US investors score landslide victory in latest opioids vote

Resolution at Depomed achieves unprecedented support

The Investors for Opioid Accountability (IOA) coalition has achieved the highest support from fellow shareholders on the issue so far and is mulling a second proposal at Cardinal Health.
About 62.3% of shareholders at NASDAQ-listed Depomed voted in favour of a resolution demanding the drug maker adopts board-level oversight and governance reforms to manage opioids-related risks, as well as to take those risks into account when determining executive compensation.
The resolution, voted on at the AGM held on May 8, was co-filed by the United Automobile Workers Retiree Medical Benefits Trust (a co-lead at IOA) and Calvert Research and Management (one of its 44 members, with a combined AUM of $2.2trn).
The proposal highlighted that in 2015, Depomed acquired the franchise of opioid drug Nucynta from Johnson & Johnson’s subsidiary Janssen. The transaction, the co-filers stated, has come under scrutiny from analysts and investors, as it prompted Depomed to lay off staff and sign a commercialisation agreement with Collegium Pharmaceutical to outsource the sales and marketing of the opioid drug.
According to the resolution, Nucynta accounted for nearly 62% of Depomed’s sales since its acquisition, and the firm disclosed in its 10-K filings with the SEC that “laws and regulations applicable to the pharmaceutical industry, including the opioid market, may adversely affect our business, financial condition and result of operations”.
Depomed has also been under the scrutiny of Senator Claire McCaskill, who investigates the opioid crisis and requested the main manufacturers provided comprehensive documentation about their role in the epidemic.Depomed’s board had recommended shareholders to vote against the resolution from IOA, arguing that while the company shares the proponents’ concerns about the opioid crisis, the board already discloses how it manages risks and has aligned its governance with best practices.
The vote at Depomed is the latest in a new shareholder movement to tackle the financial and societal consequences of the opioid crisis.
Early successful resolutions were filed in 2017 by the union’s International Brotherhood of Teamsters General Fund at opioid distributors McKesson (40%) and Cardinal Health (36.41%), according to data by proxy voting analysis firm Fund Votes.
After the IOA coalition was set up, votes followed this year at distributor AmerisourceBergen, and manufacturers Pfizer and Johnson & Johnson. A resolution was withdrawn at Mallinckrodt Pharmaceuticals.
According to Donna Meyer, Director of Shareholder Advocacy at Mercy Investments (co-lead of the IOA coalition), the next one will be filed at Cardinal for the second time. Its AGM will be held in November 2018.
“[We are] encouraging them to negotiate a settlement with shareholders – which they say they plan to do. Otherwise, we have a resolution ready for them,” she told RI.

To read RI’s full analysis of investor engagement on the issue of the US opioid crisis, see here