Believes Removal of Four Incumbent Directors
is Necessary to Stop Value Destruction at AMAG
Caligan’s Four Highly-Qualified Nominees
Have the Experience and Skillsets Needed to Conduct Comprehensive
Review of AMAG
Caligan Partners LP (“Caligan”), one of the largest shareholders
of AMAG Pharmaceuticals, Inc. (NASDAQ:AMAG) (“AMAG” or the
“Company”), announced today that it has mailed a letter to AMAG
shareholders in connection with its filing of a definitive consent
statement and accompanying form of consent card with the U.S.
Securities and Exchange Commission (the “SEC”) to allow
shareholders to act by written consent to effect the replacement of
four directors of AMAG and to, among other things, amend the
Company's bylaws to help prevent against entrenchment by incumbent
directors.
This press release features multimedia. View
the full release here:
https://www.businesswire.com/news/home/20190916005417/en/
Image 1: AMAG Share Price Jan 3, 2017 –
July 31, 2019 (Graphic: Business Wire)
The full text of the letter is below. Additional information,
including a detailed presentation, can be found at
www.saveamag.com.
September 16, 2019
Dear Fellow AMAG Shareholder,
Caligan is one of the largest shareholders of AMAG
Pharmaceuticals, Inc. (“AMAG” or the “Company”) with beneficial
ownership of 10.3% of the Company's outstanding common stock. We
are seeking your consent to remove four members of AMAG’s board of
directors (the "Board") who have overseen substantial value
destruction during their tenures and replace them with Caligan’s
four highly qualified nominees (the “Nominees”).1
AMAG Directors Caligan Seeks to
Remove
Director
Director
Since
AMAG
TSR
Nasdaq
Biotech Index
AMAG
Relative
Performance
S&P
500
AMAG
Relative Performance
Davey Scoon
12/1/2006
-86.0%
307.3%
-393.3%
175.4%
-261.4%
Gino Santini
2/7/2012
-51.1%
165.7%
-216.8%
156.4%
-207.6%
James Sulat
4/16/2014
-53.5%
43.7%
-97.1%
77.3%
-130.8%
Dr. John Fallon
9/5/2014
-64.8%
18.1%
-82.9%
63.3%
-128.1%
We believe urgent change is needed at AMAG to reverse more than
a decade of value destruction and share price decline, the majority
of which has been overseen by the incumbent management team and
Board. AMAG’s attempts to criticize our public approach and recent
ownership in the Company only serve as a distraction from AMAG
leadership’s objectively poor financial and operational
performance, and AMAG’s poor share price performance. While the
Company baselessly asserts that actions suggested by Caligan may be
“destructive to the long-term value of the Company,”2 the reality
is that, based on the total shareholder return of the Company
over the short, medium, and long term, the
only corporate action AMAG’s incumbent Board has definitively
accomplished is destroying shareholder value.
Caligan has come forward to bear the costs of a consent
solicitation because we believe:
(i) AMAG’s “ambitious five-year strategic
plan”3 has caused AMAG’s severe underperformance
(ii) There has been no accountability of
AMAG’s leadership for the underperformance
(iii) There is an immediate need for
Caligan’s Nominees to be added to the Board in order to review the
Company’s current strategic plan and all viable alternatives
We believe the only way for
shareholders to effect meaningful change at AMAG without waiting
for the next shareholder meeting is through our proposed consent
solicitation.
I. AMAG’s Strategic Plan Has Caused Its
Underperformance
The Company’s recent press release states that “Since 2017, the
Company has made significant progress executing on its ambitious
five-year strategic plan to develop and commercialize innovative
products.”4 Since January 3, 2017, AMAG’s
total shareholder return is -76%5. See Image 1: AMAG
Share Price Jan 3, 2017 – July 31, 2019.
Further, the broader investment community continues to express a
healthy degree of skepticism at the Company’s “innovative
products”6:
Firm Reference
Cowen – August 7, 2019
“As for our broader thesis – and as we
have indicated in the past and above – we simply do not believe
in the current new commercial portfolio (Intrarosa and
Vyleesi)…And again, given our view of high development risk for
AMAG-423 and ciraparantag, we believe investors should seek better
options.”
