Aurinia Pharmaceuticals (NASDAQ:AUPH) yesterday announced the appointment of Dr. Richard M. Glickman as Chairman and Chief Executive Officer (NYSE:CEO), at the same time as announcing that Charlie Rowland has resigned as CEO and executive member of the board effective immediately. The sudden change in a public company's CEO is always significant and immediate questions arose as to what happened and whether or not this news is positive.
As I set out in my recent January 23, 2017 article about Aurinia I believe Aurinia has become a likely buyout target. The company has a number of upcoming catalysts (including the release of the 48 week Phase 2B AURA data and the commencement of the Phase 3 trial in Q2 2017), and management and the board will likely need to make some important decisions as to the future of the company. Certainly strong and experienced leadership for Aurinia is a must. As well Aurinia's share price has been on a rollercoaster over the past few years, and investors have been frustrated that the share price has not reflected Aurinia's true value.
While I had never previously spoken to or met Dr. Glickman, I was aware from speaking to others closely affiliated to the company over the past year that he was considered a major board asset. As can be seen from his biography, found on the company's website, Dr. Glickman is intimately familiar with the company, its lead drug voclosporin, the challenges of patients suffering from Lupus Nephritis, is well connected within the industry and brings decades of experience at the CEO level and working with capital markets. In my view he has the right background for his new role and I consider his appointment as the new CEO as positive news.
In addition to being a co-founder of Aurinia, his bio states,
"... he previously served as the Interim Executive Chairman of the Company for the period September 20, 2013 to February 28, 2014 and as Acting Interim CEO for the period October 22, 2013 to November 5, 2013. He was a co-founder, Chairman and CEO of Aspreva Pharmaceuticals ("Aspreva"), playing an integral role in the development and establishment of CellCept®, or MMF, as the current standard of care for lupus nephritis. Aspreva Pharmaceuticals was acquired by Swiss pharmaceutical company Galenica for nearly $1B in 2008. He currently serves as founding Chairman of Essa Pharmaceuticals Inc., Chairman of the Board of Engene Corporation and a Director of Cardiome Pharma. He is also a Partner at Lumira Capital, one of Canada's most successful healthcare focused venture capital firms. Dr. Glickman has served on numerous biotechnology and community boards, including member of the federal government's National Biotechnology Advisory Committee, Director of the Canadian Genetic Disease Network, Chairman of Life Sciences B.C. and a member of the British Columbia Innovation Council. Dr. Glickman is the recipient of numerous awards including the Ernst and Young Entrepreneur of the Year, a recipient of both BC and Canada's Top 40 under 40 award, the BC Lifesciences Leadership Award and the Corporate Leadership Award from the Lupus Foundation of America (LFA)."
Last night I called Dr. Glickman and asked him about what had happened. While I appreciate he had to be tactful as to what actually transpired within the board room, he was very complimentary about Charlie Rowland's abilities and his integrity. However, clearly the board was not happy either with Charlie Rowland's performance or the direction he was taking the company. What was clear to me after speaking with Dr. Glickman (and from what I have learned about his background) is that the change is positive for the company. I asked Dr. Glickman if he would answer a series of questions that I wanted to pose to him in writing and he was happy to oblige.
The following is my series of questions last night (February 6, 2017) to Dr. Glickman with his written responses.
Question: Dr. Glickman, firstly let me congratulate you on your appointment as the new CEO of Aurinia Pharmaceuticals. I've read your biography, which is very impressive, and note that you were one of the original founders of Aurinia.
Answer: Thank you Steven for your kind words, I have been involved with Aurinia since its inception and am intimately aware of the value of voclosporin and its' importance to patients. I co-founded the company to take advantage of the tremendous lupus nephritis expertise we had assembled at Aspreva and allow them to use their skills and commitment to develop their legacy at Aurinia. Making the decision to take on the role of a full time committed CEO was not easy, but reflects my belief that there is significant untapped value in this company.
Question: The resignation of Charlie Rowland was announced suddenly. What happened?
Answer: Changes in management are never easy, the Board's spent considerable and thoughtful time on this decision, trying to understand basis of the gap in market cap between how the Board views Aurinia's value and how the market currently perceives the value was a key driver, given that we have important near term events in the company, it was felt that a different skill set and relationships were needed to address this gap. Hence the decision to act now in advance of these events.
Question: Terminating a CEO is always a serious business and never done lightly. Charles Rowland's resignation today seems very close to the timing of the release of your 48 week Phase 2B AURA data? Is there any relationship between the release of that 48 week data and Charlie Rowland's resignation?
Answer: There is no relationship with the 48 week data whatsoever, that data is completely blinded at this point. As mentioned, it was more to address the skill set we wanted in place prior to its announcement. We are very much looking forward to the release of these data.
Question: As the new CEO, what do you see as Aurinia's major challenges in the next year? In other words what issues are keeping you awake at night?
Answer: First and foremost, its critical to deliver on expectations and milestones that we as a company have committed to, the timely release of data and start of our Phase III program are two critical value creating events. I also think that it's time to educate various stakeholders on the value of voclosporin and the commercial opportunity it represents. This is the best performing drug that I have ever been engaged with and we need to share the data with thought leaders, industry executives and a much larger range of investors. So for me, our major challenge is how to best to facilitate this education as I believe it will transform into greater flexibility and options on how we create maximal shareholder value.
Question: As I am sure you are aware, investors have been frustrated that Aurinia's share price has not adequately reflected Aurinia's intrinsic value given the recent success of Voclosporin in its Phase 2B trial for the treatment of Lupus Nephritis, what do you believe you can do to try to remedy this problem?
Answer: This question hits the nail on the head, in the Board room we shared this frustration and hence the action that you saw yesterday. For me, success is driven by real data and the ability to articulate a value proposition that is enticing and defensible. It is my job to ensure that we continue to educate the stakeholders and address this value discrepancy.
Question: What changes, if any, do you expect to make or bring to Aurinia Pharmaceuticals from the way it has been managed before your appointment as CEO?
Answer: I bring my own set of values to the role, I am obsessively loyal to the patients we serve, our employees and to our shareholders. The fundamental business strategy is sound and will not change, however, greater attention will be paid to education and communication, especially to current and new investors.
Question: I see from your background that you have a lot of experience, and in various capacities, in dealing with the capital markets. What are the options that you think Aurinia should be considering in raising the funds necessary to complete the Phase 3 AURION trial?
Answer: First, I am a firm believer in the efficient use of capital, spending wisely to create maximal value. I feel it's a crime to undercapitalize companies and foolish to over-capitalize them. I am currently reviewing our ongoing capital requirements with an eye to ensure we minimize unnecessary dilution to shareholders while ensuring we have adequate financial resources to complete our study and secure appropriate time post data to ensure the full value of our actions are realized. We have a number of means with which to meet our capital requirements, key criteria is that they do not take away from the blue sky potential I see in this company.
Question: Is there anything else you would like to add?
Answer: I would just like to reiterate that I am very enthusiastic about our company's future and am deeply committed to provide the leadership needed to take us forward. I feel very accountable to our patients, employees and shareholders in this role.
Disclosure: I am/we are long AUPH.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.