SYDNEY, Dec. 15, 2017 /PRNewswire/ -- Parnell Pharmaceuticals Holdings Ltd. (OTC PINK:PARNF) company Director, Robert Joseph is providing this Notice to shareholders for consideration in advance of voting at the Extraordinary General Meeting called for Friday, 29th December 2017, at 9:00am (Australian Eastern Standard Time).
- In the last 12 months, Company executives have pursued multiple deals, the most important, and the most desirable, of which are:
- Zydax for human use (being the licensing of the Zydax patent rights to interested human pharmaceutical companies). This deal would result in the Company receiving several million dollars in upfront and milestone payments, and potentially tens of millions of dollars in royalties for a period of up to twenty years if Zydax is approved as a generic of an existing human drug, Elmiron® in the USA.
- The second deal involves the Company turning over the commercial distribution for its Reproductive Hormones in the US and other countries to interested multi-national veterinary pharmaceutical companies. The Company in return would receive a multi-million dollar upfront payment, and would continue to manufacture the hormone products thereby generating a gross profit that would be at least equivalent to that currently being earned from this business unit. Most significantly, the deal would enable the Company to eliminate the cost of its US operations, which are presently estimated to be costing $6 million per annum. This deal may also result in the future outright sale of the hormone assets potentially delivering tens of millions of dollars.
- These two deals have now been negotiated, and are ready for acceptance. In doing so, the Company would essentially become a specialty contract manufacturing company with potential for significant revenue growth. This restructure would also increase profits by millions of dollars each year providing a pathway for the Company to pay out its current debt which starts to amortise in the first quarter of 2019. The Company may then be in a position to commence paying substantial dividends to its shareholders.
Furthermore, given the significant reduction in the size of the Company if the two deals are consummated, I have already indicated that if it was in the best interests of shareholders, I would be more than happy to step down as CEO to enable cost savings. I have however also stated my belief that the desired growth of the contract manufacturing business is likely to be beyond the capacity of Brad McCarthy acting as COO of Manufacturing in this pursuit.
- In September 2017, my fellow directors Alan Bell and Brad McCarthy, abruptly informed me of their preferred strategy which was to leave the Company (and therefore its current shareholders) owning only the Zydax asset, and to split off the Company's remaining assets (Reproductive Hormones and Manufacturing Facility) to a new company, which would be owned only by them, for virtually no consideration (they suggested their new Company would take on Parnell's current debt obligations). I firmly rejected their proposal as being clearly detrimental to shareholders' interests.
- Since my dispute arose with Mr Bell and Mr McCarthy they are now stating to employees that they wish to take the risk of continuing to commercialise the Company's products in the USA (requiring an increase in expenditure). However, they have given no indication as to how they would realistically achieve this and have refused to release any financial information to shareholders about the performance of the Company; such releases having been customary practice each quarter since the Company's IPO. Of equal concern is the fact that they have also continually sought to withhold information from me as a Director, and to obstruct me from undertaking my legal obligations.
- I have sought to resolve this dispute privately, and in the best interests of all stakeholders for two months but to no avail. It has now become a public matter as a result of Mr Bell's decision to announce a shareholders meeting. I am therefore compelled to provide shareholders with complete information to enable an informed choice when voting at the upcoming meeting.
- My strategy for the Company involves accepting the two pending deals, closing US Operations to make substantial cost savings, and seeking to grow the Contract Manufacturing Operations.
- The response from my fellow directors was to attempt to remove me as a director and CEO of the Company. Many of the steps taken by them are likely to be invalid as they have involved breaches of one or more of; the Australian Corporations Act, the Company constitution (the equivalent of US articles of association), and the Bondholders Agreement (which governs the Company's relation with its debt holders).
- Mr Bell and Mr McCarthy have articulated no clear alternative strategy for the Company, other than to split it, or continue to invest in the current, loss making business model. I believe that the above mentioned deals are needed to see shareholders rewarded in the short term, and to enable the Company to pay off its debts. Also, I see the company split envisaged by Mr Bell and Mr McCarthy as extremely harmful to shareholder interests.
- I believe urgent change is needed to the Company's corporate governance structure through the appointment of three or more, fully independent directors to ensure Bell and McCarthy cannot unilaterally act in a manner that is not in the best interests of shareholders.
If you vote AGAINST the resolution and retain me as a director, I shall be in a position to press for the acceptance of the two deals, and call a general meeting to resolve on the removal of Mr Bell as a director, and the appointment of three independent directors.
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SOURCE Parnell Pharmaceuticals Holdings Ltd.