Piper Jaffray – August 7, 2019
“Vyleesi: Just throwing good money at
bad in our view”
Jefferies – August 7, 2019
“Challenges seem continued to emerge
for AMAG. Aside from generic competition to Makena (~40% of
total sales), revenue growth prospects seem unfavorable from its
own Makena generic supply issue/impairment charge, slow Intrarosa
uptake since launch (3Q17) & likely slow launch/uncertain
market potential of recently approved Vyleesi.”
JP Morgan – June 21, 2019
“With a high level of market skepticism
around the commercial potential for this product (Vyleesi), we
believe success with either ‘423 or ciraparantag would be needed to
meaningfully shift the outlook for the company”
The market is so skeptical of AMAG’s strategic plan that AMAG
has the second highest short interest of any US pharmaceutical or
biotech company with consensus estimates greater than $300MM of
product revenue in 2019.7 See Image 2: Short Interest (% of O/S
Shares).
The Company has also represented that it has been “strengthening
the financial profile of the Company.”8 Caligan asks shareholders:
how has a strategic plan that has seen AMAG’s Non-GAAP Adjusted EBITDA swing from +$223MM in
2016 to consensus estimates of -$83MM in 20199
strengthened AMAG’s financial profile? See Image 3: AMAG Non-GAAP
Adjusted EBITDA ($MM).
Despite what we perceive to be healthy and widespread market
skepticism in AMAG’s “ambitious five-year strategic plan”10 and its
impact on AMAG’s financial profile, AMAG’s Board and leadership
have chosen to ignore the market’s views and to continue forward,
destroying AMAG shareholder value along the way.
II. AMAG’s Board and Management Need to Be
Held Accountable
After our interactions with AMAG’s leadership, it is clear to us
that the Board and management’s perception of its performance is
divorced from reality. While the Company may argue that
shareholders already opined on the composition of the Company’s
Board in May, at the time AMAG shareholders had no alternative to
the Company’s incumbent directors.
Since 2012, as AMAG’s stock has lost almost half of its value,
the Board has awarded compensation to senior management at an
average of 110% of their target annual incentive.11 See Image 4:
Achievement of Annual Performance Goals.
Similarly, AMAG’s Board members have voted to increase their
annual compensation by 70% since 2012 12 despite overseeing a ~50%
loss in stock price. See Image 5: AMAG Annual Director
Compensation.
Caligan believes AMAG’s directors are so out of touch that they
recently cite as an example of “maximizing long-term value
creation” the “divestiture of the CBR business” and how they
“strengthened [AMAG’s] balance sheet through debt reduction.”13
Caligan is seeking to remove four directors who approved the
acquisition of CBR in 2015 for $683MM14 (and the concurrent
issuance of $500MM of high-yield notes to finance the
transaction15) only to approve the divestiture of CBR less than
three years later for $519MM (with sale proceeds being used to
retire the $500MM of high yield notes16). The loss to AMAG
shareholders from the CBR transaction was more than $208MM, 50% of
AMAG’s current market capitalization17. We believe the
Board’s promotion of the CBR divestiture
as an example of responsible stewardship is akin to an arsonist
touting their record as a firefighter.
If the Board is so confident in the Company’s “position for
long-term value creation,”18 why has only one of its eight
non-executive directors19 ever purchased a share of AMAG stock with
their own personal funds?
III. Caligan’s Nominees Will Conduct A
Comprehensive Strategic Review
The Company believes that “any corporate action must be for the
benefit of all Company shareholders and must be rooted in a strong
understanding of the pharmaceutical industry.”20 Caligan asks: what
has the current Board’s “strong understanding of the pharmaceutical
industry”21 done for shareholders other than destroy value?
Caligan’s Nominees are highly qualified individuals who have the
experience to conduct a comprehensive review of AMAG’s strategic
plan, including viable alternatives:
- Paul Fonteyne, former CEO of Boehringer Ingelheim USA
- Lisa Gersh, former CEO of Alexander Wang, Goop, and Martha
Stewart Living Omnimedia
- David Johnson, Managing Partner of Caligan Partners LP
- Kenneth Shea, Former Senior Managing Director, Guggenheim
Securities, LLC
Post-board refreshment, Caligan believes that AMAG’s Board needs
to take decisive action including:
- Conducting a comprehensive review of strategic alternatives for
AMAG including separating its women’s health assets from Feraheme
and Ciraparantag
- Immediately rationalizing AMAG’s bloated commercial spending
levels to move the Company back to profitability
- Conducting a robust process to find the right international
distribution partner to market Feraheme worldwide
Caligan believes this consent solicitation is a healthy process
for the Company, given its long history of underperformance and its
low valuation multiple relative to peers. AMAG shareholders now
have a real choice to express their opinions on the urgent issues
of board refreshment and the Company’s current strategic direction.
