* Actelion facing fire from largest shareholder
* Elliott Advisors owns just over 6 pct of Actelion
* Actelion AGM on May 5 in Basel, Switzerland
By Katie Reid
ZURICH, April 29 (Reuters) - Europe’s largest biotech group Actelion Ltd ATLN.VX faces a tough battle at its annual general meeting to convince investors that it has the most value-creating strategy after facing heavy criticism from its largest shareholder.
Elliott Advisors has accused the $7.5 billion group of squandering shareholder value through its high-risk strategy and the New York-based fund has urged Actelion to consider selling itself after a string of product setbacks.
The fight will come to a head next Thursday morning when Actelion and Elliott square up in Basel in front of scores of investors and both will be fencing hard to get their candidates onto the Actelion board.
“Actelion will have to stay cool. Elliott will probably be quite aggressive,” said Helvea analyst Olav Zilian.
The hedge fund has a track record of activism and pushing for radical change at a range of companies.
The dual is likely to go to the wire, but Actelion may just win out after crucially securing the public support of two large shareholders Rudolf Maag, who owns 4.2 percent, and biotech investment fund BB Biotech, which has a 3.5 percent stake.
“We believe it remains too close to call but currently the balance is probably just in management’s favour, based on public comments by loyal shareholders to date,” Jefferies analyst Peter Welford said in a note.
Actelion has called on shareholders to re-elect chief executive and Actelion founder Jean-Paul Clozel as well as Carl Feldbaum and Juhani Anttila onto the board.
The Swiss biotech group also wants shareholders to back two new candidates -- Jean-Pierre Garnier, a former GlaxoSmithKline (GSK.L) chief, whom Actelion wants as chairman-designate, and Robert Bertolini, a former finance chief of Schering-Plough.
Elliott, which now owns more than 6 percent of Actelion, has said it would back these two new board candidates, but it is also proposing its own slate of six drug industry and M&A experts, including former Novartis NOVN.VX executive James Shannon, who it wants to chair Actelion instead of current chairman Robert Cawthorn.
“We are expecting a significantly higher turnout than usual. The usual is between 30 and 35 percent of shareholders,” Actelion spokesman Roland Haefeli said.
“The company is reasonably confident that the motions of the board of directors will prevail,” he said.
Georgeson, Elliott’s proxy solicitor, expects 50 to 55 percent of Actelion shareholders to vote their shares at the AGM.
Actelion has also won support from Swiss investor group Ethos, which can be influential in Switzerland, as well as from Germany-based independent proxy voting service IVOX and proxy firm Glass Lewis.
But U.S.-based shareholder advisory group ISS, which is supporting some of Actelion’s proposals, has said it is advising shareholders to vote for the removal of Cawthorn, boosting Elliott’s cause.
According to an analysis by Georgeson, Elliott has confirmations from 20 percent of shareholders and the likely support of another 15 percent from subscribers of ISS, which also advised shareholders to back three of Elliott’s boardroom nominees.
“Based on our extensive discussions with major institutional shareholders over the past few weeks, we know they are concerned about the strategic direction of the company and the need for a refresh of the board,” a spokesman for Elliott said.
“Coupled with the fact that ISS supports seven of the nominees and existing members that we are supporting, including three that we nominated, and has asked shareholders to remove five out of nine of existing Board members, including the chairman, we are optimistic that there will be substantial change at Actelion following the AGM which will benefit all shareholders,” the spokesman said.
Actelion has been seen as a bright light in the European biotech industry thanks to its success with Traceler, a drug to treat a rare heart and lung disease, but investors have been unsettled by its failure to broaden its pipeline.
Helvea’s Zilian also expects Actelion to prevail at the shareholder meeting, although he believes it is likely Elliott candidate Shannon will be elected and Actelion’s Anttila will fail to be re-elected.
Zilian said in the months following the AGM, the company may want to shake up management and look for ways to deploy its cash.
“They will have to prepare the rejuvenation of senior management to also help make investors more confident. This would be a new start. Actelion has to somehow make a cut and move on,” Zilian said.
“Pulmonary arterial hypertension will remain key, but they have to grow out of this now. They should also be more aggressive about spending cash and be more gutsy about going for some M&A,” Zilian said. (Reporting by Katie Reid, editing by Matthew Lewis)