Farallon Capital says the results of a recent shareholder vote show it succeeded in refreshing the board at oncology-focused biotech company Exelixis. 

The $36-billion hedge fund, which owns about 7.8% of Exelixis stock, said shareholders elected all three of its independent candidates. 

These leaders include Tomas Heyman, interim CEO at Interlaken Therapeutics and former president of Johnson & Johnson’s corporate venture capital group; Robert Oliver, former CEO of Otsuka America Pharmaceutical and an executive advisor; and David Johnson, managing partner of Caligan Partners.

They’re “ready to work constructively with the rest of the board to fulfill the mandate they received from shareholders and help the company better allocate capital and focus its R&D efforts,” Farallon said in a statement during Exelixis’s annual meeting Thursday. 

Prior to Thursday’s meeting, Exilixis had appointed just three new directors in the past 13 years. Farallon nominated the trio earlier this year after ratcheting up its activism at Exelixis, primarily out of concern for what it saw as unfocused R&D spending. 

The refresh was meant to “provide a jolt of fresh thinking” to the board, seven of whose directors have more than 15 years of tenure and three of whom have served for more than 20 years.

Exelixis had earlier given a thumbs-up to two of the nominees, agreeing to appoint Heyman and Oliver as part of a “good faith effort to reach a settlement with Farallon and avoid an unnecessary and disruptive proxy contest.” However, the company had initially resisted Farallon’s third candidate, Johnson, on the grounds he lacked the right qualifications.

In the run up to the meeting, incumbent director Lance Willsey, who was set to serve his 27th year on the board, withdrew his name from the election. That paved the way for Johnson’s election to the 11-member board. 

“We expect the remaining incumbent directors to heed the clear message of this election and recognize that Exelixis must embrace change to achieve its full potential for patients and shareholders,” Farallon’s statement added.

Exelixis has four marketed drugs, including flagship product Cabometyx (cabozantinib). According to a company forecast, Cabometyx will generate more than $2 billion in sales this year from its three marketed cancer indications. 

Farallon is pushing for the company to focus its R&D efforts on its best clinical prospects. In 2022, the company collected revenue of $1.6 billion, spent nearly $900 million on R&D and recorded earnings before interest, taxes, depreciation and amortization of $222 million. 

This year, its R&D budget is expected to surpass $1 billion, as it pursues 27 indications across 79 trials using at least three different therapeutic modalities. Activist investors also want to see the company articulate a differentiated and clear strategy, as well as commit to returning capital to shareholders.

“Exelixis has made essentially no money for its investors,” Farallon argued. “Since its IPO nearly 23 years ago, Exelixis has generated a total shareholder return of less than 1% per year.”