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The couple who built Moorestown pharmaceutical technology developer Tabula Rasa Healthcare Inc. into a Wall Street favorite have agreed to step down after their board struck a deal with their chief critic — the company’s largest shareholder — after its stock price plunged and shareholders revolted.
Tabula Rasa announced Wednesday that CEO and Chairman Calvin H. Knowlton, 72, and his wife, President and Chief Marketing Officer Ursula Knowlton, 54, are “retiring” from the company, which advises medical providers on how prescription drugs interact and prescribe. Various combinations to better serve patients.
Read more: Tabula Rasa stock falls and shareholders back as CEO couple builds South Jersey mansion
The company’s chief financial officer and president, Brian Adams, was named interim CEO. Michael Purcell, a veteran corporate auditor who joined the board in 2018, is the new board chair.
As part of their severance, the Knowltons will be paid their base salary, which is $1.1 million a year for an additional 18 months, along with health care and job placement services. Plus stocks are currently $2 million for Calvin Knowlton and $1.4 million for Ursula Knowlton.
The Knowltons previously owned about 3% of the company, although their stake was reduced by the stock price and margin calls by banks that had made loans on Calvin Knowlton’s stock before the crash.
» Read more: Former tabula rasa skeptic turns violent at Philly-area healthcare tech firm
Along with the Knowltons’ exit, the board handed the company over to California-based Indaba Capital Management LP, which owns about a quarter of Tabula Rasa’s stock, largely because of its declining stock price over the past year.
The stock topped $80 in 2018 before losing more than 90% of its peak value. The stock rose 7.7% in Wednesday trading, closing at $4.90 a share.
Tabula Rasa is owned by Indaba founder Derek Schrier and partner Jonathan D. Schwartz said members of the Knowltons joined the board when they left. A. Gordon Tunstall has agreed to step down from the board as Shrier appoints a long-delayed replacement for Knowltons former chief executive Indaba rather than seek other shareholders.
“The Knowltons have helped establish a strong foundation for the company” and built a strong management team capable of growing sales, Purcell, a retired Deloitte & Touche audit partner who joined the board in 2018, said in a statement.
Interim CEO Adams predicted “continued growth,” with higher sales, profits and share values, more health plans and “at-risk” patient care providers using Tabula Rasa’s pharmacy, drug risk management and business services.
The Knowltons defended their record with brief statements: Calvin Knowlton boasted of his “robust speed,” and Ursula Knowlton said the couple was grateful to be able to help clients and patients.
The board agreed to make management reforms and set up a three-person strategic review committee, headed by investor Schrier, to sell the “non-existent” businesses acquired by Knowltons and to “explore other value creation opportunities” – an investment banking phrase that typically involves considering a sale of the company.
In a statement, Shrier called the agreement a “constructive agreement” to “begin a new chapter” in the history of Tabula Rasa. He said the change would help customers and patients as well as investors.
In a letter to board members earlier this year, Shrier wrote that the Knowltons had become an “ineffective husband-and-wife management team,” terming the latter under a board characterized by “consistent underperformance” and “unsatisfying corporate governance.” The Knowltons rather than all the shareholders.
» Read More: 2016 Healthcare IPO: Moorestown’s Tabula Rasa Raises $52M
The couple has deep ties to the Philadelphia pharmacy community. Calvin Knowlton chaired the department at the city’s historic pharmacy school at the University of Science (now part of St. Joseph’s University) in the early 1990s when Ursula Voltis Thomas was earning her doctorate. In 1996, she went to work for a Philadelphia-based pharmaceutical management company. They later married and raised a family of 10 children.
Knowlton sold Excel Rx to Omnicare Inc. in 2005. It sold for $270 million, and the next year the couple launched what is now Tabula Rasa, Latin for “blank slate.”
They took the company public in a $52 million initial public offering in 2016 with the help of venture capitalists including Philadelphia-based Rittenhouse Ventures. The stock soared over the next two years, valuing the company at more than $1.5 billion. They bought many smaller firms and sales increased by $300 million last year. But by then, the company’s share price had already declined as it failed to translate new sales and business into profits.
The couple is finishing up a 44,000-square-foot home on nine acres on the border of Moorestown and Cinnaminson Townships, which Schrier used as a sign that Knowlton would spend the millions he got from the bankrupt company during his campaign for office. Stockholders lost value when the stock fell while they were advancing their lifestyles.
In June’s board election, only a minority of shareholders voted for the Knowltons and their partner Tunstall, who were all unopposed. By a 3-to-1 ratio, shareholders in June voted down the Knowltons’ pay package — which collected $6 million in cash and stock last year. She earned $3.8 million.
After the board put pressure on Tabula Rasa, instead of appeasing shareholders, he agreed to give the Knowltons more stock and devised a “poison pill” plan designed to make the hostile takeover more difficult.
“The naysayers have won,” said Charles Elson, a corporate management consultant in Newark, Del. “The shareholders made their point, and the board came around to it. The writing was on the wall, and now you’re seeing their way out.”
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