Calls for the Immediate Resignation of Four
Directors, Including Chairman Peter Staple, Heather Mason, William
McKee and Dr. Jeffrey Vacirca
Intends to Nominate Independent, Qualified
Directors at the Company’s Next Shareholder Meeting If No Progress
is Made
Criticizes Board’s Failure to Explain and
Recover Damages From Value-Destructive Spectrum Pharmaceuticals
Acquisition
Urges Board to Improve its Due Diligence
Process Before Any Further M&A
The Buxton Helmsley Group, Inc., a significant shareholder of
Assertio Holdings, Inc. (NASDAQ: ASRT), today issued the following
letter to the company’s Board of Directors.
***
July 23, 2024
Mr. Peter Staple Chairman, Board of Directors c/o Mr. Sam
Schlessinger Assertio Holdings, Inc. 100 South Saunders Road, Suite
300 Lake Forest, IL 60045 sschlessinger@assertiotx.com
Dear Peter:
The Buxton Helmsley Group, Inc. (“BHG” or “we”) is the beneficial owner of approximately
1% of the equity shares of Assertio Holdings, Inc.
(“Assertio” or the
“Company”). We have grave
concerns that the current composition of the Assertio Board of
Directors (“the Board”) is
inadequate to meet either the specific requirements of Assertio’s
circumstances or the standard responsibilities of a public
company’s board, which include:
- Supporting the development and implementation of the strategic
plan;
- Overseeing management’s execution of the Company’s
strategy;
- Holding management accountable for meeting targets;
- Planning for succession; and
- Establishing management’s compensation with the right
structures and incentives.
Your continuing refusal to discuss the state of affairs at
Assertio, despite multiple requests, is unhelpful. The responses we
have received from your surrogates (Ajay Patel, Assertio’s CFO, and
Sam Schlessinger, Assertio’s General Counsel) were also unhelpful.
Our preference, in general, is to work collaboratively with the
boards of companies in our portfolio and avoid the expense and
distraction of a proxy contest. It appears that you prefer to
ignore your shareholders instead of talking with them to resolve
concerns and spend scarce corporate resources rather than avoid a
costly proxy contest. Additionally, BHG believes that this Board
has an obligation to shareholders to explain the massive
shareholder value destruction that has occurred on its watch. With
that in mind, if you are willing to work with us towards a
value-creating solution to these serious problems, and to work
together with us to fix this Board, please let us know.
To provide a vignette of the unhelpful responses to date, we are
compelled to report that Assertio (via Mr. Schlessinger’s
correspondence with BHG) initially purported it had no knowledge of
corroborating whistleblower allegations from multiple former
Spectrum Pharmaceuticals, Inc. (“Spectrum”) employees or publicly available
supporting evidence. We were surprised that Mr. Schlessinger asked
BHG for evidence of the misconduct alleged by multiple internal
whistleblowers, when the Company has had nearly a year (since
closing on the Spectrum acquisition) to collect that
information/evidence from whistleblowers. Assertio should have
collected that information/evidence long ago from the
whistleblowers, not BHG, when the issues were directly raised to
Mr. Schlessinger. Days later, after BHG informed Mr. Schlessinger
that we knew he was directly sent the information by
whistleblowers, he suddenly knew everything about the matters and
informed us they had “no merit.” Whether that was false ignorance
at first or an overnight investigation, something smells rotten
here. We find it difficult to believe that multiple whistleblowers
are all just “making up” the same story. The opportunity for this
Board to responsibly conduct an investigation (in accordance with
its fiduciary duties) has passed. Mind you, such glaring issues
should have already been detected pre-Spectrum acquisition, if
adequate due diligence had actually occurred, which it clearly did
not. This Board cannot be trusted to investigate its own failures,
especially since such gross failures appear to be ongoing, and even
more so because this Board has already proven its inability to
conduct a basic investigation through the now-apparent Spectrum due
diligence failures.
