Sector News

Activists want Spectrum to dump its CEO and find a buyer

May 13, 2015
Life sciences
Hedge fund Armistice Capital has taken a 5.4% stake in Spectrum Pharmaceuticals, agitating for sweeping changes in how the biotech does business and demanding it find a buyer on the quick.
 
Armistice, led by founder Steve Boyd, contends that Spectrum is bloated, poorly managed and in desperate need of change after years of broken promises. In a letter to Spectrum’s board, Boyd disclosed his firm’s 3.6 million-share stake and asked the company to dump its “money-losing” R&D activities and recruit a “top-tier investment bank” to find a buyer. In the meantime, CEO Rajesh Shrotriya should either resign or “adjust (his) compensation to better align with the interests of shareholders,” Boyd wrote.
 
The last straw, according to Armistice, came in February when Spectrum’s shares plunged after a federal court invalidated some patents tied to the cancer drug Fusilev, clearing the way of Novartis’ Sandoz to launch a generic. That very night, with half of Spectrum’s revenue suddenly imperiled, the company awarded $2 million in cash bonuses to its top four execs, according to Boyd, typifying the “dysfunctional culture” that has marred shareholder value.
 
To groom Spectrum for an acquisition, Boyd proposes “a combination of reducing management compensation and employee headcount, significantly curtailing research and development, eliminating excessive corporate offices, and focusing on in-licensing and co-promotion opportunities.” He mentions the research-averse Valeant Pharmaceuticals as a potential model, recommending Spectrum spin out some of its riskier pipeline assets into a standalone biotech company.
 
In making his case, Boyd lays out a long list of failings and misguided projections from Shrotriya and Spectrum’s management, including promises that Fusilev was safe through 2022 and that the bladder cancer treatment apaziquone would be submitted to the FDA in 2013. It remains unfiled.
 
“I will be the first to acknowledge that the business of forecasting is a thankless profession,” Boyd wrote. “Nonetheless, the disconnect between your statements and reality have created distrust in the investment community, employee turnover, shareholder lawsuit expense and an SEC investigation that is on-going.”
 
Spectrum’s shares rose more than 7% before the market opened on Tuesday.
 
By Damian Garde
 

Related News

June 13, 2021

Making drug-resistant bacteria susceptible to antibiotics

Life sciences

Antibiotic resistance remains one of the biggest public health challenges. New drugs are still needed to tackle tough-to-treat bacteria. But finding new therapeutics to kill off pathogenic bacteria has been difficult.

June 13, 2021

Vexed by vectors: How COVID-19 vaccine and cell and gene players are tackling the viral vector bottleneck

Life sciences

Viral vectors are engineered viruses used to deliver gene therapies, gene-modified cell therapies and certain vaccines. And their shortage is already upon us, thanks to manufacturing approaches that simply haven’t kept pace with the advance of cell and gene therapies.

June 13, 2021

Beigene expands into cancer cell therapy with Shoreline pact

Life sciences

Beigene, a fast-growing drugmaker based in Cambridge, Massachusetts and Beijing, will partner with Shoreline Biosciences to develop cell therapies for cancer, expanding its research beyond the small molecule and antibody drugs.

Send this to a friend