Troubled AMAG spurns activist's attempt to rework board as share price flags

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AMAG is hoping to stave off activist investor Caligan's plan to replace four members of its board. (Pixabay)

Activist investor Caligan is hoping to oust four directors on the board of AMAG, the maker of female libido med Vyleesi, for its sluggish performance. But AMAG’s board isn’t giving up so easily.The troublemaking proxy challengers are “self-serving and reckless,” the company's board said Monday, asking shareholders to rebuff Caligan’s effort to replace four of nine directors with its hand-picked nominees.

In its response to Caligan’s call to vote on its nominees, including the firm’s co-founder David Johnson and former Boehringer Ingelheim CEO Paul Fonteyne, AMAG said the activist's critique cited “sloppy research, wild assumptions, misleading peer groups and Caligan’s confusion” about the specialty pharmaceuticals industry.

“Caligan’s suggestions represent a dramatic and fundamental misunderstanding of how value is created in the pharmaceutical industry and the value in AMAG’s business model and strategic plan,” the company said in an SEC filing.

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Caligan’s proposal pointed to AMAG’s shrinking share price—and what it called the failure of the drugmaker’s five-year strategic plan—despite the “immense value” of some of its pharmaceutical portfolio. The firm said AMAG’s board, recently elected in May, was approved because shareholders lacked options.

“It is clear to us that the Board and management’s perception of its performance is divorced from reality,” Caligan said in a filing.

Caligan acquired 10.3% of AMAG’s shares in early August, aiming to push the company to find an international marketing partner for its iron deficiency med Feraheme and investigate opportunities for its women’s health business. Earlier this month, Caligan also floated the idea of splitting up the drugmaker.

AMAG is in the midst of launching controversial female libido drug Vyleesi after its approval in June. While the drugmaker has high hopes for the drug, analysts have posted less-than-stellar forecasts.

In a June 17 note to investors, Barclays’ analyst Balaji Prasad predicted the drug could generate revenue of $108 million by 2025, assuming an annual price of $600, he said. Piper Jaffray analyst Christopher Raymond said in a May note “we do not have high expectations for the asset.”

That tempered response has been backed by a stock price on the continued downswing. The company’s shares hit a peak of $77.17 in July 2015 but have been on a steady downward march since then to $13.09 in pre-market trading Monday.

Caligan tied that financial performance to its targeting of AMAG's four directors, including Davey Scoon, Gino Santini, James Sulat and John Fallon. For Scoon, who has served on AMAG’s board since 2006, Caligan said the director has overseen an 86% drop in total shareholder return since his election.

Alongside Johnson and Fonteyne, Caligan has nominated Lisa Gersh, the former CEO of Alexander Wang, Goop and Martha Stewart Living Omnimedia; and Kenneth Shea, a former senior managing director of Guggenheim Securities. AMAG cited the nominees’ lack of industry experience—and a potential conflict of interest for Johnson—as their primary concerns with Caligan’s picks.

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