Alexion Drops After CEO, CFO Resign Amid Soliris Sales Probe
Shares of Alexion Pharmaceuticals (ALXN) plunged on Monday morning after the company said both its chief executive officer and chief financial officer have left the company, effective immediately. The shakeup in the C-level suite comes on the heels of the Soliris whistleblower case and the delayed 10-Q filing.
EXECUTIVE SHAKEUP: Alexion announced this morning that CEO David Hallal is resigning for "personal reasons" and will be replaced on an interim basis by board member and former AstraZeneca (AZN) CEO David Brennan. The company will launch a search for a permanent CEO. Hallal became Alexion's CEO in April 2015. Additionally, Alexion said this morning that CFO Vikas Singh is also leaving the company "to pursue other opportunities." He will be succeeded by David Anderson, who served as Honeywell's (HON) CFO for 11 years. Commenting on the resignations, CNBC's Meg Tirrell reported that the CEO and CFO are leaving the company after losing the confidence of Alexion's board. "With strong new leaders in place, we will continue to be relentlessly focused on serving patients and families with devastating and rare diseases," said Chairman Leonard Bell.
SHAKEUP COMES FROM 'POSITION OF STRENGTH': In a conference call discussing the executive shakeup, the company said that while the CEO and CFO announcements are "likely unexpected," the changes come from "a position of strength." Interim CEO Brennan said he is "fully committed" to the role and that the company's rare disease pipeline is "robust and promising." The company did not take questions on the call.
INVESTIGATION NEARING COMPLETION: Alexion disclosed last month that it was investigating allegations made by a former employee regarding sales practices involving its Soliris drug. The company said in this morning's statement that its audit and finance committee's investigation is close to completion and that it has not identified any facts that require it to update its previously reported historical results at this point in time.
WHAT'S NOTABLE: On November 4, Alexion cancelled a presentation at the Credit Suisse Healthcare Conference because "something came up." Rumors swirled at the time that Alexion could be a takeover target, and it was later noted that the company had not yet filed its 10-Q for the third quarter. On November 9, Alexion announced the internal investigation into Soliris sales practices. This morning, Alexion said its Q3 10-Q would be filed in January.
ANALYST COMMENTARY: Piper Jaffray analyst Joshua Schimmer noted the "surprising" departures of the CEO and CFO on the heels of the Soliris whistleblower case and the delayed 10-Q filing, but reiterated his Overweight rating on the stock and recommended using the selloff in shares as a buying opportunity. Schimmer said he believes the handling of the whistleblower case led to a fight for control of the board, "which the CEO/CFO lost." Schimmer also said that comments from the chairman and interim CEO on the conference call "expressed a high degree of confidence that further supports our view that the company does not face dire straits from whatever is going on behind the scenes." SunTrust analyst Yatin Suneja said he also believes the CEO and CFO departures are related to the whistleblower allegations and noted that the changes "might not be received well by investors." JPMorgan's Anupam Rama said that the 10-Q overhang is "now somewhat removed," though the management changes present "a new overhang." He also believes the management transition period introduces "a new element of uncertainty."
PRICE ACTION: In early trading, Alexion is down about 14% to $113.51, a slight bounce back from pre-market trading. Shares are down roughly 40% year-to-date.
Disclosure: None