Exclusive: Catalent to explore options after Elliott deal – sources

Aug 29 (Reuters) – (This story from August 28 was resubmitted to correct the spelling of Elliott in the headline)

Catalent Inc. (CTLT.N) is close to reaching an agreement with activist investor Elliott Investment Management that will include new directors and a commitment to review strategic alternatives such as the sale of the company, sources familiar with the matter said on Monday.

The company, which has been the subject of acquisition interest from both private equity firms and strategic buyers for months, is ready to agree to add four new directors proposed by Elliott to its currently 12-member board, the companies said. sources.

The sources declined to be named because the information is confidential and warned that a deal could still fall apart at the last minute.

Spokesmen for Catalent and Elliott declined to comment.

Catalent’s share price rose 8% in after-hours trading before giving back some of the gains after closing at $45.65 on Monday.

The US-based contract drugmaker is also owned by the Danish company Novo Nordisk. (NOVOb.CO) lead manufacturing partner of its popular weight-loss drug Wegovy. The volatility at Catalent could increase scrutiny over the relationship between Novo and his partner.

Catalent’s deal with Elliott also makes the hedge fund an indirect player in the Wegovy story, the first to market a new class of highly effective weight-loss drugs. Some analysts have forecast a $100 billion market by 2030.

Reuters reported last week that a second Catalent factory will begin filling Wegovy injection pens for Novo as part of an expanded supply agreement. Novo is spending billions of dollars to make more obesity drugs amid skyrocketing demand, particularly in the United States.

Asked by Reuters on Friday about Catalent’s problems, Novo’s CEO saying He trusted that the company would solve his problems.

Novo’s shares were down 0.65% at 1109 GMT but were on track to post a 17% gain in August, their biggest monthly gain since February 2014.

Novo declined to comment on the news.

Novo shareholder Markus Manns, a portfolio manager at Union Investment in Germany, told Reuters on Tuesday that as long as Catalent can continue to make Wegovy for Novo, he is not concerned about developments with Elliott.

The deal would allow Elliott, one of the industry’s most active activist investors, to help influence Catalent’s strategy at a time when its share price has lost about half its value in the past year.

Earlier this year, Danaher (DRH.N)which on Monday agreed to acquire Abcam, was pointed out as a possible suitor.

CRITICAL ROLE

Catalent, which is valued at about $8 billion and played a pivotal role during the pandemic filling vials with the COVID-19 vaccine for various companies including AstraZeneca, Johnson & Johnson and Moderna, has grappled with a variety of issues recently. .

Its chief financial officer left in April, when the company warned “Productivity issues” and higher-than-expected costs at three of its manufacturing sites would impact fiscal 2023 results.

Catalent also warned in June when released quarterly earnings three times behind that the corrective actions it was taking to address quality control flaws identified by US drug regulators at its Brussels factory required more time to correct.

The Brussels plant started filling Wegovy injection pens in 2021, but issues This caused a supply shortage in the US throughout 2022.

The company is scheduled to report its quarterly results before the US market opens on Tuesday.

In the past, when Elliott has driven sales of parts or the entire target company, including on eBay and Switch Inc., and then gained representation on the board of directors, there have been major changes of ownership. Analysts in the seller industry, including Deutsche Bank, point out that Danaher, valued at $193 billion, has untapped M&A capacity even after buying Abcam.

Elliott is not the only activist investor to buy Catalent this year, with regulatory filings showing Keith Meister’s Corvex Management and Scott Ferguson’s Sachem Head Capital Management owned shares in the company at the end of the second quarter.

Despite Catalent’s operational and regulatory problems, several investors said the company has value given its role in meeting demand for outsourced manufacturing from big pharmaceutical companies.

Earlier this year, Elliott pushed for changes at cloud computing company Salesforce, averting a power struggle when the company announced better performance and a series of cost-cutting measures. He is also pushing to remove NRG CEO Mauricio Gutierrez.

Our standards: The Thomson Reuters Trust Principles.