Allergan disclosed in a US Securities and Exchange Commission filing on Friday that it has agreed to split its chairman and chief executive roles, both currently held by CEO Brent Saunders, at the next leadership transition. The company said that splitting the roles now, as hedge fund Appaloosa has requested, “could impede the board’s effectiveness by creating a crisis of confidence in Saunders at a time when leadership stability and effectiveness is critical.”
Earlier this month, hedge fund Appaloosa increased pressure on Allergan following the company’s disclosure that its major depressive disorder drug candidate rapastinel did not meet the primary endpoint of three phase 3 studies, and was likely to fail a fourth. At that time, Appaloosa said that “with this latest fiasco, we again call on [Allergan] to install an independent chairman with suitable experience to bring new leadership to the board and rein in management’s predilection for value-destruction.”
Last month, Appaloosa suggested Allergan should consider a merger or putting itself up for sale when the drugmaker had indicated it would only split the roles of chairman and CEO at the next leadership transition. At the time, Appaloosa said the company’s decision to separate the roles “at some vague future date…once again lays bare [its] reluctance to hold management accountable.” More recently, Appaloosa disclosed that Allergan shareholder John Chevedden supported its recommendation to split the roles of chairman and CEO.
Allergan reported a loss of $4.3 billion in the fourth quarter ended December 31, versus a profit of $3.1 billion in the year-ago period, while revenue in the quarter was down 5.7 percent year-on-year to $4.1 billion. The drugmaker also said in January that it withdrew plans to offload its women’s health business.
Allergan also said in the SEC filing that it had formed a board committee to oversee mergers, acquisitions, divestitures and other transactions, led by Robert Hugin, the former Celgene CEO, who was appointed to Allergan’s board last month.