Innoviva Files Definitive Proxy and Sends Letter to Shareholders
Board Recommends that Innoviva Shareholders Support the Company's Strategy and Board, Which has Delivered Strong Returns
Recommends Shareholders Vote "FOR" All of Innoviva's Highly Qualified Directors on the WHITE Proxy Card
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Growth in Total Royalties Earned Last 10 Quarters (Graphic: Business Wire)
In connection to the definitive proxy filing, Innoviva's Board of Directors issued the following letter to the Company's shareholders:
Dear Fellow Innoviva Shareholder:
The Annual Stockholder Meeting of
Innoviva's management team and Board of Directors (the "Board") has
established a track record of creating value for our shareholders,
including delivering strong performance and significant capital returns.
Our strategy has resulted in a sustained increase in market share of our
respiratory portfolio in the attractive
Recently, an activist hedge fund acquired a 3% stake in the Company and asked for four seats on our seven-member Board. The fund has since dropped its demand to three seats. The fund has provided no rationale for its demands to change the Board or our strategy, particularly given Innoviva's track record and focus on shareholder value.
Our strong focus on shareholder value has delivered the following results:
- Delivering stock price appreciation that outperformed the NBI Index by 22% in 2016.
-
Returning more than
$210 million of capital to investors since the first quarter of 2015. -
Increasing the growth prospects for Innoviva's respiratory portfolio
in support of the Board's plan to return as much as
$150 million to investors in 2017. - Increasing the operating margin to 86% of total revenue in the fourth quarter of 2016.
- Achieving compounded quarterly growth in royalty revenue of 32% in the last ten quarters (see chart).
While we have increased revenues, we have also significantly reduced
operating expenses since the spin-off of our R&D activities in 2014.
Compared to the first quarter of 2014, our last full quarter as a
combined company, operating expenses in the fourth quarter of 2016 were
down over 90% to
Innoviva's strong performance has been driven by a Board and management team who have proven their ability to generate shareholder value. We believe your current Board and management team possess the right combination of financial acumen, operational expertise and relevant skills to make the critical decisions that will dictate the success of our business.
Your Board comprises seven directors, six of whom are independent, who have industry-leading expertise, a track record of value creation and are experienced dealmakers. Specifically, your Board includes:
- Four current or former CEOs;
- Two former CFOs;
- Six directors with relevant industry experience;
- Five directors with experience executing substantial M&A transactions;
- One director with professional investment experience;
- Three directors with healthcare investment banking experience; and
- Three leaders that have delivered significant outperformance in executive roles.
We've added five new independent directors since 2014 and, in the past six months, we added two new independent directors who exemplify the experience and skill set we value in any director candidate.
Most importantly, your Board is committed to delivering shareholder
value, as well as to aligning our corporate governance with best
practices. Your directors are annually elected, own
Sarissa's Proxy Fight
Sarissa Capital Domestic Fund LP and certain of its affiliates
(together, "Sarissa"), an activist hedge fund founded by
Sarissa has launched a proxy fight to replace a substantial portion of the Board, notwithstanding Innoviva's track record of delivering strong results, our plans to drive future value and the experience and expertise of our Board. Perhaps recognizing the ill-considered nature of its campaign, Sarissa has instead turned to tactical games and unfounded claims to support its proxy fight.
- Sarissa's Tactics in Launching its Proxy Fight. Sarissa nominated four directors for election to Innoviva's seven-member Board on the Company's nomination deadline, without discussing such Board changes with the Company in advance of its nominations. After dropping its general counsel from its original slate to take control of the Board, Sarissa is still seeking to replace three of Innoviva's seven directors.
-
Innoviva's Engagement with Sarissa.
Innoviva has had multiple discussions with Sarissa beginning in the fourth quarter of 2016. After Sarissa submitted its slate on the date of the nomination deadline,Innoviva again reached out to Sarissa to discuss the content of its letter. Members of Innoviva's Board subsequently interviewed and carefully assessed Sarissa's candidates, and we continue to offer to have meetings and calls with representatives of Sarissa. -
Unfounded Attacks. In support of its slate, Sarissa has
attacked the Company's cost structure and executive compensation and
has launched a wasteful books and records demand to try to bolster its
unsupported claims. Here are the facts:
- We maintain only 14 employees to run our public Company and have elected to contract out certain staff functions that we feel can be more effectively covered by third parties.
