- Against the backdrop of an activist investor activity, Acorda Therapeutics Inc. has enacted a new rights plan aimed at diminishing the power of large shareholders.
- The poison pill allows Acorda shareholders owning less than 15% of its outstanding common stock to purchase additional preferred and outstanding common shares at a reduced price. The agreement is triggered only when an investor creeps past the 15% ownership mark, or buys additional stock if they have already surpassed that mark. Once the agreement is triggered, shareholders with more than 15% or more ownership lose their the ability to buy the cheaper stock.
- Acorda leadership is currently facing pressure from Scopia Capital Management LP, which holds about 17% of the drugmaker's outstanding common stock, to sell the company.
Activist shareholders are a big threat to companies, mainly because their campaigns seek to shake up structures or control deals and are frequently successful. The battles between companies and their shareholders can often be protracted and distract from the day-to-day operations.
For Acorda, the current threat comes from Scopia. Over the past month, the asset management firm has criticized the drugmaker for slow value growth and for not replenishing its portfolio as main product Ampyra (dalfampridine) faces loss of exclusivity. If generics of Ampyra hit the market, more than 90% of the company's revenues could be in jeopardy.
"Had the company prevailed in the Ampyra litigation, Acorda would have been a unique company with a path to $1 billion in revenues and significant standalone value," Ashu Tyagi, a partner at Scopia, wrote in an Aug. 7 letter to Acorda's board of directors. "Unfortunately, the company was unsuccessful, and it has now crossed the Rubicon. In 2018 the business will revert to burning cash with a levered balance sheet and no clear timeline to return to profitability. These are treacherous waters."
Scopia also expressed concerns over the company's pipeline; namely for key Parkinson's disease assets tozadenant and Inbrija (levodopa). The latter received a refuse-to-file letter from the Food and Drug Administration earlier this week, further delaying any approval and creating even more uncertainty.
"While we believe in the value of this drug, it will take time to launch and will likely only replace Ampyra revenues," Tyagi wrote of Inbrija. "Tozadenant may succeed in Phase 3 next year, or it might fail. The path to a highly profitable, multi-product independent company will be solely determined by this binary event. That is a lot of development risk for shareholders to bear."
Tyagi pointed to the recent acquisitions of Cynapsus and NeuroDerm as evidence of the value Acorda could offer shareholders by going on the block. The company, however, doesn't seem interested, and has enacted its Rights Agreement as a way to defend itself against further activist activity.
The agreement essentially dilutes the power of large shareholders. It provides investors the ability to purchase one-thousandth of a share of Acorda Series A junior participating preferred stock for $110 (though that price may change) for every share of outstanding common stock they own. That ability is only exercisable, however, if a sole investor acquires 15% or more of the company's outstanding common stock.
What's more, any investor who owns less than 15% of Acorda's outstanding common stock can buy additional common shares (currently for $110, but also subject to change) at half their market value.
The Rights Agreement began Sept. 1 and will stay in effect until Aug. 31, 2018.
The agreement "is intended to promote the fair and equal treatment of all Acorda shareholders and ensure that no person or group can gain control of Acorda through open market accumulation or other tactics potentially disadvantaging the interest of all shareholders," Acorda wrote in a Sept. 1 statement.