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Actelion offers sweetener to stave off attacks

Under fire: Actelion CEO Jean-Paul Clozel Reuters

Europe’s largest biotech company, Actelion, has offered the first dividend payout in its 13 year history in an effort to nip a shareholder rebellion in the bud.

The Swiss drug maker has come under increasing recent pressure from shareholder activists to remove chief executive and founder Jean-Paul Clozel from his post and submit to a takeover from a larger company.

The Allschwil-based firm announced increased 2010 sales and profits on Thursday but fell short of analyst expectations. The company has suffered a series of drug trial setbacks in recent months with the patent on its key revenue driver, Tracleer, set to expire in 2015.

In addition, the company is currently embroiled in a legal dispute in the United States with a Japanese pharmaceutical firm

Since launching in 1997, Actelion has rapidly grown into an internationally renowned biotech company, but some shareholders believe progress has stalled recently.

The failure of drugs such as Almorexant and Clazosentan to pass trials last year have added to unrest, led by the United States hedge fund Elliott Advisors – the largest Actelion shareholder that holds a six per cent stake in the firm.

Heads demanded

Elliott recently sent Actelion a letter demanding the removal of both Clozel and chairman Robert Cawthorn after complaining that the company’s share price was only half the value it should be.

There have been media rumours that Actelion has rebuffed takeover approaches by such pharmaceutical giants as GlaxoSmithKline, Amgen and Bristol-Meyers Squibb.

In a signal of what to expect at Actelion’s shareholder meeting on May 5, an Elliott Advisors representative sharply criticised the board’s strategy and corporate governance at the annual results meeting on Thursday.

Clozel was slammed for attending board meetings while the company was taken to task for refusing to consider a takeover and for spending so much money on building a new headquarters in Allschwil.

Clozel defended his record and that of his company, denouncing unnamed shareholders that were only interested in short term gain.

Quick profits

“If people on the management could not stay on [in their posts] every time a trail is negative, there would be nobody working in the pharma industry,” he countered, adding that some failures were normal on the route to finding new blockbuster drugs.

Clozel repeatedly referred to Actelion’s innovative culture, which he implied could be damaged if the firm was swallowed by another company. He added that this would be the worst time to sell Actelion to a larger rival with the company now in a position to pay back shareholders’ investments.

“This would deprive them [shareholders] for the benefit of a few people who want to make a very quick profit,” he said.

Dividend surprise

The first ever dividend payment, of SFr0.80 ($0.84), was widely viewed as a means of keeping shareholders happy along with a SFr800 million share buyback programme announced last year.

“It is highly unusual for a biotech company to issue dividend payments,” Bank Vontobel analyst Andrew Weiss told

“But if companies want to please shareholders they generally do so through their wallets,” said Weiss.

Actelion’s annual revenues of SFr1.93 billion ($2.03 billion) were largely in line with expectations, according to Weiss. But higher than expected legal provisions had hit into the company’s SFr390 million profits.

Weiss also played down Actelion’s reliance on Tracleer and its recent drug trial failures.

“They are not very well diversified in terms of revenues but that is simply what happens with start-up biotechs,” he said.

“If they could develop new drugs then that would enhance their business. But it is a tough business to discover new drugs; you do not simply pick them off trees.”

Actelion was founded by Jean Paul Clozel – a former cardiologist and Roche scientist – to develop treatments that other pharmaceutical companies had discarded.

Tracleer is the best example, a blockbuster pulmonary arterial hypertension treatment discovered by Clozel during his time at Roche, but dropped by the pharmaceutical giant.

The biotech firm was first listed on the Swiss stock exchange in 2000 and joined the prestigious blue chip index of leading firms (SMI) in 2008.

The company currently employs more than 2,400 staff and operates in 29 countries.

Europe’s biggest biotech group recorded 2010 sales of SFr1.93 billion (up 9% from 2009).

Net profits were up 25% from SFr311 million in 2009 to SFr390 million last year. However, analysts were expecting profits of well over SFr400 million.

Sales of Actelion’s leading product, Tracleer, increased to SFr1.6 billion from SFr1.5 billion in 2009.

Actelion announced its first ever shareholder dividend, to be fixed at SFr0.80 per share.

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SWI - a branch of Swiss Broadcasting Corporation SRG SSR