Insight: Elan activist Sonderby rallies outraged investors

By Toni Clarke

BOSTON (BestGrowthStock) – Danish investor Ib Sonderby is becoming an increasingly painful thorn in the side of Irish drugmaker Elan Corp Plc (ELN.I: ).

The former stockbroker, who lives 30 miles north of Copenhagen and counts the country’s Queen Margrethe II as his neighbor, has launched a vigorous and relentless campaign to shake up the company’s board.

Through his website,, Sonderby, 50, has created a pulpit and rallying point for angry Elan investors who have seen their shares fall to $4.90 from $37 over the past two years and increasingly see him as David to Elan’s Goliath.

“I am totally behind what he is doing,” said Larry Feinberg, who runs Oracle Investment Management and holds some 6 million Elan shares. “I’ve gone from being upset at the corporate governance situation at Elan to being completely outraged!”

Elan co-markets the multiple sclerosis drug Tysabri with U.S. biotech company Biogen Idec Inc (BIIB.O: ) and has an extensive pipeline of drugs to treat central nervous system disorders, assets that some investors believe are being squandered by Elan’s board and management.

Over the past few weeks, Sonderby has drawn attention to potential conflicts of interest involving Elan’s chairman; raised questions about an unusually lucrative severance package for the company’s chief executive; and shone a spotlight on a substantial fine that Elan paid for illegally marketing an epilepsy drug, Zonegran, that it sold off in 2004.

He has dug into the company’s filings, engaged consultants and unearthed documents that reveal what he considers to be a network of relationships designed to enrich the company’s board and management at the expense of shareholders.

Sonderby, who controls more than 2 million Elan shares between his own holdings and those of Danish companies on whose boards he sits, bought his shares in 2002 at rock bottom prices and has not lost money. His actions, he says, are motivated by a sense of moral outrage.

“I’ve never seen a management like this before and I’ve just been appalled,” he told Reuters. “My view is they shouldn’t get away with it and that’s why I’m pushing for change.”


Sonderby forged his career at Maersk Line, the world’s biggest container shipper and an arm of A.P. Moller-Maersk (MAERSKb.CO: ) where he was in charge of currency hedging and liquidity management.

In 1984, after four years with the company, the Copenhagen Business School graduate left to become a stockbroker at a newly formed company called Bjornskov & Co, eventually becoming its chief executive and running it until it was sold in 1997.

Since then, Sonderby, a wine enthusiast, has joined the boards of several private and public companies, and though he occasionally has been involved in shareholder actions in the past, nothing has angered him as much as what he has witnessed at Elan, he said.

“It stinks a bit,” he said.

Sonderby said he will reveal the names of three alternative directors to the company’s board who will have the experience to maximize the company’s value.

“I believe that their assets are worth more than the market assumes,” he said.

Elan dismisses Sonderby as misinformed.

“Mr. Sonderby has never shown any real interest in a dialogue with the company,” Elan said in a statement. “Unfortunately, at this point, he appears more invested in spreading misinformation than in actual investing.”

Sonderby insists that Elan has ignored his efforts to communicate with the company. In his latest broadside, to be released on Wednesday, Sonderby draws attention to a potential conflict of interest in a transaction between Elan, whose chief financial officer is Shane Cooke, and Amarin Corp Plc (AMRN.O: ), an Ireland-based biotech company.

Amarin’s chief operating officer at the time of the transaction was Alan Cooke, Shane’s Cooke’s brother.

In early 2007, Amarin licensed a nasal form of the anti-anxiety drug lorazepam from Elan, though no initial license payment was made, according to public statements.

However, in December 2008, after Amarin announced positive results from a pre-clinical trial of the product in animals, Amarin paid Elan $192,000. Seven months later, in July 2009, Elan bought back rights to the product from Amarin for $700,000, more than three times the amount it received.

While Amarin disclosed the relationship between the brothers in regulatory filings, Elan did not, something Sonderby questions.

“A transaction involving familial conflict of interests at public companies where one party is so clearly favored over the other, is both unusual and troubling,” he wrote in his memo to investors.

Elan claims no disclosure was necessary since the size of the deal was small.

“Elan had no reason to disclose it in that it was a small deal, below materiality,” said spokesman Paul McSharry. “The relationship between Alan Cooke and Shane Cooke was disclosed to Elan’s board and Shane absented himself from any discussions related to the transaction.”

For Sonderby, the size of the deal is irrelevant.

“That the dollar figures involved are not material does not supersede the fact that two brothers at two public companies were involved in a transaction which resulted in a sweetheart deal for the one,” he said.

For Sonderby, the Amarin transaction bears similarities to an Elan deal with Azur Pharma International Ltd earlier this year that raises a potentially serious conflict of interest involving Elan’s chairman and the sale of an Elan pain drug to Azur for a bargain price.

Sonderby discovered that Elan Chairman Kyran McLaughlin also serves as vice chairman of Davycrest Nominees Ltd, which owns 44 percent of Azur.

“The details of things like the Azur deal, which appear to be self-dealing and selling an asset to an inside group owned partly by the chairman at an unheard of low price, are outrageous,” said Feinberg.

(Reporting by Toni Clarke. Editing by Michele Gershberg and Robert MacMillan)

Insight: Elan activist Sonderby rallies outraged investors