- G&A expenses as a percentage of total revenues were 17% in 2016, the most recent full year period. On this basis, our costs are consistent with, or better than, those of our closest peers - Ligand Pharmaceuticals and PDL BioPharma - which had G&A costs representing 24% and 16% of total net revenues, respectively, in 2016.
-
Sarissa's cost-cutting strategy has limited upside and serious
potential risks. In 2016, the Company's total operating costs were
only
$24.6 million . Significantly reducing such costs would severely undermine our ability to fulfill our obligations under our agreements with GSK and monitor our business, without creating enough value to justify the associated risk. -
Our management team provides critical support to our partnership
at GSK, which has helped drive our revenue growth, significantly
reduce expenses and debt levels, and deliver
$210 million in capital returns to our shareholders since the first quarter of 2015. - Executive officer compensation is in line with our peers and includes significant equity ownership requirements for Section 16 officers to further ensure alignment between management and our investors.
-
Mr. Denner applied a severe cost-cutting plan at a similar company, Enzon Pharmaceuticals, Inc. ("Enzon"), whereMr. Denner was chairman, placed a number of directors on the board, and replaced the CEO. During Mr. Denner's tenure as board chair, Enzon's returns to shareholders were a negative 51%.
Your Board is dedicated to creating the most value for shareholders by generating superior performance and growth while limiting costs. While we continually seek to improve our operations, drastically gutting the Company's cost structure could seriously jeopardize our ability to continue to grow and deliver significant returns for our shareholders.
There is NO reason for replacing your highly qualified directors with Sarissa's hand-selected nominees.
Your highly qualified directors were carefully selected to provide the right mix of skills and experience to oversee the successful execution of the Company's strategic plan. Your directors have a wealth of relevant experience in healthcare leadership, including pharmaceutical, biopharmaceutical and medical device experience; financial services leadership, including substantial M&A and capital markets expertise; and significant public company executive leadership. In contrast, Sarissa's nominees either lack relevant experience or the experience they do have is not differentiated relative to your current, highly qualified Board.
Please vote the enclosed WHITE PROXY CARD today. Your vote "FOR" is a vote to continue your Company's growth. Please do not return or otherwise vote any Gold proxy card sent to you by Sarissa—even as a protest vote against Sarissa.
No matter how many or how few shares you own, your vote is critical to
ensuring
We are committed to acting in your best interests and growing the
business. Under the Board's leadership,
Sincerely,
The Board of Directors
Your Vote Is Important, No Matter How Many or How Few Shares You Own! |
Please vote today by telephone, via the |
by signing, dating and returning the enclosed WHITE proxy card. |
Simply follow the easy instructions on the WHITE proxy card. |
If you have questions about how to vote your shares, please contact: |
INNISFREE M&A INCORPORATED |
Shareholders |
(888) 750-5834 (TOLL-FREE from the |
or (412) 232-3651 (from other locations) |
Banks and Brokers May Call Collect: (212) 750-5833 |
REMEMBER: |
Please simply discard any Gold proxy card that you may receive from Sarissa. Returning |
a Gold proxy card - even if you "withhold" on Sarissa's nominees - |
will not help your Company, as it will revoke any vote you had previously submitted |
on Innoviva's WHITE proxy card. |
Please visit http://investor.inva.com/proxy.cfm for more information. |
About
ANORO®, RELVAR®, BREO® and ELLIPTA® are trademarks of the GlaxoSmithKline group of companies.
Forward-Looking Statements
This document contains certain "forward-looking" statements as that term
is defined in the Private Securities Litigation Reform Act of 1995
regarding, among other things, statements relating to Innoviva's
engagement with Sarissa.
View source version on businesswire.com: http://www.businesswire.com/news/home/20170322005110/en/
Investor Contact:
Eric d'Esparbes
Senior
Vice President and Chief Financial Officer
650-238-9640
investor.relations@inva.com
or
Media
Contacts:
212-371-5999 or 213-630-6550
ina@abmac.com
Source:
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