pandemic, dwindling vaccine contracts, an FDA citation and executive turnover have afflicted Catalent in recent months.

Now, with the CDMO on the back foot, a prominent activist investor is said to be agitating for change.

Proxy battler and shareholder dissident Elliott Management has acquired a stake in Catalent in a bid to shuffle the drugmaker’s board, The Wall Street Journal reported Thursday.  Elliott has been in talks with potential director candidates in an effort to build a Rolodex of nominees for a potential proxy contest, the news outlet added.

It isn’t immediately clear how big Elliott’s stake in the company is. As of Friday morning, Catalent had a market capitalization of around $8.5 billion, with its stock up 5% so far this year.

Meanwhile, Catalent’s nomination window for director candidates closes July 29, the WSJ added.

Catalent did not immediately respond to Fierce Pharma’s request for comment on the report. 

This sort of move is typical for Elliott, which has tried to shake things up at other drug majors like Bayer and GSK in recent years.

As for Catalent, the shareholder pressure comes after a run of challenges the company has faced since the start of 2023.

Back in April, Catalent cautioned that “productivity issues” and high costs at three major production sites—including two of the CDMO’s largest—were expected to hamper third-quarter earnings and dampen Catalent’s entire outlook for the fiscal year, which ran through the first half of 2023. At the same time, Catalent revealed that its chief financial officer, Thomas Castellano, had stepped down, prompting the company to slot its president and division head for clinical development and supply, Ricky Hopson, into the finance chief’s seat.

Before Catalent issued its earnings caveat, rumors had surfaced that life sciences conglomerate Danaher was looking to buy out the company at a “significant premium.” Subsequently, Danaher was said to have ditched that plan.

Separately, Catalent this spring delayed its earnings report several times, telling investors on multiple occasions that it needed more time to get its finances in order.

“Our financial performance and operational execution have all fallen significantly short of our expectations and our primary focus,” the company’s CEO, Alessandro Maselli, said in May, noting, “we accept responsibility for disappointing you.”

But when Catalent finally unveiled its earnings report in June, the results weren’t as bad as expected. In the end, Catalent made a slight adjustment to its revenue projection for the year. Now, 2023 sales are expected to come in between $4.23 billion and $4.33 billion versus a prior projection of $4.25 billion to $4.35 billion.

Earlier in the year, Catalent projected 2023 revenue would fall between $4.63 billion and $4.88 billion.

Meanwhile, the company also had a recent run-in with the FDA, with the agency's rejection of Regeneron’s high-dose Eylea being linked to cleaning and procedural issues at the CDMO's site in Bloomington, Indiana.

Still, it hasn’t all been bad news for Catalent this year.

In April, the company broke ground on a $20 million expansion of its clinical supply facility in Germany, where it’s increasing its Schorndorf site’s footprint by 32,000 square feet to add additional storage for clinical supplies that need to be kept at certain temperatures.

And a month before that, nonprofit drugmaker Harm Reduction Therapeutics tapped Catalent to help produce commercial supplies of its prospective opioid antagonist RiVive. That move came shortly after Harm Reduction won a priority review on its over-the-counter naloxone application at the FDA.