Hi Henry and Luis:
I have been reading your observations for some time and would like to add some of my own.
First, some background. On February 9, 1996 Lidak announced that Bristol-Myers Squibb had joined them in a partnership to market Lidakol in North and South America (later information indicated that BMY had put up $3 million with milestone payments to follow). With the forthcoming Phase 3 results (and the assumed due diligence by BMY), that sounded like a great opportunity. Many of us invested in Lidak. the price went from 5 5/8 on 2/8/96 to a high of 6 7/16 on 2/12/96. Thereafter, that stock price acted "strange", falling to 4 11/16 on 3/14/96. the results of the failed Phase 3 were announced after the close of the markets on that date. The next day the price of Lidak plummeted to a low of $2.00 and closed at $2.50 per share. Many investors were hit hard!!!!!
A few months later, a Vickers Insider trading report on Lidak, obtained through Charles Schwab, revealed that director, Sidney N. Towle Jr., had exercised options and sold 10,000 shares at $5.71 on 2/14/96; and that director, Stuart A. Samuels, had exercised his options and sold 30,000 shares at $5.69-$6.00 between 2/15/96 and 2/27/96. No accusations here, but a remarkable coincidence. After the high on 2/12/96, and until the announcement on 3/14/96, the volume was high, the price declined, and , in retrospect, it would seem that several others, besides insiders, knew more than the average investor. It should be noted, to his credit, that Dr. Katz did not sell any shares at the time, even though he was probably the only director to have actually put his own money into Lidak.
I have been without respect for the current Lidak board since receiving the Vickers report. (I wonder how Luis would refer to the ACTIONS of these directors as compared with his reference to the hypotheticals, despite impressive backgrounds, of the alternative slate of director nominees). There are many other reasons for dissatisfaction with the current board: (1) lack of early action in resolving differences with Dr. Katz, prior to the recent public display of disarray; possibly by hiring an entirely new, but qualified, Pres. CEO, rather than reacting emotionally by promoting a subordinate to Katz; (2) with regard to the pull-out of Bristol-Myers, that apparent lack of a contingency business and financial plan; (3) from the various announcements, the failure to properly and diligently consider the Health Med financing proposal. the board had only to request with additional information they required and to reject the terms that their "business plan" could no afford (prime + 3.5% seems steep). Maybe the board did not trust the representatives of HealthMed. If so, they should have just told them to go away. And then promptly come up with an alternative, either a financing plan (NOT DILUTIVE to shareholders, as were the previous two), or another drug partnership. Over 2 1/2 months has passed since BMY's withdrawal. Lidak seems to be drifting. (4) based on : a) Dr. Katz's news release on 3/4/98 regarding board compensation, b) directors lack of investment in Lidak, and c) the Vickers report, mentioned earlier, the current board seems to have put self-interest ahead of that of the shareholders, (5) lack of communication to shareholders. One of you guys picked up on the Phase 3 P-values for Lidakol, buried on page 28 of an S-1 filing; no public announcement of this vital information. (6) inaction with regard to further clinical trials for Lidak's other promising science. the list could go on.
As the proxy fight unfolds, prior to the fiscal meeting on April 18th, there should be announcements from both sides. Probably best to wait and see. Important to establish, as been stated, that the alternative director nominees are independent of both HealthMed and Dr. Katz; and that they are qualified. |
