Activist shareholder Elliott Investment Management is seeking a shake-up of the board of directors of contract drug manufacturer Catalent (NYSE:CTLT) and has built a significant stake in the company, as per a Wall Street Journal report. However, the report did not provide details on how big Elliott’s stake is. CTLT shares jumped almost 9% in Thursday’s pre-market trading.
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Elliott has reportedly been in discussions with potential director candidates, gearing up for a proxy fight with the company. The deadline for director nominations ends on July 29.
Activist Pressure on Catalent
Catalent partners with biotechnology and pharmaceutical companies to optimize drug manufacturing and launch, and also provides other services. The contract drug manufacturing company gained a lot of visibility during the pandemic, as it enabled mass production of COVID-19 vaccines.
The activist pressure on Catalent comes at a time when the company is facing several headwinds. The company fell out of favor due to production setbacks at three of its major facilities and persistent delays in declaring financial results. Some of these production issues came in as the company failed inspections by the U.S. Food and Drug Administration (FDA).
Catalent has also been struggling with higher costs. Amid all this chaos, the company announced the departure of its CFO Thomas Castellano in April 2023. Catalent named Matti Masanovich as its new CFO last month.
After much delay, last month the company reported a larger-than-anticipated fiscal third-quarter loss and slashed its full-year revenue guidance. Catalent slipped into a net loss of $227 million from earnings of $141 million in the prior-year quarter. However, strength in the company’s biologics division helped it beat Wall Street’s toned-down sales estimates.
Elliott is known to push for strategic changes and board as well as executive shake-ups at companies like Salesforce (CRM), Pinterest (PINS), and Walt Disney (DIS). Earlier this week, the activist investor reached an agreement with alcoholic beverage maker Constellation Brands (STZ), pursuant to which the company agreed to appoint two new independent directors and share certain confidential information with Elliott ahead of its investor day later this year.
Is Catalent a Good Stock to Buy?
Of the four Top Wall Street Analysts covering Catalent stock, one has a Buy rating, two have a Hold recommendation, while one analyst has a Sell rating. Tracking the best-performing analysts could give investors useful insights about their recommendations, given their impressive success rates.
The average price target of $43.50 for CTLT implies a possible downside of 6.1%. Shares have risen 3% year-to-date as of Wednesday’s closing.
