UPDATED: Hedge fund aims to oust Depomed board for 'troubling record'


If Depomed thought it was free to chart its own course after foiling a takeover by Horizon Pharma ($HZNP) last year, it can think again. A hedge fund practiced in the art of board takeovers has set its sights on the Newark, CA-based drugmaker.

Activist investor Starboard Value says it has bought up nearly 10% of Depomed's shares and wants 6 seats on the board. It says in a filing with the SEC that it has been monitoring Depomed since last year and sees that it "has a troubling record of egregiously manipulating the corporate machinery to entrench management and the Board." It says it wants to halt the drugmaker from putting in place more antitakeover actions.

The New York-based hedge fund points out that Depomed ($DEPO) frustrated Horizon's buyout at $33 a share and now its stock price is less than $15 a share. In a letter to Depomed, Starboard says that Depomed buried in some reincorporation documents more hurdles to anyone wanting to take over the company, including now requiring 25% of shareholders to approve a special meeting from 10% previously. Starboard says it believes there is value to be had from Depomed, perhaps through a sale, and warned the company against taking further steps to thwart shareholders while it moves forward with it own efforts to remake the company.

Starboard has some experience in forcing change at companies. In 2014 orchestrated the removal of the entire board of Darden Restaurants ($DRI) and it is currently waging a campaign against the board at Yahoo ($YHOO).

Depomed today issued a statement saying it has yet to hear anything directly from Starboard. However, it said, "Depomed welcomes open communications with its shareholders and values constructive input toward the goal of enhancing shareholder value. Depomed's board and management are committed to creating value for all Depomed shareholders."

Dublin-based Horizon complained last year that Depomed wasn't open to discussions at all. It tried for months to negotiate a stock deal with Depomed to broaden its portfolio beyond the orphan disease drugs it specializes in by adding Depomed's lineup of pain and central nervous system treatments. But Depomed adopted a poison pill defense and filed lawsuits to stop Horizon. One finally worked and after 8 months, Horizon threw up its hands in frustration.

At the J.P. Morgan Healthcare Conference this year, Depomed CEO Jim Schoeneck told FiercePharma in an interview that the company wasn't intrinsically opposed to a buyout, just Horizon's offer. "We're open to stuff," he said. "It really is about value and currency, and we're always open to something that can meet those hurdles."

- read the SEC filing 
- here's the letter
- here's the Depomed statement