Harvey J. Berger will step down as chief executive of Ariad Pharmaceuticals Inc., the Cambridge biotech he founded in 1991, after reaching a settlement with the Connecticut hedge fund that has been trying to push him out.
Berger, 64, told the board he will retire from the cancer drug company when a successor is named or by Dec. 31 at the latest, according to an Ariad statement Wednesday. The statement said the board had begun a search for a new chief executive.
“I’m really proud of where we are and what we accomplished,” Berger said in an interview. “It was the right decision to put this ongoing dispute behind us.”
In a separate statement, Ariad said its board had reached a settlement with Sarissa Capital Management, the Greenwich, Conn., investment firm that has been working for the past two months to remove Berger. Sarissa owns about 7 percent of the company, which has struggled over the past two years.
Under the settlement, Berger will receive a severance payment next January of $4.2 million, three times the sum of his annual salary and 2014 bonus, according to a regulatory filing.
Sarissa, for its part, agreed to withdraw a slate of candidates it had proposed for Ariad’s board and support the board’s own nominees.
Ariad also said that its search committee for a chief executive would be headed by Alexander J. Denner, the founder of Sarissa, and that former Millennium Pharmaceuticals executive Anna Protopapas – one of Sarissa’s nominees to the board – would fill an open director’s seat.
Shares of Ariad climbed 40 cents to $9.27 on Wednesday, a gain of 4.5 percent on the Nasdaq market.
As recently as earlier this month, Berger told Ariad employees he had no intention of departing, would engage in a proxy fight with Sarissa if necessary, and was determined to stay on through the completion of a three-year turnaround plan in 2018.
But in the Wednesday interview, Berger said he reached the conclusion that “a long drawn-out proxy battle would not be in the interest of the shareholders, the employees, or the patients” who depend on Ariad’s drug for chronic myeloid leukemia. He said the severance was not a factor in his decision.
He said he expected to remain at Ariad for most of 2015 and would continue to work as hard as ever to advance its pipeline of drug candidates, including an experimental drug for lung cancer.
Berger also said he always had expected to retire around the age of 65. He’ll turn 65 in early June, just before the company’s annual meeting.
“It’s not a whole lot different in timing from what it would have been if none of this had happened,” he said, referring to Sarissa’s effort to gain control of the Ariad board and force him out.
That effort occupied much of Berger’s time since February, when Sarissa initiated its push for control of Ariad, he conceded. “Instead of working my usual 70 hours a week, I worked 100 hours a week in the last two months,” he said.
Berger said he also will leave the Ariad board but stay in touch with employees.
“I’ll always be there,” he said. “There won’t be a single employee who can’t call me for advice or help. I’m there for them and I’ll be there for the company. I’ll live on the legacy I left and the products and patients they serve. We created a culture that’s valuable and that focuses on patients.”
Berger ultimately yielded to pressure from large stockowners and directors who either supported Sarissa’s board candidates or had no stomach for engaging in a proxy battle, according to people familiar with recent events at the company, who spoke on the condition of anonymity because they weren’t authorized to discuss the situation.
In the company statement, Wayne Wilson, the lead independent director at Ariad, said the settlement was “in the best interest of shareholders as it allows us to focus on conducting the search for Ariad’s next CEO” while continuing to work on drug development. Wilson declined to discuss the transition at Ariad.
Ariad research and development president Timothy P. Clackson said Berger’s departure marked a new chapter in the company’s evolution.
“It’s certainly an important moment,” Clackson said. “But it’s also important to reflect that Harvey’s leaving the company in very strong shape. The company, like any biotech company, has had its ups and downs. But in 23 years, he’s built Ariad from nothing to a global commercial company. And we look forward to continuing that work.”
Ariad won commercial approval in 2012 for its first therapy, Iclusig, which treats thousands of people with chronic myeloid leukemia.
But the company was forced to pull Iclusig from the US market 18 months ago after a Food and Drug Administration warning about toxic side effects. Since then, the company has laid off more than 100 workers, negotiated Iclusig’s return for a narrower patient population, and scaled back its plans for a new Kendall Square headquarters.