Bid to oust VRI Biomedical board

One of Perth-based probiotics company VRI Biomedical's largest shareholders has launched a bid to remove most of the company's board and move key management to Sydney.

The shareholder, Perth-based investment banker Australian Heritage Group (ASX:AHT), has called for an extraordinary general meeting of the company to remove VRI executive chairman Leon Ivory, Kenneth Baxter, John Cade and Glyn Tonge, replacing them with CEO Dr Peter French and Australian Heritage directors Sally Capp and John Moore, a former Federal Defence Minister. Only founding shareholder Kim Slatyer would be re-elected to the board.

If successful, the Australian Heritage requisition would also see the company's CFO and company secretary positions moved to Sydney and reporting to the CEO.

In a letter to shareholders on behalf of Australian Heritage, Capp said VRI's current board and reporting structure -- under which the CFO and company secretary report to the executive chairman, rather than the CEO -- were detrimentally affecting the company's growth and success.

"We have lost confidence in the ability of the board to function efficiently and produce commercial outcomes for the company and shareholders," the letter said. "We believe that the current board has had the opportunity to develop VRI's business and commercialise VRI's science, but that they have not been able to achieve their stated outcomes on an operational and structural level."

Capp said Australian Heritage, which owns 13.5 per cent of VRI, had tried to negotiate with the board over the past week to remove some board members and implement a new reporting structure to support French as CEO, but its proposals were rebuffed and communications had broken down.

She told Australian Biotechnology News that the group was hoping it would not be necessary to call an extraordinary general meeting, but was forced into the requisition as the last act left to it as a shareholder.

"VRI was our first investment and we participated significantly in the development of the company through to its float," she said.

Cobb said VRI's share price, currently about 30 cents, had seen "significant action" (predominantly downwards, along with much of the Australian biotech sector) over the past 12 months.

"Obviously that's an element [to the group's concerns]," she said. "But what was becoming evident to us was the way the board was conducting the business, with a structure that wasn't supporting the management level.

"What we're all agreed on is that the potential of the science and the value of the scientific team is phenomenal."

At the end of the last financial year, the largest shareholders were founding directors Ivory, Slatyer and Robert Clancy, with 15.4 per cent each. Australian Heritage was the fourth-largest shareholder with 14.3 per cent.

Cobb said that although it was not the majority shareholder, Australian Heritage felt its chances of success in its requisition were good.

She emphasised that French, the company's COO since last November and its CEO since early February, was not part of the group seeking to oust the board. But she said the current structure was impeding the company's scientific and commercial progress, raising "credibility issues".

French is based in Sydney, near VRI's R&D operations in Sydney and Newcastle. In a statement, he said that while he welcomed Australian Heritage's support, he did not want that interpreted as meaning that he supported the requisition bid.

Leon Ivory was contacted for comment but had not responded by press time. A spokesperson said the company was preparing a statement in response to the Australian Heritage letter.

Reorder confirms revenue stream

In a separate statement today, VRI said its global distribution partner, Pharmanex, had placed reorders for VRI's ProBio PCC to meet demand in the US market. In the statement, French said the reorder validated the company's commercialisation process and confirmed that it would become a recurrent revenue stream for VRI.

ProBio PCC is now sold in Japan, Korea and the US.