Shares of Allergan (AGN) are higher in afternoon trading after David Tepper’s Appaloosa and Senator Investment Group issued a letter renewing their calls for the company to separate the chief executive officer and chairman roles. APPALOOSA VOICES DISAPPOINTMENT: On Tuesday morning, Appaloosa and Senator made public a letter sent to Allergan’s Board of Directors, in which they stated: “We write concerning the conclusions drawn from Allergan’s much-heralded strategic review, publicly outlined by chairman and CEO Brent Saunders on May 30th. Like the rest of the investment community, we were underwhelmed by the company’s half-hearted attempt to restore strategic momentum… The token measures outlined in Mr. Saunders’ presentation betray the Board and management’s desire to cling to a status quo that has produced three years of steadily declining stock performance and a fire-sale market valuation. It is now clear that fresh thinking is absent from the current regime, thus explaining the market’s complete loss of confidence in the stock. To that point, we reiterate our strong suggestion that at a minimum the company split the office of CEO and chairman; retain a new chairman or CEO from outside the company; replace at least two additional directors on the current Board; and upgrade management personnel in critical operating units….In our conversations, chairman and CEO Saunders has been fond of repeating a famous quotation that ‘the definition of insanity is doing the same thing over and over again, but expecting different results’. Until Mr. Saunders and the Board heed this advice, adopt new governance and renew the company’s operational focus, it appears that shareholders can expect Allergan’s stock price to continue to languish.” ALLERGAN RESPONSE: On Tuesday afternoon, Allergan issued a statement in response to the letter, saying input is welcome from all shareholders and the company is committed to driving shareholder returns. “The conclusion of our recently completed strategic review is to create a more focused Allergan that concentrates on four therapeutic areas where we have leadership positions and depth and breadth of our products and pipeline, and to pursue a disciplined capital allocation strategy to generate value for shareholders,” the company said, adding that board refreshment continues to be a “top priority.” WHAT’S NOTABLE: In April, Appaloosa and Senator issued a public letter saying they had “become deeply concerned with the substantial value destruction” at the company and questioned Allergan’s interest in acquiring Shire (SHPG). The firms called on the company to concentrate on core therapeutic areas and separate the roles of chairman and CEO. Later in April, Allergan said it would not make an offer for Shire. Appaloosa and Senator then issued another letter in May urging the company to take the immediate steps of separating the roles, accelerating the board refreshment process, articulating a clear purpose for its strategic review and clarifying its position on “transformational M&A” transactions. Additionally in May, the Federal Trade Commission granted clearance for a transaction involving Tepper as “the acquiring party” and Allergan as the “acquired party”, however additional details were not made available. ANALYST VIEW: In a research note on Tuesday, Wells Fargo analyst David Maris said the level of engagement from the two prominent activist funds can be a positive for Allergan and the shares, especially if it results in improved investor confidence in the credibility of the company’s future. The analyst thinks Allergan will be responsive to the activism and agree to separate the roles of chairman and CEO. Allergan shares can outperform without a change of the CEO, but some other changes will need to be made such as those suggested in the activists letters, Maris contends. Further, he notes that the appearance of activists can bring strategic interest from other parties that see a company in transition. Maris cautions, however, that neither activist suggested that Allergan put itself up for sale. The analyst keeps an Outperform rating on Allergan. PRICE ACTION: Allergan is up 0.8%, or $1.14, to $152.34 in afternoon trading.