ISS pressures Mylan shareholders to change board
- In a 35-page report, Institutional Shareholder Services (ISS) is urging shareholders to vote for change at board level at Mylan and against ratification of the compensation package for Chairman Robert Coury, previously the company's CEO. This is based on the "long-term reputational damage" that Mylan has incurred following the EpiPen pricing and classification controversies.
- ISS claims that Coury's compensation for 2016, which includes $9 million in time- and performance-based equity awards and a $43.6 million restricted stock grant based on his continued service as non-employee chair, is "outsized."
- Mylan has responded with a letter to its shareholders, describing the company's board as "engaged, refreshed and responsive," and Coury's compensation as "aligned with the company’s stock performance." The letter also noted that "nearly 90% of consumers who received an EpiPen Auto-Injector or its authorized generic had an out-of-pocket cost of less than $100 and more than 80% are paying less than $50."
ISS's argument against the current Mylan board is that it blames the board members for what it sees as the erosion in share value and reputational damage to the company resulting from the pricing challenges and the resulting Congressional hearings, investigations by regulators, lawsuits and potential legal and settlement costs.
The state and city of New York pension funds and the California teachers pension fund are also urging shareholders to vote against board members, including Chairman Robert Coury. Unsurprisingly, Mylan does not agree, and sent a statement to BioPharma Dive this morning: "We are confident that our shareholders recognize that this Board has overseen a period of strong and sustainable long-term growth, and that the recommendation and rationale to remove the Board and leave the company without any leadership is simply irrational and not in the best interests of the company, its shareholders and other stakeholders."
Mylan's board also sent a letter to its shareholders. This didn't directly address the increases in price for EpiPen, simply stating that the U.S. drug pricing debate "is not company- or product-specific, but rather an industry-wide issue that requires a broad conversation and a holistic solution involving all market participants." It describes its response to the pricing criticisms – launching an authorized generic at half the cost of the branded product – as an "unprecedented action to respond meaningfully to the seismic shifts in our healthcare system."
However, the generic two-pack still weighs in at $300, still higher than the historic price of $265 for a pack of two around four years ago, and the 2007 price of about $57 for a single injector. Mylan also hasn't been helped by the recall of batches of defective EpiPens across the world.
Mylan closed yesterday at $38.88, with a 52-week low of $33.60, but down from a 52-week high of $50.40. This is well below Teva Pharmaceutical's $82 a share offer back in April 2015, subsequently withdrawn in July 2015 after discussions with investors.
Teva subsequently acquired Actavis Generics from Allergan in August 2016 instead. The failure of this deal has been challenged, especially as it has a generic competitor to EpiPen in the works. Mylan's board response in its letter is: "the Teva approach was not right for the company and the long-term implications were inconsistent with Mylan’s commitment to shareholders and other stakeholders."
The upcoming Mylan annual general meeting is on June 22, 2017.
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