David Tepper's Appaloosa hedge fund just slammed the leadership of $50 billion drugmaker Allergan, and is calling for change

AP

Allergan CEO Brent Saunders is in the hot seat.

• Billionaire David Tepper's Appaloosa LP made a strongly-worded call for change to drugmaker Allergan's board leadership structure on Tuesday.
• Appaloosa wants Allergan's board to separate the role of chairman and CEO, which today are both held by Allergan's Brent Saunders.
• In a Tuesday letter, Appaloosa slammed Allergan's executive decision-making, "the record for which has been fraught with ill-considered initiatives and self-inflicted wounds for several years now."

David Tepper's Appaloosa LP just put out a harsh call for change at the $50 billion drugmaker Allergan, and it's also a strongly-worded critique of the company's leader, Brent Saunders.

Appaloosa specifically wants Allergan's board of directors to separate the roles of chairman and CEO, which are both currently held by Saunders. The hedge fund calls it a "first step" to turning things around at Allergan. But the letter also makes clear that Appaloosa is condemning Saunders's leadership.

Allergan's stock has declined about 38% since Saunders became chairman in late October of 2016. The Standard & Poor's 500 Index has jumped 27% over the same time period.

When it began asking for the change last April, "we believed that the introduction of a seasoned independent Chairman with extensive pharmaceutical experience could exert a favorable influence on executive decision-making, the record for which has been fraught with ill-considered initiatives and self-inflicted wounds for several years now," the Appaloosa letter said. "AGN's moribund corporate performance and flagging stock price since our letters only deepens our conviction on this point."

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Appaloosa also noted that it has made the request four times over the course of less than a year, including the latest letter on Tuesday. The board's inaction, it said, bordered "on blind obedience and raises serious fiduciary concerns." Allergan did not immediately return Business Insider's request for comment.

Appaloosa isn't the only one with frustrations about the pharma company. Allergan is best known for its profitable Botox product, but an imaginative 2017 effort to extend patent protection on another best-selling product turned into a high-profile stumble.

The company acknowledged investors' frustrations in 2018, and announced a strategic review.

But when Allergan reported its financial results in late January, RBC Capital Markets analyst Randall Stanicky downgraded it, saying the company hasn't delivered growth for three years and calling its 2019 guidance "disappointing."