When Novartis completed its $9.7 billion acquisition of The Medicines Company in early January, it capped a more than four-year activist campaign by Sarissa Capital Management to push for changes at the target company.
It was well worth the long effort.
Novartis paid a 45 percent premium for The Medicines Company’s shares, which quadrupled in price last year. The stock, which accounted for more than one quarter of Sarissa’s U.S. common stock assets at the end of the third quarter, heavily drove the hedge fund’s 34 percent gain in the fourth quarter of 2019 and 37.1 percent gain for the year, according to a person familiar with the matter.
In fact, 2019 represented the hedge fund firm’s best year since its 2013 inception, more than double its 15 percent-plus gains in each of the two previous years, the person said.
Sarissa declined to comment.
Alex Denner founded Sarissa in 2012. The activist, who specializes in health care, previously was a managing director at various businesses affiliated with Carl Icahn. He developed the activist strategy in health care at Icahn Capital.
Denner earned a Ph.D at Yale University, where he performed research in biomedical engineering. He also received master degrees in science and philosophy from Yale, as well as an undergraduate degree from Massachusetts Institute of Technology.
Denner is a Tiger grandcub, serving as a portfolio manager for health-care investments at O. Andreas Halvorsen’s Viking Global Investors from April 2005 to May 2006.
Sarissa, which currently manages $1.2 billion, takes huge, concentrated positions. At the end of the third quarter, The Medicines Company accounted for 26 percent of the firm’s U.S. long assets, while Allergan, its second largest holding, accounted for 22 percent of assets, according to a regulatory filing.
In June, AbbVie agreed to acquire Allergan for $63 billion. Earlier this week, AbbVie and Allergan announced deals to sell two drugs to satisfy regulators before the deal could close.
Biogen and Ironwood Pharmaceuticals represented nearly 19 percent and nearly 11 percent of Sarissa’s assets, respectively, at the end of September.
Denner joined The Medicines Company board in February 2016 and became chairman in 2018. The holy grail of the company is inclisiran, a cholesterol-lowering drug that has still not received FDA approval but which Sarissa asserted in its third-quarter letter has “the potential to revolutionize the treatment of cardiovascular disease.” In fact, inclisiran was highlighted in Novartis’ press release announcing the deal.
“Given the enormous capital required to reach its full potential, we believed inclisiran’s promise would be best realized by a company such as Novartis with resources and scale in excess of The Medicines Company’s, and we played an instrumental role in the sale of the company,” Sarissa stated in the letter, which was obtained by Institutional Investor.
Biogen is known for its multiple sclerosis drugs. But the wild card is aducanumab, a drug it hopes will treat Alzheimer’s disease. On Thursday, the company told investors on a conference call it still plans to submit an application this year for approval of the drug, according to Investor’s Business Daily.
“Although predicting the outcome of any regulatory decision is always very difficult, particularly when the data for the FDA to analyze is complex, we approach this 2020 event with optimism,” Sarissa stated in the third-quarter letter.
In the letter, which was dated December 2019, Sarissa also takes credit for strongly advocating for Ironwood’s decision last year to spin off its R&D business.
Nonetheless, Sarissa asserts the company’s “flawed business model” prevents it from successfully commercializing its well-regarded drug to treat constipation. “We believe that Ironwood’s board and management should seek to maximize the potential of Linzess and the shareholder value that could be created by shifting its commercialization efforts to a company already at scale in the space,” Sarissa told clients in its letter. “We continue to engage with management and the board.”