Penwest Pharmaceuticals Co. (PPCO) yesterday announced that its Board of Directors has approved certain changes to the Company’s corporate governance practices that are designed to make the Board more responsive to shareholder input and accountable for its performance. The Company also announced that Kevin C. Tang has been selected as Chairman of the Board.
Some of you may remember Kevin Tang from his almost successful bid to liquidate Vanda Pharmaceutical (VNDA) last year as it traded below its net cash value. Mr. Tang ended up withdrawing his request for dissolution after the FDA approved its drug Fanapt, which caused shares of Vanda to skyrocket 900% in a single day. To this day, that remains one of our best investments, and we are glad Mr. Tang is back.
Also elected to the board is Roderick Wong, who some of you may also remember from his activist position on Facet Biotech (FACT) last year at $9 per share. A few months later FACT was bought by Abbott for $27 per share.
The governance changes approved by the Board include:
- The affirmation of the July 1, 2010 expiration of the Company’s shareholder rights plan, or “poison pill,” which prevented any shareholder from acquiring more that 15% of the Company’s outstanding common stock, and its intention to not reinstate any such plan;
- The elimination of the Company’s classified, or “staggered,” board structure, which will result in all directors being elected on an annual basis, instead of for a three-year term;
- A change that will allow the holders of a majority of the outstanding shares to remove directors with or without cause with an affirmative vote;
- A change that will allow a vote of the holders of a simple majority, instead of a super-majority, of outstanding shares to alter, amend or repeal the Company’s Articles of Incorporation and Bylaws;
- A change that will allow shareholders holding more than 10% of the outstanding shares to call special meetings of shareholders; and
- The clarification of the deadline for shareholders to provide notice to the Company of shareholder proposals and director nominations for consideration at the annual meeting of shareholders.
These governance changes require amendments to the Company’s Articles of Incorporation and Bylaws, and in certain cases shareholder approval. The Board intends to recommend those changes requiring shareholder approval at its next annual meeting.
In a letter to shareholders, Mr. Tang sums up his goals for the company:
“ The Board will take prompt and thoughtful action to wind down substantially all of the Company’s operations in order to preserve the full value of the Opana ER royalty stream for the benefit of shareholders”
Although the company is not completely liquidating, it seems that Mr. Tang’s goal is to get as close to it as possible while preserving cash flows from royalty. Given his record of successful activist positions, it is likely that he will get his wish.