Husband and wife bosses of Moorestown pharmaceutical tech firm resign under pressure
Tabula Rasa's Calvin and Orsula Knowlton have been ousted from their Moorestown health tech firm after it went public and lost most of its value.
The couple who built Moorestown pharmaceutical tech developer Tabula Rasa HealthCare Inc. into a Wall Street favorite, then tried to keep control after its stock price collapsed and shareholders rebelled, have agreed to leave after their board cut a deal with their top critic — the company’s largest shareholder.
Tabula Rasa announced Wednesday that chief executive and chairman Calvin H. Knowlton, 72, and his wife, copresident and chief marketing officer Orsula Knowlton, 54, will “retire” from the company, which advises medical providers on how prescribed medicines might interact and suggests different combinations to better serve patients.
Tabula Rasa’s new leaders
Brian Adams, the company’s chief financial officer and copresident, has been named interim CEO. Michael Purcell, a veteran corporate auditor who joined the board in 2018, is the new board chairman.
As part of their departure, the Knowltons will be paid their base salaries, which total $1.1 million a year for 18 more months, along with health-care and job placement services; plus stock currently worth $2 million for Calvin Knowlton and $1.4 million for Orsula Knowlton.
The Knowltons had previously owned about 3% of the company, though their stake had dwindled because of both to a steep drop in the share price and margin calls by banks that financed loans against Calvin Knowlton’s stock before it lost value.
With the Knowltons on the way out, the board has turned the company over to California-based Indaba Capital Management L.P., which owns about one-quarter of Tabula Rasa stock, mostly acquired as the share price tumbled over the past year.
The stock briefly topped $80 at its high in 2018 before losing more than 90% of its peak value as costs rose from a string of unprofitable acquisitions, and sales and profit projections tumbled. The stock rose about 7.7% in Wednesday trading, closing at $4.90 a share.
Tabula Rasa also said Indaba founder Derek Schrier and an ally, Jonathan D. Schwartz, have joined the board as the Knowltons depart. A. Gordon Tunstall, the former lead director who Schrier had said deferred too much to the Knowltons instead of looking out for other shareholders, has also agreed to leave the board as soon as Indaba names a replacement.
“The Knowltons have helped establish a strong foundation for the company” and built a strong management team that can boost sales, Purcell, a retired Deloitte & Touche audit partner who joined the board in 2018, said in a statement.
Interim CEO Adams predicted “continued growth,” higher sales, profits and share values, as more health plans and providers of care to “at-risk” patients use Tabula Rasa’s pharmacy, medication risk management and business services.
The Knowltons defended their record in brief statements: Calvin Knowlton boasted of “strong momentum,” and Orsula Konwlton said the couple was grateful to have been able to help clients and patients.
The board has also agreed to governance reforms and set up a three-person strategic review committee, headed by investor Schrier, to continue selling “noncore” businesses acquired by the Knowltons and to “explore other value creation opportunities” — an investment banking phrase that typically includes considering a possible sale of the company.
In a statement, Schrier called the deal “a constructive agreement” to “start a new chapter” in Tabula Rasa’s history. He said the changes would help clients and patients as well as investors.
In a letter to board members earlier this year, Schrier wrote that the Knowltons had become “an ineffective husband-and-wife management team” whose term had lately been characterized by “sustained underperformance” and “abysmal corporate governance” under a board that defended the Knowltons, instead of all shareholders.
Knowltons’ deep Philly ties
The couple has deep ties to the Philadelphia pharmacy community. Calvin Knowlton headed a department at the city’s historic pharmacy school, the University of the Sciences (now part of St. Joseph’s University) in the early 1990s, when Orsula Voltis Thomas was earning her doctorate there. She went to work for his previous, Philadelphia-based medication management company, excelleRx, in 1996. They later married and raised a large family, including their children from prior marriages.
Knowlton sold his excelleRx in 2005 to Omnicare Inc. for $270 million, and the couple started what is now Tabula Rasa, Latin for “blank slate,” the next year.
Backed by venture capitalists including Philadelphia-based Rittenhouse Ventures, they took the company public in a $52 million initial public stock offering in 2016. Over the next two years, the stock rose, giving the company a value of more than $1.5 billion. They bought a string of smaller firms, and sales topped $300 million last year. But by then the stock price was already down as the company failed to translate new sales and businesses into profits.
The couple is finishing a 44,000-square-foot mansion on nine acres on border of Moorestown and Cinnaminson Townships, which Schrier in his campaign for their ouster used as a symbol of how the Knowltons were spending millions they got from the money-losing company on advancing their lifestyle while shareholders lost value as the stock sank.
‘The writing was on the wall’
In a June board election, only a minority of shareholders voted for the Knowltons and their ally Tunstall, who had all run unopposed. By a 3-to-1 ratio, shareholders in June also voted against the Knowltons’ pay package — he collected $6 million in cash and stock last year; she received $3.8 million.
Schirer turned up the pressure on Tabula Rasa after the board, instead of acting on shareholders’ discontent, agreed to give the Knowltons additional stock and adopted a “poison pill” plan designed to make a hostile takeover more difficult.
“The dissidents won,” said Charles Elson, a Newark, Del., corporate governance consultant. “The shareholders made their point, the board came around to it. The writing was on the wall, and now you’re seeing their exit.”