Sarissa Capital Management is expected to file a lawsuit against Innoviva (INVA) in Delaware Chancery Court after Innoviva said Thursday that preliminary results show the company's shareholders voted to reelect all seven of Innoviva's director nominees and have rejected an effort by the activist fund Sarissa to seat three dissident directors to the company's seven-member board.
Sarissa was seeking the election of its dissident nominees George Bickerstaff, Jules Haimovits and Odysseas Kostas.
Sarissa told shareholders attending Innoviva's annual meeting Thursday that it is planning a lawsuit alleging that Innoviva management reneged on a settlement with the activist fund.
On Wednesday, Sarissa said Innoviva had accepted its offer to settle the proxy contest, then notified Sarissa that it no longer would agree to the settlement. The press release issued by Sarissa late Wednesday said Innoviva that afternoon accepted an offer from Sarissa to settle the proxy fight by adding two Sarissa director nominees to its board. "After requesting and receiving our signature pages to the fully agreed upon settlement contract, Innoviva apparently continued to solicit proxies without disclosing our agreed upon deal," Sarissa said. "Then Innoviva suddenly informed us that they no longer agreed to the deal."
Sarissa maintains that the agreement is legally binding despite the lack of Innoviva signatures on a formal document.
Brisbane, Calif.-based Innoviva, formerly known as Theravance Inc., manages a drug portfolio anchored by its partnership with Glaxo (GSK) , which is a major shareholder of Innoviva.
Although Sarissa agreed that a slight majority of total Innoviva shares backed the full management director slate Thursday, it also asserted that an overwhelming majority of the non-GSK shares voted to install the three dissidents.
Sarissa has said it believes that Innoviva "is being run for the benefit of management instead of shareholders." The hedge fund has said that "for simply managing royalties," Innoviva had around $25 million in operating expenses in 2016 and about $22 million in 2015.
Proxy advisory firms Institutional Shareholder Services Inc. and Egan-Jones have backed all three of Sarissa's nominees, while Glass Lewis & Co. has recommended two of the activist's candidates.