Novartis has hit back against suggestions made by minority shareholders at Alcon that the Swiss major's plans to push through the acquisition of the eyecare specialist is against the law.
Alcon's independent directors committee (IDC) has opposed the deal which is well under way now that Novartis has bought Nestle's remaining 52% stake for $180 per share, bringing the Basel-headquartered giant's' ownership of Alcon to 77%. However the offer of 2.8 Novartis shares for each Alcon share made to minority stockholders, worth around $160 at the moment, has been repeatedly rejected as too low.
In June, the IDC quoted a legal expert who said that any offer had to be approved by them but Novartis has brought in its own legal heavyweight to say this is not the case. Peter Nobel of the University of Zurich is quoted as saying that "merger transaction decisions must be made by the full board and cannot be subject to a veto right by a sub-set or committee of directors".
He added that the assertion that IDC approval "is required to approve a merger with Novartis is inconsistent with well-accepted principles of Swiss law", claiming that there is already "appropriate protection of minority shareholders" under the legal system.
Prof Nobel also said that neither Swiss law nor Alcon regulations "provide a valid basis for considering Novartis-nominated board members as conflicted solely as a result of having been nominated by the firm. Five of Novartis' choices joined the board in August.
The IDC has argued that the current version of Alcon regulations cannot be amended by the full board, which Prof Nobel also diagrees with. He said "this is not about moving goalposts during a game - we are concerned with Swiss company law and not with a sporting event".
Novartis also pointed out that in July, the IDC announced the creation of "an irrevocable litigation trust, funded solely by $50 million of Alcon assets". This is "inconsistent with Swiss law and are not in the interests of Alcon, possibly creating a breach of fiduciary duties by these board members", the company added.
Thomas Plaskett, chairman of the IDC, responded by saying "we are disappointed that at no point since the beginning ofthis process has Novartis presented us with a revised proposal toconsider". He added that "although ourcontinued preference is for a negotiated transaction, we are confidentin our legal position and are prepared to defend the rights of minorityshareholders in a court of law".
Illegal marketing cases settled
Meantime, Novartis confirmed that it is to pay $422.5 million to settle previously-disclosed allegations that it marketed the epilepsy drug Trileptal (oxcarbazepine) and five other drugs for unauthorised use in the USA.
Under the settlement with the US Attorney's Office for the Eastern District of Pennsylvania, Novartis will plead guilty to one misdemeanour count of misbranding Trileptal for neuropathic pain and bipolar disease and pay a fine of $185 million. The company had been accused of having "trained, managed, and rewarded its sales staff for these off-label promotional efforts".
The drugmaker will pay another $237.5 million to settle civil allegations about illegal promotion of Trileptal, Diovan (valsartan), Exforge (amlodipine/valsartan), Sandostatin (octreotide), Tekturna (aliskiren) and Zelnorm (tegaserod). Novartis also agreed to enter into a corporate integrity agreement with the Office of the Inspector General of the US Department of Health and Human Services and implement "additional compliance-related measures".
The settlement "demonstrates the government's continued scrutiny of the sales and marketing practices of pharmaceutical companies that put profits ahead of the public health,” said Thomas Doyle of the US Food and Drug Administration’s Office of Criminal Investigations. He added that “we will continue to seek this kind of criminal resolution and stiff sanctions when pharmaceutical companies undermine the drug approval process".
Four whistleblowers will share almost $25.7 million as part of the settlement.