That was no end-of-summer lull.
Somewhere in the relative quiet of recent weeks was the sound of Irvine-based drug maker Allergan Inc. getting ready for a full fall calendar as it continues its fight to remain independent.
The maker of Botox and other drugs is trying to stave off the hostile takeover attempt—valued at around $50.4 billion as of late last week—by Canada-based drug maker Valeant Pharmaceuticals International Inc. and activist investor Bill Ackman’s Pershing Square Capital Management LP.
Much of the action will be moving to bicoastal courtrooms in coming weeks as Allergan, Valeant and Ackman deal with a pair of lawsuits.
One of them is over the timing of a special meeting of Allergan’s shareholders, currently set for Dec. 18—and not everyone has circled the date just yet.
“We anticipate the legal maneuvering by both sides to continue,” Liav Abraham, an analyst who follows Allergan for Citigroup, wrote in a client note.
Special Meeting
Abraham expects Allergan to “argue that the materiality of the potential federal securities violations by Pershing Square/Valeant precludes Pershing’s participation in the special meeting.”
“Consequently, the date of December 18th for the special meeting is not a certainty, in our view, and could well be pushed into 2015,” he wrote.
Valeant and Ackman—Allergan’s largest shareholder with a 9.7% stake—want to oust a majority of its current directors. That would open the door to replace them with nominees willing to open negotiations at that meeting.
Delaware Chancery Court Chancellor Andre Bouchard will hold a trial over the special meeting’s timing on Oct. 6.
Allergan set the Dec. 18 special meeting date for shareholders of record as of Oct. 27 only after Valeant and Ackman said they secured the support of 31% of Allergan shareholders.
Both sides took broadsides at one another amid the wrangling over the court date.
“It is apparent that Allergan fears letting its stockholders have a voice and we believe that its transparent efforts to prevent that will not stand,” Valeant and Pershing Square said in a statement issued after Allergan called its special meeting date.
Allergan said it believed Valeant and Pershing Square “are now trying to hastily schedule the special meeting in order to facilitate Valeant’s grossly inadequate offer and to mask Valeant’s continued poor operating performance.”
Allergan declined comment for this story.
Allergan, Valeant and Pershing Square also will stay busy on the West Coast over a lawsuit filed Aug. 1. Allergan contends in that suit that Valeant and Ackman engaged in insider trading when Pershing Square bought $3.2 billion in Allergan shares with advance knowledge of Valeant’s takeover intentions. Allergan has said the action deprived selling shareholders of $1.2 billion in value gains.
Allergan filed an answer last week in U.S. District Court in Santa Ana to a counterclaim filed by Valeant and Pershing, which have taken issue with Allergan’s characterization of the Canada-based drug maker.
“… Allergan has expressed nothing new about Valeant’s unsustainable business model, its misleading financial disclosures, and its massive debt burden,” Allergan’s response read. “Market analysts and well-recognized members of the investment community repeatedly have made similar statements ever since Valeant announced its hostile takeover attempt on April 21, 2014, and in some cases even before. Indeed, it is surprising that [Valeant and Pershing] even level these allegations, which bear the distinct odor of desperation, when much of the factual bases for Allergan’s statements have been readily endorsed by others and clearly presented in Allergan’s [lawsuit].”
Coming Up
Allergan will be busy with its court cases, but business also is expected to go on.
The drug maker is expected to report its financial results for the current quarter roughly between Oct. 27 and 31. Analysts expect Allergan to post a profit of $436.9 million on sales of $1.73 billion in the period that will end Sept. 30.
Allergan’s calendar could also include a deal announcement—it has looked to buy a drug maker in a related field as a way to put a stop to Valeant’s pursuit.
Salix Pharmaceuticals Ltd., which operates from Raleigh, N.C., remains at the top of observers’ minds as a potential buy for Allergan, although reports have indicated that talks between the two are dormant.
“If you look at our pillars in recent years, it is clear that people with technology in areas such as ophthalmic pharmaceuticals, medical aesthetics, medical dermatology, neurology, [and] urology come to us,” Chief Executive David Pyott said in July on Allergan’s second-quarter earnings call.
