The chief executive of Elan Corp, Kelly Martin, is once again under fire from a shareholder who has made accusations about lack of disclosure and conflicts of interest.
Ib Sonderby, head of the private investment firm Zoar Invest and a stockholder in the Irish group for more than six years, launched SaveElan.com in July, claiming it to be a forum "to gather and educate concerned shareholders regarding the issues currently facing Elan and its management". He has now announced plans to unveil "four potential directors for the Elan board" in a conference call next week.
This follows a letter written early this week by Mr Sonderby criticising Mr Martin's position as a director of an Irish hedge fund, Kinsale, while operating as CEO at Elan. That was not disclosed, though following a press article in December 2008 Mr Martin pointed out that his initial investment in the fund was less than 1% of its value, and he no longer had an investment in Kinsale or any involvement in its operations. The Elan line at the time was that Mr Martin's involvement with Kinsale was not perceived to be of material interest.
However Mr Sonderby is not satisfied and claims that Mr Martin’s name was "surreptitiously removed from the Kinsale website immediately after" the 2008 press article, "so his role there, at present, is unknown". He cites a conversation with a corporate governance expert who has "informed me that he knows of no executive at a public company that sits on the board of a hedge fund".
Mr Sonderby states that thanks to his role as CEO of Elan, Mr Martin holds "a position of great value to a hedge fund such as Kinsale". He then asks whether the latter is "breaching his position of trust within industry by serving in such a conflicting role? Does he have an incentive to hide his involvement in Kinsale?"
The activist investor goes on to claim it is "clear that Mr Martin’s dual roles represent an inappropriate and unacceptable combination of responsibilities of which shareholders should have been informed". Mr Sonderby also reiterates his unhappiness with the way Elan has been run, citing the way an agreement with Johnson & Johnson was handled, involving the Dublin-headquartered firm's investigational Alzheimer’s disease drugs, plus the divestiture of the severe pain treatment Prialt (ziconotide) to Azur and a deal with Amarin.
To these cases, "we can add yet another conflict of interests and failure to disclose material information," Mr Sonderby concludes, complaining of "a long series of poor business decisions and wasteful spending at the company". He is therefore going to recommend "a list of board candidates that will restore oversight in the near future".
Though not concerning these specific allegations, Elan sent PharmaTimes World News a statement noting that "over the last several years, the board, "including the independent directors, have met with investors frequently and taken significant steps to address concerns". In fact, the firm says, "many of the matters Mr Sonderby has raised recently have been addressed previously, and we regret that he appears seriously misinformed on others".
Elan added that "Mr Sonderby has never shown any real interest in a dialogue with the company". In June, Mr Martin revealed he is to step down from the post of CEO at the beginning of May 2012 after his contract was changed to a fixed term from an open-ended agreement.