Support For Actelion Melts As BB Biotech Reduces Stake

Support for Actelion Ltd (ATLN.VX) has melted further, as long-time investor BB Biotech (BION.EB) continued to cut its stake in Europe's largest biotech ahead of a key investor meeting next month that will determine the company's board composition and future direction.

BB Biotech, which is supporting Actelion's current board and strategy against efforts by U.K. hedge fund Elliott Advisors to uproot most of the current top brass, held 3.5% of the company's capital at the end of March, according to its quarterly report. That's down from 3.8% at the end of 2010 and markedly lower than the 4.3% the Swiss investment company held at the end of September 2010 before Actelion's troubles became more pronounced.

BB Biotech's stake reduction comes at a crucial time, as Actelion is tries to secure investor support for its current board and management, which wants the company to stay independent and continue developing its own drug franchise.

It's strategy is contested by Elliott Advisors, a unit of $17 billion U.S. hedge fund Elliott Management, which is advocating a boardroom overhaul and wants the company's top echelon to consider a sale of the biotech as one of several future options.

BB Biotech shrugged off comments it was voting with its feet.

A spokesman for the group said the reduction of its holding in Actelion is part of its portfolio reshuffle, amid recent efforts to increase holdings in targeted companies where it owns less stock.

A substantial part of BB Bitoech's 1.33 billion Swiss francs biotech fund are held in shares of Actelion. The investment into the Swiss biotech makes up 17.9% of its overall portfolio. This is equal in size to its stake Celgene Corp (CELG) and more than its core holdings in companies such as Gilead Sciences Inc and Vertex Pharmaceuticals Inc (VRTX).

"The sell down by BB Biotech in Actelion to 3.5% is lending support to our case and we remain confident that we can prevail at the upcoming annual shareholder meeting," a spokesman for Elliott Advisors said about BB Biotech's recent move.

Elliott, which has tasked U.S. shareholder consultancy Georgeson Inc to analyze the potential voting outcome, previously said that of the 50% to 55% of Actelion's investors who may appear at the annual general meeting, around 20% will side with the activist hedge fund. The bulk of institutional investors, who make up another roughly 15%, may follow recommendations by proxy advisor Institutional Shareholder Services, or ISS, which is partly backing Elliott.

Actelion investors will decide the company's board composition on May 5.

While Elliott wants current chairman Rob Cawthorn to step down and has nominated six new board members, including former Novartis AG (NVS) executive James Shannon, it is backing Actelion's board nominees Jean-Pierre Garnier, a former chief executive of GlaxoSmithKline PLC, and Robert Bertolini, a former Schering-Plough chief financial officer.

Actelion has come under pressure from Elliott Advisors after a series of drug development setbacks hurt its prospects, adding pressure on the biotech's board and management. Although Actelion hopes it can maintain its strong franchise--which rests on its pulmonary hypertension drug Tracleer that has annual sales of almost 2 billion Swiss francs--concerns are high that Actelion's efforts may fail.

Tracleer will lose its patent protection in 2015 and potential follow-up drug macitentan may not come to market before 2013. Elliott and its chairman nominee Shannon doubt that macitentan may replace Tracleer in a meaningful way.

Actelion Tuesday said: "we continue to see significant support for the motions brought forward by Actelion's board of directors and are reasonably confident that they will prevail."

Actelion recently launched a 800-million-franc share buyback and said it plans to pay out its first ever dividend in an apparent attempt to win over shareholders.

Besides BB Biotech, Swiss investor Rudolf Maag, who owns more than 4% of the company's stock, has lent support to Actelion's current board.

Other substantial investors such as Orbis Investment Management, Lazard Asset Management Ltd and New Investment Management Ltd have not said how they plan to vote.

-By Goran Mijuk, Dow Jones Newswires, [phone]; [e-mail]