Irvine-based Quality Systems Inc. blunted what could have been yet another proxy fight this month.
The healthcare software maker added three candidates to its upcoming directorial slate chosen by New York-based investment firm Clinton Group Inc.
James Malone, chief financial officer of Boston-based healthcare software company American Well Corp.; Peter Neupert, a partner at San Francisco-based private equity firm Health Evolution Partners LP and a former Microsoft Corp. executive; and Morris Panner, chief executive of Phoenix-based DICOM Grid, a cloud healthcare software company, are Clinton’s choices for Quality’s board.
Clinton withdrew four other nominees and agreed to support six Quality-nominated candidates.
Quality also said in a Securities and Exchange Commission filing that its board’s transaction committee, which is slated to have two Clinton-backed director nominees, plans to recommend that the full board retain an investment bank or management consultant to look into various options, including a potential sale of the company.
Quality’s board and management team “are pleased to have worked constructively with the Clinton Group to reach this agreement,” said Chief Executive Steven Plochocki. “We welcome the addition of James, Peter and Morris and look forward to their participation.”
Clinton, which owns about 1% of Quality, said in June that it would nominate Malone, Neupert, Panner and four others to Quality’s board.
The investor argued that Quality, which makes software that doctors and dentists use to manage their practices, had missed out on gains competitors experienced because of 2010’s healthcare reform law and greater provider emphasis on improving quality and effectiveness.
It said Quality’s current board of directors isn’t a good fit and that directors should have more experience in the healthcare information technology industry.
Clinton’s complaints also encompassed Quality’s practice of paying dividends to shareholders instead of investing that money back into its business and its business model, which focuses on smaller practices rather than large hospital groups.
All of the board nominees will stand for election at the company’s Aug. 15 annual meeting.
Quality and Clinton’s situation contrasts with some of its proxy fights this century, particularly those driven by shareholder and former director Ahmed Hussein.
Hussein, who owns about 10% of Quality, resigned in May after 14 years on Quality’s board. Many of those years were marked by spats between him and Quality management over corporate governance—he led four proxy fights against Quality management during the past nine years.
Hussein said in a resignation email that he concluded Quality would “continue to be severely damaged” under its management and board.
Quality fired back in a Securities and Exchange Commission filing, saying it “believes it made a good-faith attempt to work with Mr. Hussein constructively.”
The company also said it believed Hussein’s resignation would allow its board to “more efficiently perform its duties and focus on value creation for all our shareholders.”
Roth Downgrades ICU
ICU Medical Inc., a San Clemente-based medical device maker, received a downgrade this month to “neutral” from “buy” from Newport Beach investment bank Roth Capital Partners LLC.
Roth’s action came after ICU, which makes needleless intravenous connectors and other devices, cut its 2013 financial outlook.
ICU said it now expects to have full-year profit of $38 million to $39.6 million, down from an earlier range of $41.1 million to $43.4 million. It said it expects full-year revenue of $320 million to $325 million, lower than a previous range of $330 million to $337 million.
Analysts are looking for ICU to earn $42.8 million on revenue of $333.6 million this year.
The device maker adjusted its guidance for several reasons, ICU Chief Financial Officer Scott Lamb said during the company’s second-quarter earnings call.
Those reasons were: softness in its critical-care market; a conversion timing shift for new business in its cancer and infusion therapy markets; and a “slight year-over-year decrease that we now expect in sales to Hospira [Inc.] for the full fiscal year,” Lamb said.
Hospira, a Lake Forest, Ill.-based diversified drug and device maker, is ICU’s longtime primary customer and has been mentioned as a potential acquirer.
“While we acknowledge a potential sale of the company may still be a possibility and believe [ICU’s] strategic value could imply upside to current levels, we find it difficult to raise our target price further based on a speculative [at this point] takeout scenario,” Roth medical technology analyst Chris Lewis said in a client note issued this month.
Bits and Pieces
Raymond Cohen, former chief executive of Laguna Hills-based Vessix Vascular Inc., has joined a couple of corporate boards. Cohen is now the nonexecutive chairman of London-based Lombard Medical Technologies PLC. Lombard makes devices to repair abdominal aortic aneurysms, or ballooning of the body’s main artery. He’s also now a director of Spectrum Pharmaceuticals Inc., a Henderson, Nev.-based drug maker with origins in Irvine. Cohen sold Vessix to Natick, Mass.-based Boston Scientific Corp. last year for $425 million. … Hoag Memorial Hospital Presbyterian said it is creating an endowed chair in honor of Dr. Kris Iyer, the executive director of its Mary & Dick Allen Diabetes Center. The chair is being created with a $2.25 million gift from the Allens, Margaret and Tom Larkin, and the George Hoag Family Foundation.
