- A shareholder proposal to immediately split Allergan's CEO and chairman roles failed Wednesday, as a majority of investors in the pharma rejected the non-binding plan.
- At Allergan's annual shareholder meeting in Dublin, investors holding roughly 60% of shares voted against the proposal, while 38% backed the split. Just under 2% abstained.
- The embattled pharma has spent the first months of 2019 rebutting criticism from Appaloosa, an activist hedge fund led by David Tepper. While Allergan conceded in March to split the CEO and chairman roles at the next leadership transition, Tepper's group dismissed that as a "half measure." Brent Saunders currently holds both positions.
Allergan's corporate governance battle was fueled as much by drama as substance, given the proposal's non-binding nature. But the pharma still faces a major challenge in appeasing shareholders clearly frustrated with the company's underperformance and steady share price losses.
In recent weeks, Allergan's experimental depression therapy rapastinel failed multiple late-stage clinical trials, while its eye drug abicipar disappointed analysts with only modest improvements on safety.
Both drugs are part of a group the company previously dubbed its "six stars" — experimental candidates that Saunders once touted as capable of $13 billion in combined peak annual sales. As development progress faltered, the company quietly dropped that branding last year.
Investor discontent led to Appaloosa's campaign for an independent chairman. But the proposal's prospects were dimmed last month, when two influential Wall Street advisory firms sided with Allergan management. In response, the firm highlighted the 38% that voted for the split and the need for concrete actions to be taken.
"The decision should be viewed as rejecting the effort to immediately remove the CEO, which was the implied message of the separation effort," Bernstein analyst Ronny Gal wrote in a note to investors on the vote. "It does not communicate satisfaction with the current state of affairs."
Gal expects Allergan to address the idea of separating its aesthetics and therapeutics businesses on next Tuesday's first quarter earnings call.
RBC Capital Market's Randall Stanicky, meanwhile, noted the vote results don't alter the overall picture for Allergan.
"The existing strategy has clearly not worked, the pipeline has disappointed meaningfully and needs to be replenished and the current platform is unfocused," Stanicky wrote Wednesday.
Saunders is familiar in dealing with pressure for change. He kicked off a strategic review a year ago that led to announced plans to sell its women's health and infectious disease businesses. So far, neither unit has been sold.
The pharma's stock fell by more than 3% in early morning trading Wednesday before recovering slightly.
"So where do we go from here?" asked Evercore ISI analyst Umer Raffat in a Wednesday note. Allergan will have another chance to answer that question next Tuesday.