As we have said before, we are open to the possibility that
there is an alternative explanation for the serious matters we have
brought to the Board’s attention in private correspondence. In the
absence of a response from you, we can only conclude that the Board
is unfit to serve, and that the reason for your silence is that you
have no defense.
Assertio first came to our attention because of its perplexing
and highly suspicious disclosures related to the acquisition of
Spectrum. The Company’s inability to explain these disclosures,
even after attestation by a dual CPA-Certified Fraud Examiner as to
the irregularities and a need for independent investigation, and
this Board’s unwillingness to allow an investigation by
unconflicted parties, heightened our concerns. When fiduciaries
refuse to explain themselves, there is usually a reason. BHG has an
extensive track record of identifying public companies with
suspicious disclosures/conduct. We have found that meaningful
leadership changes at those companies successfully safeguarded and
maximized shareholder value by intervening before the damage became
irreparable. Refreshed leadership, without a conflict of interest,
can investigate issues and pursue causes of action against culpable
parties, thereby reversing shareholder harm to date and restoring
value to those companies and their investors. BHG’s recent
intervention with Fossil Group, Inc. (NASDAQ: FOSL), and eventual
settlement agreement, led to the departure of its CEO and CFO and
the addition of true shareholder advocacy to the Fossil board.
Fossil equity shares rallied more than 80% within two months of the
board’s refreshment following constructive engagement with BHG.
The following is a non-exhaustive list of factors that lead us
to believe the Board must be reconstituted:
- The write-down of 75% of the value of Spectrum within 3 months
of the Board-recommended transaction’s completion;
- The abject failure by the Board to pursue any recovery of the
damages associated with the Spectrum acquisition;
- The decision to pursue a post-Spectrum strategy of diversifying
Assertio’s asset base, presumably by engaging in acquisitions,
without adopting practices to prevent yet another massive due
diligence debacle at the expense of this Company’s investors;
- The absence from the Board of specific expertise that is
relevant to Assertio’s challenges (for example, expertise in
biologic drugs, corporate governance, drug development, forensic
accounting, fraud litigation, pharmaceutical regulation, quality
control, or shareholder representation);
- The corresponding excess of former pharmaceutical executives
with redundant experience on the Board;
- Failure by Nominating and Corporate Governance Committee Chair
William McKee to proactively recruit directors as needed for the
Board to comply with its mandatory retirement age policy;
- Disproportionately high annual director compensation (from
$220k to $375k, or approximately twice the director compensation of
comparable life science companies);
- Assertio’s demonstrable culture of retaliation against internal
whistleblowers (not viewing them as brave resources, but instead
adversaries), which jeopardizes preservation of (and any effort to
increase) the Company’s long-term value;
- The Board has not adequately investigated multiple allegations
regarding the integrity of Spectrum’s assets from former,
high-level Spectrum employees; an adequate investigation would
include speaking with the whistleblowers and obtaining
information/evidence from them to gain an understanding of the
basis for their reports; without an adequate investigation, the
Board cannot say it is certain that Assertio’s business conduct is
exclusively lawful; and
- Withholding material information from shareholders and refusing
to even disclose the reason for withholding that material
information (such topics include the Company’s opioid-related
liability, details related to its insurance coverage, and other
matters).
The status quo is no longer tenable. Continuing waivers of the
Board’s retirement age are unacceptable. The three legacy members
of the Board (Messrs. Mason, McKee, and Staple) have overseen
shareholder value destruction in the hundreds of millions of
dollars; the best thing that could be done to create/maximize value
for shareholders is for them to leave. In consideration of the many
failures identified above, this Board is in no position to select
director replacements—we are concerned that any director selected
by the current Board would be perceived as operating under a cloud
of suspicion and, therefore, unable to assuredly fulfill their
duties of maximizing shareholder value.
It is also clear to us that shareholders cannot rely on the
leadership of Dr. Jeffrey Vacirca, given his previous roles as
Spectrum’s medical researcher, then a Spectrum board member, and an
Assertio Board member upon closing of the Spectrum acquisition. Our
research has unearthed details regarding Dr. Vacirca’s prior work
for Spectrum that confirms he is unqualified to serve on Assertio’s
Board.