AMAG shareholders can send a clear message to the Company that
change is warranted.
We are encouraged by the support we have received over the past
few weeks from research analysts and both institutional and retail
shareholders. Now is the time for all of us to act.
We ask for your support to remove four incumbent AMAG
directors and appoint the Nominees by signing and returning the
WHITE consent card today. Please join us as shareholders of AMAG in
our effort to stop the value destruction at our company.
If you have any questions or need assistance in consenting on
your WHITE consent card, please call our proxy solicitor,
D.F. King & Co., Inc., toll-free at (800) 252-8173 or collect
at (212) 269-5550.
Thank you for your continuing support.
David Johnson
Caligan Partners LP
About Caligan Partners LP
Caligan Partners LP is an investment firm headquartered in New
York, NY that pursues a deep value-oriented strategy through
investments in activist equities and distressed debt.
LEGEND
Caligan, Caligan Partners CV II LP, David Johnson, Samuel
Merksamer, Paul Fonteyne, Lisa Gersh and Kenneth Shea
(collectively, the “Participants”) have filed a definitive consent
statement and accompanying form of consent card with the SEC to be
used in connection with the solicitation of consents from the
stockholders of AMAG Pharmaceuticals, Inc. (the “Company”). All
stockholders of the Company are advised to read the definitive
consent statement and other documents related to the solicitation
of consents by the Participants because they contain important
information, including additional information related to the
Participants. The definitive consent statement and an accompanying
WHITE consent card will be furnished to some or all of the
Company’s stockholders and will be, along with other relevant
documents, available at no charge on the SEC’s website at
http://www.sec.gov/, on Caligan’s website at www.saveamag.com and
from the Participants’ consent solicitor, D.F. King & Co., Inc.
by requesting a copy via email to AMAG@dfking.com. Information
about the Participants and a description of their direct or
indirect interests by security holdings is contained in the
Schedule 14A filed by Caligan with the SEC on September 16, 2019.
This document is available free of charge from the sources
indicated above.
1 All TSR data from S&P Capital IQ
through July 31, 2019, before Caligan began material purchases of
AMAG shares.
2 Company September 12, 2019 press
release
3 Company September 12, 2019 press
release
4 Company September 12, 2019 press
release
5 All total shareholder return and divided
adjusted share price data from S&P Capital IQ.
6 Company September 12, 2019 press
release
7 S&P Capital IQ data
8 Company September 6, 2019 press
release
9 2016 Non-GAAP Adjusted EBITDA from
4Q2016 earnings presentation. 2019 consensus EBITDA from S&P
Capital IQ.
10 Company September 12, 2019 press
release
11 Company annual proxy statements 2013 -
2019
12 Company annual proxy statements 2013 -
2019
13 Company September 12, 2019 press
release
14 Purchase and sale proceeds for CBR from
AMAG’s cash flow statements from 2018 and 2016 10-K.
15
https://www.jonesday.com/en/practices/experience/2015/08/jefferies-finances-amag-pharmaceuticals-acquisition-of-cord-blood-registry
16 Company press release June 15, 2018.
“AMAG intends to use the majority of the transaction proceeds to
pay off the remaining $475 million of principal of its 7.875%
Senior Notes due 2023.”
17 From AMAG 2016 10-K and 2018 10-K. CBR was purchased for
$682.4MM in 2015 and divested for $519.3MM in 2018. Total Loss
includes transaction fees of $14.1MM in 2018, loss on debt
extinguishment of $28.1MM in 2018, $15.25MM of financing fees in
2015, and $1.1MM loss on debt extinguishment in 2017. Loss could be
higher due to undisclosed transaction fees in 2015.
18 Company September 6, 2019 press
release
19 SEC Form 4 filings
20 Company September 6, 2019 press
release
21 Company September 6, 2019 press
release
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190916005417/en/
Investors: Ed McCarthy / Geoffrey Weinberg D.F. King
& Co., Inc. +1 (212) 269-5550 AMAG@dfking.com
Media: Dan Zacchei / Joe Germani Sloane & Company +1
(212) 486-9500 Dzacchei@sloanepr.com JGermani@sloanepr.com
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