Exelixis’ board of directors is waving the white flag after a third director targeted by activist investor Farallon Capital Management announced he wouldn’t stand for reelection.
The decision by Lance Willsey disclosed Sunday gives Farallon all three board changes it has been fighting for. The activist investor has been publicly battling the biotech since early April, arguing that Exelixis' R&D strategy is lopsided and that spending was undisciplined, leaving shareholders without much to show.
Farallon expects Dave Johnson to now be elected at an upcoming shareholders meeting, but continued to snipe at the company in a victory statement issued Sunday: “It is unfortunate that it took our engagement for the company to initiate a share repurchase plan and our proxy contest to compel the board to refresh its stale board of directors. The board’s insistence on contesting our nominees until now underscores its aversion to change.”
Willsey's decision should "end the need for Farallon to continue its proxy campaign," Exelixis said in a release Monday. The company had previously supported two of Farallon's board candidates—Interlaken Therapeutics CEO Tomas Heyman and former CEO of Otsuka America Pharmaceutical Robert Oliver—but was mum on Johnson. With three fresh faces on the board, Farallon hopes attention turns to refocusing Exelixis’ pipeline.
Days before Willsey’s announced departure, Farallon sent out another letter to Exelixis’ shareholders, contending that the director has been ineffective in his 26 years on the board and that he hasn’t had an active medical license since the 1990s and is in fact a professional race car driver. Fierce Biotech found that Willsey was listed as a driver for the Weathertech Sportscar Championship, part of the International Motor Sports Association. An Exelixis sticker appears on the driver's side window of Willsey's car.
“Frankly, we do not blame Dr. Willsey for wanting to remain on this board. We believe that Dr. Willsey has not seen a patient in 25 years and has not invested professionally in 20 years, but he benefits handsomely from his association with Exelixis,” Farallon wrote.
The activists also alleged that Exelixis’ roughly $1 billion in R&D spending slated for this year is diluting the value of the actual money maker, cabozantinib. The cancer therapy is approved and marketed as both Cabometyx and Cometriq. Farallon argues that Exelixis is undervalued not because cabozantinib doesn’t have value, but because investors are resonating with the R&D investments. The first step toward progress after Willsey’s decision to step down, according to Farallon, is supporting the three new board members at the annual shareholder meeting on May 31.
“In order to ensure these things happen, it is essential that an unequivocal message be sent to the company that shareholders will not accept any further foot-dragging or attempts to preserve the status quo.”