Savient hammered after hedge fund claims it's bankrupt
John Johnson has a good reason today to be thankful for his new job at Dendreon: He won't have to face the music at Savient, where his former colleagues will be grappling with a high-profile lawsuit from a West Coast hedge fund claiming that the company is being looted by an executive team that has badly fumbled a drug launch and bankrupted the developer.
Shares of Savient ($SVNT) skidded down 25% on Tuesday after the company filed notice at the SEC that Tang Capital has asked a court in Delaware to declare Savient insolvent and appoint a receiver to liquidate assets and divvy up the cash among creditors. Savient, for its part, says there's no merit to the suit and intends to fight.
When John Johnson moved from the top post at Savient to the helm at troubled Dendreon ($DNDN), there was considerable speculation about just what he had learned from the launch of the gout drug Krystexxa that would help him with Provenge. Tang officials would likely suggest it wasn't much, based on the gleeful coverage by TheStreet's Adam Feuerstein, who snagged a copy of the lawsuit and quoted from it extensively.
Tang--which wants $100 million in damages--insisted that Krystexxa's 5-quarter track record demonstrate that it was not only an "abject failure," but the least successful new drug launch in the industry's history. And it was just as bitter about management:
"The Company's officers and Director Defendants are incentivized to maintain the status quo and continue to pursue a hopeless drug launch while ignoring the fact that it has already failed," says the Tang suit. "While recognizing failure and drastically cutting head count and expenses would preserve value for creditors, it would also mean an end to officers' and Director Defendants' lucrative cash compensation and would extinguish any chance, however remote, of recognizing any value from their out-of-the-money stock options."