Dimethaid reports deeper loss
If a shareholder rebellion carries the day at Dimethaid Research Inc.'s annual meeting Tuesday, chief executive Rebecca Keeler could find herself out of a job immediately and the drugmaker's long-depressed share price may begin to revive.
A slate of board members and a proposed new CEO have been nominated by a group of dissident shareholders who want the company, which reported a higher quarterly loss of $3.8 million (U.S.) on Monday, to concentrate on research and development.
Dimethaid's current strategy is to become an integrated pharmaceutical company.
Keeler's management team has argued that the insurgents don't have enough biotech experience to lead the company to profitability and would harm it by selling its Quebec drugmaking plant.
"The odds are stacked very heavily in favour of the incumbents and it is unlikely that they will be thrown out," Duncan Stewart, an analyst at Tera Capital in Toronto, said Monday. He noted that shareholder initiatives like the one led by Dan Chicoine at Dimethaid are rarely successful.
"That being said, all the conditions are ripe for that sort of thing. This is a stock that has underperformed for ages, and most of the people who own the stock have lost enormous amounts of money in it."
Shares in Dimethaid traded above $12 early 2000 but closed Monday at 39 cents, down 7 cents or 15 per cent on the day.
Stewart said the day's decline likely reflected uncertainty over Tuesday's vote.
"People who like current management are worried that they're not going to be around, and people who hate current management are worried they're not going to be kicked out," Stewart said.
Management will likely tout a 115 per cent sales increase in the company's latest quarter, while the dissidents can point to ongoing losses.
Dimethaid, which keeps its books in U.S. dollars, reported after markets closed Monday that its $3.8-million loss in its first quarter ended Aug. 31 came to seven cents per share, on sales of $1.7 million.
That compared with a year-earlier loss of $2.5 million, also seven cents per share, on sales of $790,000.
The company more than doubled its sales and marketing expenses to $2.7 million to sell its osteoarthritis lotion Pennsaid.
Chicoine, a finance executive at a division of auto parts maker Magna International Inc. who aims to be on Dimethaid's board, has said he has support from 20 per cent of the shares outstanding. He and his candidates, including proposed CEO Henrich Guntermann, need a simple majority of the votes cast to oust Keeler and the existing board.
"We're pleased with the votes that we've got so far," Chicoine said Monday, noting that between 40 and 50 per cent of shareholders typically vote their proxies in such situations.
Dimethaid extended the deadline for submitting proxies last week from Friday to Tuesday just before the 9 a.m. EDT meeting. According to Stewart, that's usually an indication that management is losing confidence in the outcome of the vote.
Bill Mackenzie, president of shareholder activist firm Fairvest Corp., has advised shareholders to vote in favour of the current management team, but acknowledged Monday that "it's going to be a tight vote because the dissidents carry a lot of credibility."
After talking to Keeler and other managers at Dimethaid, Mackenzie's firm sided with them.
"There's knowledge on the board, there is new blood and hopefully this new blood will lay down the law on the CEO if the CEO is not delivering according to plan or if there is no plan," Mackenzie said.
Dimethaid, based in Markham, Ont., just north of Toronto, has manufacturing sites in Varennes, Que., and Wanzleben, Germany. It employed 131 people at the end of its most recent financial year in May.
Aside from Pennsaid, the company is working on a topical antifungal treatment and an immune system modulator.
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