EXEL - Exelixis faces proxy battle with investor Farallon Capital (update)

2023-04-05 21:03:00 ET

Update 9pm : Adds Exelixis comment.

Exelixis ( NASDAQ: EXEL ) will face a proxy battle with hedge fund Farallon Capital, who last Monday announced it nominated three individuals for the biotech firm. Exelixis ticked up 1% in premarket trading.

"We believe the Company must focus its R&D efforts and spending, communicate a differentiated and coherent strategy, commit to ongoing distributions of excess capital to shareholders and augment the Board with new perspectives," Farallon Partner Philip D. Dreyfuss wrote in a letter Wednesday to Exelixis' board. "This is why we recently provided you notice that we intend to nominate three exceptional director candidates to the Board."

When Farallon announced it would nominate directors last week, it hadn't decided yet if it would go ahead with a proxy battle and was trying to work with the company, according to a WSJ report on Tuesday. Farallon had been in discussions with Exelixis ( EXEL ) over the fund's main concern, which is research and development spending, the WSJ said. Those talks recently fell apart.

Exelixis ( EXEL ) recently reached a near-final agreement to avoid a proxy contest that included appointing two of Farallon’s nominees and announcing the retirement of two long-standing existing directors and forming a new Capital Allocation Committee, the company said in a statement in response to the Farallon letter. An agreement was never struck.

"... Farallon demanded a highly unusual breadth and depth of information access as a non-negotiable part of any settlement, including unprecedented access to Exelixis’ pipeline, people and clinical trial date," Exelixis ( EXEL ) said in the statement. "This would jeopardize the Company and all its shareholders, which the Company cannot agree to."

Last month Farallon Capital, which has a 7.2% stake in Exelixis ( EXEL ), said the biotech is undervalued and "needs to refresh the board." Farallon said in the letter on Wednesday that it has been continuously invested in Exelixis since 2018.

Farallon also said that Exelixis ( EXEL ) has more than $2 billion of cash and marketable securities on its balance sheet that it needs to find ways to distribute to holders.

"We were pleased to see the Board respond to our call for a return of capital with its recent announcement of a share buyback, but from our perspective, the plan does not go far enough," Farallon's  Dreyfuss wrote in the letter.

Last month, Exelixis ( EXEL ) authorized a $550M share repurchase program of the company’s common stock before the end of 2023.

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