In addition, Assertio, and particularly the Board, should treat
this communication as a litigation hold notice (given the
increasing likelihood that we will need to launch derivative
litigation against the Board). Accordingly, the Company and Board
must suspend all document destruction policies and not destroy,
delete, transfer, or alter any documents, communications, data,
correspondence, e-mails, text messages, reports, disclosures,
contracts, affidavits, invoices, statements, receipts, worksheets,
or other documents or information (including metadata) in your
possession, custody and/or control, whether hard-copy or
electronic, that contain information about or relating to, directly
or indirectly, the concerns we have raised. You must take every
reasonable step to preserve this information until final resolution
of this matter.
That said, please consider this letter an advance notification
that we will undertake a proxy contest if we cannot come to a
constructive solution with you before. Therefore, subject to
intervening developments, you should expect to receive a formal
nomination notice from us, in accordance with the Company’s bylaws
and securities laws, in the coming months. We intend to hold the
Board accountable through all means available to us in the
meantime, including through derivative suits against the Board. For
the avoidance of doubt, we expressly reserve all rights and
remedies, at law and in equity.
* * *
BHG’s investment philosophy is predicated on the idea that
transparent, comprehensive disclosure is an intrinsic element of
maximizing shareholder value. We believe that Assertio’s value is
artificially depressed by poor disclosure and the Board’s
demonstrated inability to represent shareholders’ interests.
Given the massive value destruction suffered by Assertio
shareholders and the Board’s subsequent actions (including its
responses to our further findings), it is clear to us that the
Assertio Board is incapable of meeting the specific needs of the
Company under its circumstances, not to mention the general
obligations of any public company board. This Board, therefore,
must be reconstituted.
Very Truly Yours,
Alexander E. Parker Senior Managing Director The Buxton Helmsley
Group, Inc.
Cc: Mr. William T. McKee, Director Ms. Heather L. Mason,
Director Dr. Jeffrey L. Vacirca, Director Mr. Sravan K. Emany,
Director Mr. Sigurd C. Kirk, Director Mr. Brendan P. O’Grady,
Director and Chief Executive Officer Mr. Ajay Patel, Chief
Financial Officer Mr. Matthew Kreps, Investor Relations Officer
***
About Buxton Helmsley
The Buxton Helmsley Group, Inc. is a New York City-based
investment advisory firm and fund manager, engaging both active and
passive investment strategies across a range of asset classes, with
a general focus on opportunities in North America and Europe. The
investment approach is based on deep fundamental analysis and risk
management, with a focus on ensuring disclosure obligations are
being upheld under applicable accounting standards and securities
laws.
Cautionary Statement Regarding Forward-Looking
Statements
This press release does not constitute an offer to sell or
solicitation of an offer to buy any of the securities described
herein in any state to any person. The information herein contains
"forward-looking statements". Specific forward-looking statements
can be identified by the fact that they do not relate strictly to
historical or current facts and include, without limitation, words
such as "may," "will," "expects," "believes," "anticipates,"
"plans," "estimates," "projects," "potential," "targets,"
"forecasts," "seeks,” "could," "should" or the negative of such
terms or other variations on such terms or comparable terminology.
Similarly, statements that describe our objectives, plans or goals
are forward-looking. Forward-looking statements are subject to
various risks and uncertainties and assumptions. There can be no
assurance that any idea or assumption herein is, or will be proven,
correct or that any of the objectives, plans or goals stated herein
will ultimately be undertaken or achieved. If one or more of such
risks or uncertainties materialize, or if BHG's underlying
assumptions prove to be incorrect, the actual results may vary
materially from outcomes indicated by these statements.
Accordingly, forward-looking statements should not be regarded as a
representation by BHG that the future plans, estimates or
expectations contemplated will ever be achieved.
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Media: Longacre Square Partners
BuxtonHelmsley-ASRT@Longacresquare.com