June 1, 2023

Illumina's CEO easily survived his reckoning

Illumina CEO Francis deSouza won re-election to the company's board by a nearly 3-to-1 vote margin, according to details disclosed yesterday, suggesting his future at the embattled company isn't as precarious as it seemed.

DeSouza, under fire for leading Illumina into the boondoggle of acquiring Grail, won 93 million shareholder votes to keep his job on the board, with 38 million withholding support in last week's election. That's despite weeks of criticism from activist investor Carl Icahn, who ran his own slate of candidates, and shareholder advisory firm Glass Lewis' recommendation that shareholders replace him.

The result doesn't change Illumina's immediate business future. Revenues have slipped below investors' expectations, and Grail remains a cash-burning investment all but guaranteed to end in a loss. And deSouza's re-election doesn't mean all's well with shareholders. John Thompson, Illumina's chairman, got voted out, and in a largely symbolic vote, the vast majority of shareholders voted against the company's pay package for executives, lending weight to Icahn's claim that the company has been poorly managed.

Activism

Exelixis is going to rein it in

After staring down what would have become a public proxy fight, Exelixis caved to an activist investor, moving forward with a strategy it previously decried as "short-sighted and value destructive."

The news is that Farallon Capital Management, which owns about 8% of the company, got its three nominees elected to Exelixis' board. In April, Farallon accused the company of wasting money on a "large, unfocused R&D program without an organizing principle or strategy." In a statement yesterday, Farollon said it expects the incumbent board members to "heed the clear message of this election and recognize that Exelixis must embrace change to achieve its full potential for patients and shareholders."

Just what that will look like remains unclear. Exelixis, which makes about $2 billion a year from the cancer treatment cabozantinib, had already promised to refocus its research spending and spend $550 million on share buybacks. That proposal didn't appease Farallon, suggesting the company's future could be even more austere.

Middlemen

CVS: PBM profits are Congress-proof

If Congress follows through on its threats to crack down on how pharmacy benefits managers make their money, CVS Health, which owns one of the largest PBMs in the country, will still be able to maintain its margins, an executive said.

As STAT's Bob Herman reports, CVS's chief financial officer told an audience of investors "there's other ways in the economic model that we can adjust to" if lawmakers curtail the drug rebates that make up a large portion of their business, adding that, "if some of these things change, it could lead to higher costs for employers and health plans."

This comes as Congress digs into PBMs' practice of extracting rebates from drug makers and using what's called spread pricing, in which companies charge their customers more for certain drugs and then pay out less to the pharmacies that dispense, pocketing the difference.

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Obesity

FDA: Please don't buy off-brand Ozempic

As Novo Nordisk's powerful weight-loss medicines remain in short supply, the FDA is warning consumers that the purported versions of Ozempic and Wegovy offered online might not be what they seem.

Compounding pharmacies and chemicals manufacturers are selling semaglutide, the active ingredient in Novo Nordisk's products, at lower prices and in more abundant qualities than the brand-name version, according to the agency. The problem is that many of them are selling versions of the active ingredient that are used in lab research, not meant for patient use, which are not regulated by the FDA and could put patients at risk.

Meanwhile, Novo Nordisk is struggling to meet demand for semaglutide, both for patients with Type 2 diabetes who take Ozempic and for the escalating number of people seeking the weight-loss treatment Wegovy. Earlier this month, the company paused its advertising "to avoid stimulating further demand for this medicine," and Novo Nordisk has said it will start limiting starter doses for new patients to ensure a steady supply for people already on the drug.

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