Immediate Resignation/Termination of CEO Khoso Baluch
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To the CorMedix, Inc. Board of Directors:
Replace Mr. Baluch as CEO now, before he further harms CorMedix!
- 62.5% of shares voted "Withhold."
- The Market has told you it has no confidence in him.
- His poor performance is clearly documented.
On June 12, 2017 a clear majority (62.5%) of shares voting in the proxy expressed their lack of confidence in Mr. Baluch’s leadership of CorMedix. Their votes, cast as owners of the company, were the only means collectively available to express their appraisal of Mr. Baluch’s performance and whether they want him to continue. Despite Mr. Baluch’s many telephone phone calls to large shareholders in May and June, and a shareholder conference on May 25, in all of which Mr. Baluch advocated his case, the shareholders replied, through their votes, “No.”
The market has spoken in the same way as have the shareholders. The share price has lost 85% of its value during Mr. Baluch’s 9 month tenure ($2.53 on 10/3/16, the day his hire was announced, to $0.39 as of 7/25/17). The market thus has no confidence in Mr. Baluch’s ability to effectively discharge his duties as CEO. Also, the market sees a BOD unwilling to take appropriate action: exit Mr. Baluch for cause if he does not resign.
Until Mr. Baluch is replaced by someone in whom the market has confidence, the share price will likely continue to languish and the company will be forced to do another severely dilutive financing at a still lower share price.
The July 12, 2017 R&D day was a misguided (and poorly executed) attempt to increase the share price. It had the opposite effect, lowering, on above-average volume, the share price 5% on an up day for biotech. Why? The market saw Mr. Baluch still at the helm, wasting company resources on future indications that the company cannot fund, instead of being focused on reducing burn and funding the company to an NDA submission.
Mr. Baluch has failed at all of his three most important duties: 1. managing the company’s only clinical trial, 2. diligently managing funding and expenses, and 3. properly managing people.
Specific Performance Failures of CEO Baluch:
1. Failure to enhance shareholder value. Worse, share value has declined by 85% during his tenure. All efforts to increase it have only backfired. Not only does Mr. Baluch fail to hold himself accountable for the company’s dismal stock price performance, he also fails to understand that enhancing shareholder value is a strategic imperative for a biotech CEO.
2. Failure to acknowledge majority proxy withheld vote (62.5%) and offer his resignation, despite numerous demand letters/emails by shareholders requesting his resignation.
3. Refusal in 2016 and early 2017 to proactively seek, and to accept, help (which had been offered) from certain financial experts, which refusals violated his Duty of Care.
4. Failure to prioritize, plan and execute a timely and successful funding of the company; ultimately executed a delayed, disastrous and value-destroying financing in April 2017. After unnecessary delay, and despite multiple offers of help from knowledgeable shareholders (including weeks before when share price was over $2), failed to fully pursue all funding alternatives and did a financing with two warrant classes that took share price to $0.40.
5. Failure to sell the company’s value (product and people, including a life-saving, cost-reducing, phase III asset having de-risking NUMP data, QIDP and fast track status, and, per the company, $1 bn market potential) to potential investors. Mr. Baluch admitted his inability to do so in the May 25, 2017 conference, admitting that the market did not see the value of the product/Company. Such can be only the CEO’s failure.
6. Failure to optimally manage the LOCK-IT 100 trial (begun in December 2015) and failure timely to disclose a critical issue regarding the trial (lower overall CRBSI event rate, lengthening the trial and increasing its expense) to investors. Despite Mr. Baluch’s start in early October 2016, and a supposed “comprehensive assessment” of the trial disclosed in November 2016, he did not disclose existence of event rate issues until his press release of April 20, 2017 (7 days prior to the disastrous financing), a significant issue that should have been known, addressed and disclosed, at the latest, by the end of the trial’s first year (by December 2016). Mr. Baluch’s late disclosure of this information alone is grounds for termination.
7. Failure to focus company efforts and funding (despite financial crisis) on critical lead indications and core staff, resulting in excessive burn rate. (Examples: failed to focus on lead indications – instead spent time/funds on future indications and travel/effort/funds on European marketing; expanded, rather than reduced, headcount and spend, which, because of the company’s financial distress, should focus on mission-critical efforts only). Despite Mr. Baluch’s first earnings call promise to focus on increasing LOCK-IT 100 recruitment, the company financials for Mr. Baluch’s first quarter (4Q/2016) showed a reduction in R&D spend.
8. Failure to achieve 2016 objectives (during 9 month Baluch tenure into July 2017) that had been formally communicated as guidance via February 22, 2016 PR, in some cases with delays in, or absence of, issuing PRs to explain failures and/or acknowledge change in guidance . List of failures (as of July 2017) or unknown status for stated 2016 company objectives:
o Complete enrollment in pivotal Phase 3 “LOCK-IT 100” – FAILED
o Complete discussions with FDA on the protocol for second Phase 3 trial in oncology – FAILED
o Initiate second pivotal Phase 3 “LOCK-IT 200” multi-center clinical trial --FAILED
o Obtain Orphan Drug Designation for pediatric neuroblastoma stage IV – FAILED
o Obtain Orphan Drug Designation for pediatric central venous catheter utilization – FAILED
o Initiate pharmaco-economics studies within the “LOCK-IT 200” trials – FAILED
o Initiate and complete secondary data analysis of health economics in oncology patients (colorectal, breast, and lung) – UNKNOWN
o Continue Cost Reduction Program, targeting Neutrolin COGS reduction by 65% plus for U.S. launch - UNKNOWN
9. Failure of critical hiring and executive management decisions (CFO, Exec VP conversion from part-time contractor to executive, CSO/CMO lines of reporting); with poor performance of hires, refused to exit executives despite evidence of ‘for cause’ actions.
10. Failure to demonstrate sound judgment. Mr. Baluch referred to shareholders’ expressions of concerns at the May 25 shareholder conference, which he had called for such purpose, as “distractions.” Mr. Baluch drove the stock further down during his poor performance at the July 12 R&D conference, which lacked focus and further demonstrated his poor judgment in touting future aspirational product uses, without a sound plan and any funding, and when funding is inadequate to get Neutrolin’s NDA submitted and approved. During every earnings call, Mr. Baluch fails to convey his command of the company; the market has shown its lack of support with a decline or flattening every week during his 9 month tenure.
In light of CEO Baluch’s many failures, and multiple, objective indicators that consistently confirm such failures’ devastating effect on shareholder value, the Board’s refusal to demand his resignation or to terminate him for cause continues to damage the company and constitutes a failure to perform its duty to the company and to shareholders.
Shareholders have offered alternate solutions, including funding, superior, biotech-experienced director candidates, and a proven, immediately available, biotech CEO.
The Board of Directors should immediately terminate CEO Baluch.
Time is critical. Further delay in such action will further harm the company and shareholders.
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