Eleventh hour resolution for Amrad

A sense of disappointment hung over the handful of Amrad shareholders who turned up to what was supposed to be an extraordinary general meeting on May 22.

Most had been prepared to cast their vote on the future of their embattled board, bringing to an end a stand-off between Amrad and its major shareholder Circadian that had lasted almost two months.

Many were elderly, some had driven from country Victoria to have their say and almost all did not know an agreement had already been reached between the companies until they arrived at the meeting room door.

So they silently took seats before what, to all intents and purposes, was simply a meeting for investors who had not yet heard news that the real meeting had been cancelled.

Ambient world music gave the room a sense of calm that belied the fractious weeks that had preceded this day. Just hours earlier a compromise had been struck between Circadian, a 19.3 per cent shareholder via its wholly-owned subsidiary Fibre Optics, and Amrad that shifted incumbent chairman Prof John Mills to the deputy position and replaced him with corporate recovery specialist Olaf O'Duill.

The deal also put a second Circadian nominee, former CSL vice-president Bob Moses, on the board as a non-executive director.

Room was made for the two new positions through the resignations of Jeremy Curnock Cook and Henry Nordhoff.

The stoush had been triggered by investor discontent following the failure of a key trial just weeks after Amrad conducted a $15 million institutional share placement at $1.15 a share.

It was a long, drawn-out agreement, after Circadian's original proposal - to replace Mills, Curnock Cook and non-executive director Helen Cameron with O'Duill, Moses and Circadian director Ian Davis - was vehemently opposed by Amrad on the grounds it would give the shareholder too much control in the boardroom.

But the company appeared able to look past these fears when, speaking after the deal's announcement, Mills said he knew O'Duill and Moses (who is also chairman of Circadian subsidiary Antisense Therapeutics) and that "they are independent people, with independent underlined in bold-faced italics".

It later emerged that Amrad's second-largest shareholder, Victorian State Trustees, had met with both parties on the eve of the meeting to suggest ways forward for the company, which the State government helped set up with seed capital in 1986.

As Treasurer, Innovation Minister John Brumby had responsibility for directing the trustees' votes. Brumby told Australian Biotechnology News that despite holding a 16 per cent stake, the trustees had been, and would continue to be, a passive shareholder.

"Having said that, it was our view that some changes to the structure and composition of the board were necessary," he said. "I am pleased an outcome has been reached which I believe was positive for the company and that will, in my view, enable the company to optimise its growth potential," he said, adding that the challenge now was to build on growth opportunities.

Back at the meeting formally known as extraordinary, Mills began with an apology then proceeded to fire up a PowerPoint presentation, which chose a most inopportune event during which to crash.

Unfazed, Mills went on to tell shareholders how exciting the ensuing months would be as the board worked towards realising Amrad's vision of becoming a medium-sized sustainable biotech with a portfolio approach.

He then introduced incoming chairman O'Duill - currently a director of Sigma, McPhersons, Envestra, Tower, Sunraysia Television, and Rocklea Spinning Mills - who recounted his corporate recovery background in business and with the State government during the Tricontinental clean-up.

O'Duill set out his plan to improve and accelerate shareholder value, but said he would have some learning to do first. "I have to find out what this company is about and maybe on the way through, as I learn, I can impart a bit of knowledge," he said.

"Hopefully at the end of the day we will be delivering to you commercial outcomes with which you will be enormously pleased."

So after four brief questions, two of which were from journalists, the shareholders filed out to make the most of their visit with a free cup of tea and a biscuit.

On Friday, May 24, O'Duill began his latest directorship, telling Australian Biotechnology News his first job would be to read over recent board papers and decisions to come to grips with the issues.

His next step would be to consult with the chief executive and senior management to ascertain their priorities for the business moving forward, and to start to develop his own priorities.

O'Duill said that while he was not privy to the detailed reasons behind Circadian's original proposal, he was told there had been "a degree of dissatisfaction among a number of shareholders about the results of this company".

"The difficulty for this company is that it is not just a research house but also has the job of delivering to shareholders some value and in recent years it has made losses," he said.

O'Duill said he saw his role as re-engendering harmony among board members and pushing towards improved shareholder returns.

But the market does not yet appear convinced, leaving the share price hovering below 80 cents, with analysts predicting investors would wait for some solid news - such as the result of the company's hepatitis B trials later this year - before deciding whether or not to return to the Amrad fold.

Amrad's difficult year

• February 15: Reports a consolidated loss of $6.9 million in the six months to December 31 compared to a profit of $2.6 million in the previous corresponding period.
• February 22: Launches an institutional placement at $1.15 a share to help "accelerate the path of key projects to completion of Phase II clinical development".
• February 26: Announces positive results from its Phase I/II clinical trial of chronic pain compound AM336 and plans to proceed to full Phase II trials.
• February 28: Institutional placement concludes, raising $15,525,000.
• March 22: Announces its Phase II trial of emfilermin had shown the drug failed to reduce peripheral nerve damage in cancer patients.
• March 27: Major shareholder Circadian Technologies, via its wholly-owned subsidiary Fibre Optics, serves notice on Amrad calling for a general meeting of shareholders to replace Mills, Curnock Cook and Cameron with its own nominees, O'Duill, Moses and Davis.
• April 3: Two early-stage research projects - stroke compound AM36 and components of the SOCS discovery platform - revert to Amrad after collaborators DevCo and GlaxoSmithKline decide they no longer wish to pursue them. On the same day, Amrad announces an extraordinary general meeting would take place on May 22 and issues a letter to shareholders urging them to oppose Circadian's proposal.
• May 22: The extraordinary general meeting is cancelled after the parties agree on a last-minute compromise that sees Mills become deputy chairman and O'Duill step in as chairman.