A Medical Device Daily
Delcath Systems ' (Stamford, Connecticut) president and chief executive, M.S. Koly, issued a letter to shareholders on Tuesday, citing several initiatives that the company's board of directors had decided to undertake in response to comments provided by shareholders at the firm's annual meeting.
Those include adding to the membership of the board of directors, expanding the company's investor and public relations activities, instituting what Koly termed a “more robust” shareholder communications plan, and possible retention of the services of a nationally known investment bank or merger advisory firm to assist in exploring a potential sale to, or business combination with, a third party.
On the latter item, Koly noted that at the annual meeting, a majority of the shares that were voted but less than a majority of the total outstanding shares approved a non-binding measure proposed by a shareholder to retain a bank or advisory firm with experience in the medical dev-ice industry to assist in exploring a possible sale or other business combination.
“Your board of directors unanimously agrees that a sale of the company prior to the completion of our pivotal Phase III trial [of the Delcath system] is premature and would significantly limit the long-term value shareholders could realize if, as we expect, FDA approval of the Delcath system is granted,” Koly said. “However, since the annual meeting we have had preliminary discussions with several investment banking firms regarding their possible engagement by Delcath to assist the board with its continuing evaluation of all available options.”
He added: “When considering the underlying value of the company, the board would like to impress upon shareholders that the Delcath system is a platform technology with 12 patents issued and/or pending. Delcath is well positioned to leverage its intellectual property and expand the application of the Delcath system through partnerships and potentially lucrative licensing arrangements.”
Koly said that while the company currently is focused on liver cancer, “these 12 patents represent an as-yet-unrealized potential for future product applications for the treatment of long-bone, abdominal, uterine and kidney cancers. The board believes that these additional applications, as well as the use of the Delcath technology in the treatment of hepatitis as part of its 'platform strategy,' will greatly increase the overall value of the Delcath technology and generate significant long-term value for Delcath shareholders during the years to come.”
As to the other items about which shareholders raised questions, the letter said the board of directors had determined that it is in the best interests of Delcath and its shareholders to add two new independent directors over the coming months. “The board believes that the addition of two new highly-qualified independent board members who can provide access to additional opportunities in the clinical field, and/or have significant expertise in research and clinical trials, will provide Delcath with additional perspective and greater opportunities to complete its trials and further position the company to execute its long-term strategy for maximizing value for shareholders,” Koly wrote.
He said the board intends to begin its search promptly, with the aim of having a new director in place by the end of the third quarter of this year and a second new director in place by the end of the year.
Koly said the board also has taken action to expand Delcath's investor and public relations campaigns “to introduce the Delcath story to new institutional investors and to the major broadcast and print media.” The expanded program includes an intensive schedule of investor meetings and interviews with major business and healthcare trade reporters.
“In the board's estimation, this program will help raise the company's profile among investors, significantly enhance the company's ability to attract interest from major hospitals, and support our efforts to add new sites for our current clinical trials,” he said.
Koly said further that the board had instituted a more robust shareholder communications plan, “to ensure that existing shareholders are better, and more frequently, apprised of our progress.”
Delcath is a developer of isolated perfusion technology for organ or region-specific delivery of therapeutic agents.