Catalent strikes agreement with Elliott Investment Management for new board members, to conduct review

Battling major drops in revenue, top management replacements and issues with its manufacturing facilities, Catalent has reached a settlement with activist investor Elliott Investment Management.

The news comes as Catalent reported another revenue drop in the fourth quarter of fiscal year 2023, even after seeing the company take drastic steps this spring and summer to recover its business amid a drop-off in Covid-19 vaccine sales and challenging operations.

The contract manufacturer said Tuesday that revenue decreased 17% to $1.07 billion in Q4, down from $1.29 billion in the same quarter a year ago. Biologics revenue was $406 million, a 37% drop. For the full fiscal year 2023, Catalent’s biologics revenue fell 21% to $1.9 billion.

The cooperation agreement with Elliott Investment includes the addition of four new directors to its board, growing it from 12 to 16. The four new independent directors include Frank D’Amelio, the 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.

John Greisch

John Greisch, the former president and CEO of Hill-Rom Holdings and former CFO of Baxter, will serve as the chairman.

Catalent’s board is also setting up a new strategic and operational review committee “to conduct a review of 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.”

Ahead of the announcement, Reuters reported that the deal with Catalent includes considering a sale of the company, citing sources familiar with the matter.

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

Catalent has attempted to make changes over the last year to right its tilting ship, including the departure 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 it encountered productivity and cost issues at three of its locations, including “productivity challenges” and higher-than-expected costs at its Bloomington, IN, facility, and 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.

fda