Catalent and activist investor Elliott agree to new board seats, strategic review amid sales decline

As it deals with major declines in revenue, the replacement of top managers and issues with its manufacturing facilities, Catalent said it has reached an agreement with activist investor Elliott Investment Management.

Total revenue decreased 17% to $1.07 billion in Q4, down from $1.29 billion a year prior. The company’s revenue from biologics fell even more, down 37% to $406 million.

Elliott took a stake in Catalent earlier this year after a period of post-pandemic turmoil at the contract manufacturer. Under their agreement, also announced Tuesday, Catalent will add four new independent directors to its board, growing it from 12 to 16 members.

John Greisch

The expanded board will also launch a strategic review led by new chairman, John Greisch, the former CEO of Hill-Rom Holdings and former CFO of Baxter, to examine “the company’s business, strategy and operations, as well as the company’s capital-allocation priorities, in order to maximize the long-term value of the company.”

The four new directors include Frank D’Amelio, former CFO of Pfizer; Steven Barg, global head of engagement at Elliott; Stephanie Okey, a former leader in the rare disease business at Sanofi’s Genzyme; and Michelle Ryan, a former treasurer at Johnson & Johnson.

Ahead of the announcement, Reuters reported that the review could include a potential sale of the company, citing sources familiar with the matter.

Under the agreement, Elliott agreed to “customary standstill, voting, confidentiality, and other provisions.”

Catalent shares were up 3% in early trading Tuesday.

Catalent has made changes over the last year to right the ship, including the departures of CFO Thomas Castellano; Mario Gargiulo, head of global operations for biologics; Mike Riley, division head for bio product delivery; and Manja Boerman, division head for bioModalities.

The company disclosed earlier this year that it had productivity and cost issues at three of its locations, including “productivity challenges” and higher-than-expected costs at its Bloomington, IN, facility, and that it couldn’t hit its productivity and revenue goals because it had to “enhance its operational and engineering controls” after an inspection.

The FDA released documents in July that showed issues with maintenance and cleaning at the Bloomington manufacturing facility responsible for the FDA rejection of a new version of Regeneron’s blockbuster drug Eylea. The therapy was approved earlier this month.

The company’s thrice-delayed Q3 results, finally released in June, also showed financial difficulties: its biologics manufacturing business tumbled 32%, driven by a drop-off in sales of Covid-19 vaccines.

The manufacturer posted a loss of $227 million, starkly contrasting the $141 million it earned a year ago. It also issued updated guidance for the year, saying it now expects revenue of $4.2 billion and $4.3 billion in 2023, compared with previous guidance from February of $4.6 billion to $4.8 billion.

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